Bankrupt crypto exchange FTX Trading on Tuesday announced a settlement with liquidators for FTX's Bahamas unit, resolving a long-simmering dispute over whether the company's U.S. bankruptcy proceedings should take precedence over the Bahamian liquidation.
FTX and FTX Digital Markets have agreed to pool their assets and harmonize their approach to valuing customer claims to ensure equal treatment for customers in either country's insolvency process. The settlement will allow most customers of FTX.com's international crypto exchange to choose whether to seek repayment from either the U.S. bankruptcy or the Bahamian liquidation, according to FTX.
FTX's CEO John Ray, who took control of the company from convicted FTX founder Sam Bankman-Fried, said that the agreement is a critical milestone in the company's effort to repay customers.
"The unique challenges raised by the conflicting filings of the FTX Debtors and FTX Digital Markets have been some of the toughest the team has faced," Ray said in a statement. "But we recognized at the beginning that we have an overlapping constituency: FTX.com customers."
The Bahamian liquidators, Brian Simms and Peter Greaves, said in a statement that the agreement will avoid "years of protracted litigation and expense" and "accelerate the return of funds to customers."
FTX had been at odds with Bahamian officials ever since filing for bankruptcy protection on Nov. 11, with a hole in its balance sheet that left its 9 million customers facing billions in potential losses. FTX had sued the Bahamian liquidators in March, seeking a ruling that the liquidators had wrongly claimed ownership of the exchange's assets.
Under the agreement, FTX's U.S. based bankruptcy team will take the lead on asset recovery efforts, including any potential sale of the FTX.com exchange or its intellectual property. The Bahamian liquidators will be in charge of selling real estate assets in the Bahamas and pursuing certain litigation claims.
The settlement also includes an agreement to FTX's proprietary crypto token FTT as equity in FTX, which would be wiped out in the company's bankruptcy. The value of FTT tokens had been a point of contention between the two sides last year, when FTX's U.S. team alleged that most of the assets seized by the Bahamian liquidators were valueless FTT tokens.
FTX, which collapsed in November 2022, has committed to using at least 90% of its assets to repay customers. The company plans to pay customers back in U.S. dollars, rather than in cryptocurrency.
