Federal Judge Rejects Request to Relinquish Control of FTX’s Disputed Assets

A proposal to turn up control of the $7.3 billion in disputed assets owned by the troubled cryptocurrency exchange FTX was rejected by a federal court presiding over a bankruptcy hearing. The ruling was a setback for the Bahamas’ liquidators, who planned to use the country’s legal system to stake a claim to some of the assets.

The Jurisdictional Issue: Determining Ownership of Assets

The issue of who legally owns the significant crypto and cash assets of the insolvent exchange was a crucial source of dispute between the parties during the proceedings at the U.S. Bankruptcy Court for the District of Delaware. U.S. Bankruptcy Judge John Dorsey debated on this issue throughout the proceedings. Bahamas-based liquidators urged that a section of the bankruptcy case should be overseen by a Bahamian judge; however, FTX’s restructuring advisors, who took over when founder Sam Bankman-Fried was detained on fraud charges, strenuously rejected the move.

Judge Sides with FTX’s Advisors, Citing Practical Limitations

Judge Dorsey made it plain that he agreed with FTX’s advisors and was unwilling to refer a crucial jurisdictional dispute to a foreign court. He emphasized, “Under no circumstances would I ever defer a core jurisdictional issue to a foreign court. And the core jurisdictional issue here is whose assets are [these].” The judge noted the practical difficulties the Bahamian courts have while conceding that they might have concurrent jurisdiction, saying, “But as a practical matter, they don’t have access to the assets.”

Although Judge Dorsey voiced his opinion at the hearing, no formal decision has yet been made. On June 9, when the judge is anticipated to make his ruling, the case is set to resume.