FTX’s attorneys ask the US Bankruptcy Court in Delaware to dismiss FTX Digital Markets’ (DM) claims on the assets of FTX Trading Ltd.
They argue that FTX DM was the location of a fraud, in which former FTX CEO Sam Bankman-Fried transferred customer funds.
FTX Digital Markets Should Not Affect Creditors’ Claims
Lawyers say FTX DM, which was placed into liquidation by Bahamian regulators on November 10, 2022, shortly before FTX Trading filed for bankruptcy, falsely claimed it owned cryptocurrencies, intellectual property and customers of FTX Is.
Unlike the liquidators, the lawyers said, “FTX DM was no more than a short-term provider of “match-making” services limited to customer-to-customer transactions.” The liquidators previously stated that FTX was “the center of the FTX group”.
The claims followed efforts by liquidators to move the FTX bankruptcy case from the United States to the Bahamas.
Furthermore, FTX’s lawyers stated that FTX DM was a non-debtor that should not jeopardize creditor claims to FTX Trading’s assets.
They also say that Bankman-Fried exploited close ties to Bahamian regulators to move $143 million of FTX client funds from FTX.com and Alameda Research to enrich FTX employees.
In addition, the attorneys want the bankruptcy judge to declare the transfers made to FTX DM fraudulent. They also seek a ruling that FTX DM has no ownership of FTX’s intellectual property, customer information, cryptocurrencies or fiat.
FTX Group, which includes crypto exchange FTX.com, filed for bankruptcy on November 11, 2023, amid a flurry of withdrawals due to a confidence crisis in FTX’s native FTT token. FTX’s bankruptcy case is currently ongoing in Delaware.
Bankman-Fried deliberately manufactured impression with Bahamian regulators
According to court filings, Sam Bankman-Fried had an “adjusting” relationship with Bahamian regulators. These regulators include the Securities Commission of the Bahamas, the Attorney General and the Prime Minister of the Bahamas.
The Wall Street Journal reported in November 2022 that the Prime Minister of the Bahamas, Philip Davis, had helped build the grounds into FTX’s global headquarters.
“The arrival and presence of FTX underscores the Bahamas’ readiness to be global leaders in the crypto space,” Davis said in a video released by the Prime Minister’s Office in April 2022.
The Bahamas was the first country to issue a nationwide digital currency, the Sand Dollar.
“Most likely FTX was hoping, or perhaps even hoping, that the Bahamas would not partially implement its dare [Digital Assets and Registered Exchanges Act, 2020]said Bruce Zagris, an expert on Caribbean financial services and white-collar crime. According to the WSJ, the Bahamas used FTX to justify the act.
Bankman-Fried enthralled US regulators as well
But Bankman-Fried also tried to get approval from US regulators, including the CFTC and the Federal Deposit Insurance Corporation (FDIC).
A recent report from the Washington Examiner suggested that Bankman-Fried had tried to woo the FDIC chairman with FTX’s risk framework, claiming that FTX was a “superior” cryptocurrency exchange.
Bankman-Fried faces twelve criminal charges in the US including money laundering, wire fraud and campaign finance violations.
Michael Chamberlain of the Protect the Public Trust watchdog said, “Perhaps we should consider ourselves lucky because were it not for the swift collapse of FTX, executives now facing federal prosecutions may have been the primary drivers of government surveillance of themselves and their competitors.” Are.”
The watchdog pointed out that the government agency’s quick response to an email from Bankman-Fried proved the former CEO wielded significant influence over US regulators.
Reports emerged in December 2022 that he had an extravagant dinner with Dan Berkowitz, then-commissioner of the Commodity Futures Trading Commission. Berkowitz quit shortly afterwards.
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