FTX’s U.S. and Bahamas Estates Agreed to Coordinate Asset Recovery

FTX’s Chapter 11 debtors and the court-appointed provisional liquidators of FTX Digital Markets Ltd. executed a settlement and cooperation agreement on January 6, 2023, creating a framework for coordinating the failed cryptocurrency exchange’s parallel insolvency proceedings in the United States and The Bahamas.

The agreement mattered because the two groups had spent the preceding weeks disputing control of records, digital assets and the bankruptcy process itself. Continued conflict risked increasing legal costs, duplicating recovery work and delaying decisions affecting customers and other creditors. The January 6 pact did not resolve every dispute, but it converted part of that confrontation into a documented process for cooperation.

The agreement remained subject on January 6 to approval by the U.S. Bankruptcy Court for the District of Delaware and the Supreme Court of The Bahamas. It was therefore an executed settlement framework, not yet a final judicial determination of ownership or creditor entitlement.

What the agreement established

The parties agreed to share information, identify and secure property, return property to the appropriate estates when agreed or ordered, coordinate litigation against third parties and examine strategic alternatives intended to maximize stakeholder recoveries.

They also established parameters for participation across jurisdictions. The joint provisional liquidators of FTX Digital Markets could take part in the Delaware Chapter 11 proceedings, while the Chapter 11 debtors could participate in relevant Bahamian proceedings. This did not merge the estates or eliminate the separate authority of either court.

The agreement addressed two particularly contested asset groups. It contemplated a jointly supervised disposition process for FTX-related real estate in The Bahamas, operationally led by the Bahamian liquidators and overseen by courts in both jurisdictions. It also established a process to confirm the inventory of digital assets held in a Fireblocks account controlled by the Securities Commission of The Bahamas.

The parties’ January 6 announcement said both sides were comfortable that those digital assets had been appropriately safeguarded while restructuring discussions continued. That statement concerned custody and preservation. It did not concede which estate owned the assets, establish their recoverable value or authorize their distribution.

Why cooperation was consequential

The agreement followed a public dispute over assets transferred to wallets controlled by the Bahamian commission on November 12, 2022. On January 2, 2023, the commission accused the Chapter 11 debtors of making material misstatements and said the debtors had impeded the provisional liquidators’ access to FTX’s cloud systems. The Chapter 11 debtors had separately challenged the commission’s asset valuation and asserted claims over the transferred property.

Those were competing contemporaneous positions, not findings adopted here. Their significance was institutional: reconstructing FTX required access to fragmented records and systems while courts in different countries considered overlapping claims involving affiliated companies. Cooperation could improve information access and asset preservation even without settling the underlying jurisdictional questions.

John J. Ray III, FTX’s chief executive and chief restructuring officer, acknowledged in the January 6 announcement that the parties still lacked agreement on some issues. The joint provisional liquidators likewise described the jurisdictions as having different legal tools. The pact should therefore be read as a procedural advance rather than a comprehensive resolution.

What remained unresolved on January 6

The surviving agreement and announcement did not quantify customer claims, determine the size of any estate shortfall, identify a distribution date or promise a recovery percentage. They also did not finally decide ownership of the commission-controlled digital assets, allocate every subsidiary to a particular proceeding or resolve potential claims against former insiders and third parties.

No cryptocurrency price, return, volume or market-capitalization claim is made in this reconstruction. The agreement was a cross-border insolvency development, and the reviewed records do not establish a measurable event-day market reaction attributable to it.

Court approval, implementation of information-sharing procedures, verification of the Fireblocks inventory and adjudication of disputed ownership all remained future steps as of January 6, 2023.