FTX Lawyers Accuse Bankman-Fried of Undermining Bankruptcy

Embattled cryptocurrency mogul Sam Bankman-Fried is undermining efforts to reorganize his crumbling empire with “incessant and disruptive tweeting” that appears aimed at moving assets away from the control of a U.S. court in favor of one in the Bahamas, U.S. lawyers for the bankrupt crypto platform FTX said in a court filing.

FTX, which is now under the control of John J. Ray III—a restructuring lawyer who oversaw the liquidation of Enron—asked a federal judge in Wilmington, Delaware, to transfer a competing bankruptcy case filed in New York by Bahamian liquidators to Delaware.

Such a move would consolidate all U.S.-based insolvency proceedings in one court. They also asked the Delaware judge to block “all persons and all governmental units” from taking action in any court around the world to seize assets or collect money from the company.

“Enormous efforts are underway to bring some semblance of order to a chaotic environment,” lawyers for FTX wrote in the bankruptcy filing. “It is critical to the efforts to end the chaos and to ensure that assets can be secured and marshalled in an orderly process.

Liquidators in the Bahamas moved earlier this week to solidify control over the insolvency of FTX Digital Ltd., a subsidiary within Bankman-Fried’s crypto enterprise, bankruptcy court papers show. They argue that account holders with assets in FTX’s custodial wallets are likely creditors of the Bahamian unit and are seeking to probe the rest of the crypto exchange’s corporate entities.

In an article published Wednesday by Vox Media, a reporter posted screen shots of Twitter direct messages in which Bankman-Fried criticized regulators and called the decision to put FTX into bankruptcy a mistake. “Everything would be ~70% fixed right now if I hadn’t,” Bankman-Fried wrote in the DMs.

He went on to suggest that he could still fix the matter if “we can win a jurisdictional battle vs. Delaware.”

FTX’s lawyers included the comments in the bankruptcy filing Thursday morning.

Bankman-Fried “appears to be supporting efforts” by the Bahamian liquidators “to expand the scope of the FTX DM proceeding in the Bahamas, to undermine these Chapter 11 cases, and to move assets from the debtors to accounts in the Bahamas under the control of the Bahamian government,” the lawyers wrote.

Bankman-Fried didn’t respond to messages seeking comment on the Vox article, but in his own Twitter feed, he sought to walk back the comments, which he said were not intended to be public and part of a conversation with “a friend of mine.”

Steven Church reports for Bloomberg News.

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