By Dietrich Knauth
(Reuters) -Liquidators for FTX's Bahamas unit, FTX Digital Markets, have asked a New York City court to recognize its bankruptcy in the Bahamas, saying they "reject the validity" of the cryptocurrency exchange's U.S. bankruptcy proceedings.
The Bahamas liquidators, who were appointed on Nov. 10 by the Securities Commission of the Bahamas, filed a Chapter 15 petition late on Tuesday in U.S. bankruptcy court in New York, asking the court to obtain records from FTX and block asset transfers to protect creditors of the Bahamas-based company.
Chapter 15 proceedings are used by foreign companies to seek U.S. courts' cooperation in cross-border bankruptcy cases.
FTX and 130 affiliates filed for bankruptcy in Delaware on Nov. 11 in one of the highest-profile crypto blowups, leaving an estimated 1 million customers and other investors facing total losses in the billions of dollars. But FTX Digital Markets entered liquidation proceedings first, according to the Chapter 15 petition, and its court-appointed liquidators said their case should take precedence over efforts to reorganize in the United States.
The Bahamas liquidators said they were not seeking to dismiss the U.S. bankruptcy, but noted that their actions may "impact" the Chapter 11 cases.
One of the liquidators, Bahamas-based restructuring attorney Brian Simms, said in court documents filed with the petition that the U.S. proceedings were not authorized under Bahamas law.
A Bahamas court has authorized the liquidators to protect the assets of all FTX affiliates that operate from the Bahamas, where the entire corporate structure is headquartered, according to the Chapter 15 filing. That means that only the Bahamas liquidators have the power to place FTX affiliates into bankruptcy, according to Simms.
FTX CEO John J. Ray III did not immediately respond to a request for comment.