FTX’s Bahamian liquidators accuse company’s US debtors of ‘stringing along’ process

NASSAU, BAHAMAS — FTX’s joint provisional liquidators have refuted assertions that they “sat on their hands” and waited a month to file an emergency motion seeking to gain access to the collapsed company’s electronic records.

The provisional liquidators argued that despite attempting to appear cooperative, the US Debtors have been “stringing the process along.” 

Court documents were filed yesterday in support of a motion to shorten the notice and objection periods with respect to their Emergency Motion seeking relief from the automatic stay provided by the bankruptcy filing, and access to FTX’s digital records.

According to those filings, the liquidators argued that there were only two objections raised by the debtors which were relevant to the motion.

The debtors have alleged that there was no need for an emergency motion because no matter how quickly they had acted, they either do not need the recorded information or are not entitled to it. 

The joint provisional liquidators in court filings stated: “First, the joint provisional liquidators have hardly sat on their hands and certainly did not “wait a month” to request access to their own information of FTX Digital.”

They noted that they had requested access to the property of FTX Digital, through the employees of FTX Digital, as soon as they were appointed and access was cut off to FTX Digital employees. They further noted that on or around November 15, an information-sharing protocol was discussed between US debtors’ counsel, Sullivan & Cromwell, and the joint provisional liquidators then counsel Holland & Knight. The liquidators noted that there had been conversations regarding access to information and on November 30, 2022, White & Case sent a letter to the US debtors indicating that they should preserve the recorded information. 

“On December 1, 2022, White & Case then had a telephonic meeting with Sullivan & Cromwell regarding turnover of that information. Sullivan & Cromwell indicated that they would come back with an answer promptly,” the liquidators noted, adding that ‘after days of silence,” White & Case sent another letter on  December 7.

“On December 8, not in response to the December 7 letter, Sullivan & Cromwell asked for an “in-person meeting” “next Wednesday” with counsel to the Commission to discuss a “number of issues of mutual interest.” However, given concerns that the US debtors were simply stringing the process along the joint provisional liquidators felt that filing the emergency motion would be prudent while the US debtors continued to find a suitable time to meet,” the liquidators stated.

They added, “Given the US debtors’ objection, that filing is fully justified. Despite attempting to appear cooperative, the US debtors have been stringing the process along.”

The liquidators noted that while the US debtors contend that there is “simply no exigency” in the joint provisional liquidators’ access to information regarding their own debtor and its customers, the proposition is “directly contrary to the positions taken by the US debtors regarding their own information and the need for cooperation with foreign regulators and proceedings in order to marshal and protect all the information.”