FTX US Judge Raises Concerns Over Parallel Bahamian Bankruptcy Proceedings

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Key takeaways:

  • In the FTX bankruptcy case, US Bankruptcy Judge John Dorsey retains jurisdiction over $7.3 billion in disputed assets, maintaining exclusive access and refusing to yield to a foreign court.
  • The ruling affects cash and cryptocurrency ownership, solidifying Dorsey’s role as the key “conclusion-maker” in the proceedings.

US Bankruptcy Judge John Dorsey has delivered a significant setback to the liquidators in the Bahamas by declaring his intention to maintain jurisdiction and control over the contested assets belonging to the bankrupt cryptocurrency firm FTX. This decision dealt a substantial blow to the Bahamian liquidators who were actively pursuing a claim on a portion of the impressive $7.3 billion in assets as part of an independent insolvency case.

US Bankruptcy Judge John Dorsey expressed his firm stance on not deferring a core jurisdictional issue to a foreign court during a hearing at the U.S. Bankruptcy Court for the District of Delaware. 

The judge delved into a crucial point of contention among the parties involved, specifically addressing the ownership of the substantial cryptocurrency and cash assets amounting to billions of dollars held by the insolvent exchange.

“Under no circumstances would I ever defer a core jurisdictional issue to a foreign court,” U.S. Bankruptcy Judge John Dorsey said. “And, the core jurisdictional issue here is whose assets are [these].”

This proclamation effectively cements his role as the key decision-maker in the proceedings. Judge Dorsey’s robust stance solidifies his status as the key decision-maker in the bankruptcy case, giving him complete power over the $7.3 billion in contested assets, which include cash and bitcoin.

This recent development is particularly significant as it follows closely on the heels of FTX Debtors issuing a challenge to Genesis‘ claims estimate of ‘$0.00’, which has led to an escalation in the dispute. The disagreement between the FTX Debtors and Genesis revolves around the valuation and assessment of the claims held by Genesis, with the former contesting the claim estimate provided by the latter.

 This dispute adds another layer of complexity to the ongoing legal proceedings surrounding the FTX bankruptcy case. 

Amidst the FTX bankruptcy case, liquidators based in the Bahamas have advocated for a Bahamian judge to preside over a portion of the proceedings. In contrast, FTX’s restructuring advisors, who assumed control of the exchange following the arrest of its founder Sam Bankman-Fried on fraud charges, have opposed this request. 

The final ruling on the liquidator’s plea is expected to be delivered by Judge Dorsey on June 9th during the next court session. This decision holds great significance as it will shape the trajectory of FTX’s insolvency case. 

Granting the liquidator’s request could potentially transfer control of the assets and subsequent reorganization proceedings away from the US jurisdiction. Conversely, denying the request may pose a significant setback for the liquidators in their pursuit of the disputed funds.

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Aadrika Sharma
Aadrika Sharma

I enjoy writing and try to learn new things every passing day!

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