Bahamas 'Dangerous' IT Access Is Warned Against by FTX Bankruptcy Court

Wednesday saw a worsening of the disagreement over access to FTX's computer systems as Judge John Dorsey of the U.S. Bankruptcy Court in Delaware tried to mediate conflicting claims from the United States and the Bahamas.

The court was informed by the two opposing parties that granting access to FTX's platform would allow money to be stolen by the unreliable Bahamas government and that incendiary congressional testimony from the company's new CEO John Ray III ran the risk of throwing the case "off the rails."

The hearing took place the day after Sam Bankman-Fried, the founder of FTX, was detained at the request of the United States and refused bail in a Bahamas courtroom. The exchange was liquidated in the Bahamas immediately after filing for Chapter 11 bankruptcy protection in the United States on November 11.

James Bromley, a representative of Ray's FTX, referred to a request from Bahamas-based joint provisional liquidators (JPL) for access to the Amazon and Google cloud services that powered the exchange as "this is dangerous information."

"We do not trust the Bahamian government and … we simply don't trust that the JPLs will be able to hold this information and not provide it to the Bahamian government," he continued. "The Securities Commission of the Bahamas has already collaborated with the JPLs to obtain access to digital assets and to mint tokens."

Bromley is concerned that having access to the platform will make it possible for cryptocurrency to be moved outside of US jurisdiction. A Nov. 10 email between Bankman-Fried and Bahamas Attorney General Ryan Pinder that implied local users of the website would be granted preference access to assets was previously presented by him as proof.

In the meanwhile, Brian Simms and other provisional liquidators in the Bahamas claim they require access to records in order to identify corporate assets and preserve value, and they issue a cautionary note that if there are excessively long delays, some essential data may be automatically wiped.

Simms' attorney Chris Shore told the court, "“I've seen a lot of mega-cases go off the rails," and forewarned of hefty legal fees from a protracted struggle.

Regarding allegations "that a foreign government has colluded with somebody who is jailed right now … we’re at least tilting on the rails," Shore added in apparent reference to congressional evidence provided Tuesday by Ray regarding relations between Bankman-Fried and Bahamian authorities.

Judge Dorsey made an effort to defuse what he described as a "heated debate" and is obviously hoping to come up with a solution that will allow Simms to continue doing his job. It was suggested to reach a compromise by providing a duplicate of the database, enabling static access to the data, or placing restrictions on Simms' use of the information.

The Bahamas Securities Commission also criticized Ray in a statement released on Tuesday, accusing him of making "misstatements" and misrepresenting local institutions, which Shore emphasized are as unique from the U.S. Securities and Exchange Commission as Ray is (SEC).

Additionally, Simms is requesting access to employee email and Slack records as well as QuickBooks, a commercial accounting program. To Ray's apparent amazement, such platforms might have been utilized for important governance and decision-making at the multi-billion dollar corporation.

Sam Bankman-Fried, the company's founder, has previously said that he is unable to provide an accurate account of FTX's demise because he lacks access to personal and professional information from his time working for the organization. He is currently dealing with allegations from the Department of Justice, the Securities and Exchange Commission, and commodities regulator the Commodity Futures Trading Commission in addition to media attention and congressional hearings.

If mediation fails, Dorsey will continue to think about the matter on Friday and perhaps at a hearing on January 6.

By fLEXI tEAM