January 27, 2023

The Bahamas has more than 700 islands and cays; remote workers and students can live on 16 of them, including Eleuthera (shown here).

Sylvain Sonnet | The Image Bank | Getty Images

Bahamian lawyers say FTX executives Sam Bankman-Fried and Ryan Salame spent $256.3 million to buy and maintain 35 different properties across New Providence, Bahamas.

Now, Bahamas regulators are trying to claw back the property from FTX’s U.S. bankruptcy protection proceedings, telling a Delaware federal judge that allowing the properties to be administered in U.S. courts would be both administratively ineffective and illegal under Bahamas law.

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It is the first true look behind the curtain at FTX’s mammoth real estate spending. Tens of millions were spent just at the small island development that Bankman-Fried called home, with FTX’s holding company buying at least 15 properties and one vacant lot for a combined total of over $143 million.

Two of the largest apartments at that private Albany development came in at an eye-watering $30 million; another was purchased for just over $21.3 million.

Bankman-Fried and Salame also invested tens of millions of dollars into land for their current headquarters building, sinking over $25 million into purchases at the Veridian Corporate Center. In April, FTX broke ground on a new headquarters, which has been on hold since the exchange filed for bankruptcy in November.

Now, Bahamian regulators are fighting to get those assets back from FTX’s U.S. leadership. In a Monday night filing, the Bahamian lawyers asked a U.S. judge to dismiss the Chapter 11 proceedings for FTX’s property subsidiary. Bahamian attorneys told the court that because all of the property was in the Bahamas, and because “Bahamian law does not allow recognition of a foreign insolvency proceeding for a Bahamian company” that the U.S. bankruptcy proceedings should be suspended and Bahamas regulators should be allowed to assume full control of the Bahamian real estate process.

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It is a move that is likely to spark pushback from FTX’s U.S. attorneys and CEO John J. Ray, who has committed to maximizing recovery for FTX clients both in the U.S. and abroad through restructuring and asset sales. U.S. and Bahamian lawyers have been tussling in court over jurisdiction, with each side crying foul at the other.

FTX filed for bankruptcy protection on Nov. 11, after reporting by CoinDesk revealed significant irregularities in sister hedge fund Alameda Research’s balance sheets. An eleventh-hour rescue by Binance ultimately failed, precipitating a run on the bank and an astonishing liquidity crisis for an exchange that had once been heralded as the saving grace of crypto.

Founder Bankman-Fried is now in Bahamian jail, after charges were filed against him by U.S. prosecutors.

Crisis continues to loom large over the entire crypto space. BlockFi filed for bankruptcy in November. Myriad exchanges have either frozen or “paused” redemptions and withdrawals. Rumors swirl about what exchange, if any, will be the next to fall, even as crypto firms release apparently audited proof-of-reserves in a bid to shore up investor confidence.