In a new filing certain to inflame tensions with authorities in The Bahamas, FTX management has asked a U.S. judge to find Bahamian regulators have no palace in the proceedings.
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FTX managers have asked a judge to kick regulators from The Bahamas off the bankruptcy case.
Their attorneys argued that the company's Bahamian unit, FTX Digital Markets (FTX DM) "has no ownership interest" in property of FTX, Alameda Research, or any of the approximately 100 companies in Sam Bankman-Fried's empire.
Instead, it said transactions that sent funds to FTX DM were "an attempt to hide assets" and are thus "fraudulent transfers."
Bankman-Fried and FTX offices were in The Bahamas, and he was arrested there at the request of the U.S. Justice Department. But tensions grew until a compromise was reached in January.
FTX's current management has been at odds with the Bahamas Securities Commission and its Joint Provisional Liquidators who have claimed that FTX DM was the real owner of all FTX property and that therefore they should control the dispersal of its property to the rightful owners.
The Bahamas seized what FTX's post-bankruptcy management said was about $167 million worth of FTX assets in the immediate aftermath of the collapse and bankruptcy, and still retain control of it.
An 'Offshore Haven'
Calling FTX DM a "legal nullity," the filing claims that the unit was "created as a front to facilitate a conspiracy to defraud the debtors' customers." It said:
"FTX DM was part of the mature phase of that conspiracy. It was formed and functioned as an offshore haven for a continuous fraudulent scheme, as well as a conduit through which the fruits of that fraudulent scheme could be channeled to insiders and third parties outside of the reach of any independent and effective regulatory authority."
The JPLs, FTX continued, are using what amounts to a fraudulent shell company to "cast confusion over the true ownership of the debtors' property and waste the debtors' assets in the process."
Moreover, the filing said Bankman-Fried "maintained a close, accommodating relationship with Bahamian law enforcement agencies, including, among others, the Commission, and with the Attorney General and Prime Minister of The Bahamas" and that he "aimed to leverage that relationship to minimize his criminal and civil exposure should the massive fraud be discovered."
While that's not an accusation that any Bahamian authorities committed any misdeeds, it does say that the only reason Bankman-Fried worked with them and channeled funds to FTX DM was to "minimize his criminal and civil exposure should the massive fraud be discovered."
Which will not go down well with authorities in The Bahamas.
