FTX's massive $256 million real-estate empire is up for grabs as Bahamian and US lawyers squabble over who should control it

FTX's portfolio of Bahamian properties represent some of the most tangible assets that can be liquidated and redistributed to creditors.

FTX's massive $256 million real-estate empire is up for grabs as Bahamian and US lawyers squabble over who should control it

Lawyers representing the US and the Bahamas are at odds with one another over who will control the massive real estate empire of Sam Bankman-Fried, the disgraced former head of the now-bankrupt crypto exchange FTX, according to court filings reviewed by Insider. Bankman-Fried's real estate holdings — all of which are owned by an FTX subsidiary called FTX Property Holdings, LLC —  have become a central part of the bankruptcy case against the crypto exchange as an unspecified number of creditors seek to recover billions of funds from the business. The real estate holdings represent some of the most tangible assets that can be liquidated and redistributed to creditors as lawyers for FTX say that billions of the crypto exchange's assets remain unaccounted for. According to a court filing from December 12, Bahamian lawyers asserted that Bankman-Fried spent more than $256 million to acquire 35 properties on the island. Reuters first reported in November that Bankman-Fried's purchased tens of millions of real estate in a swank luxury resort community on the island called Albany.

FTX had also planned to build a new headquarters on the island, although that project was put on hold in April, according to local reports. The same lawyers also argued in the December 12 filing that the island nation should have jurisdiction over the liquidation of FTX's real estate assets because Bahamian law does not recognize the legitimacy of a foreign bankruptcy proceeding. "FTX Property Holdings is a Bahamian corporation that does only one thing, [which is to] own real property located in The Bahamas," the filing reads in part. "All of its known assets and creditors are located in The Bahamas.

It has no connection whatsoever to the United States. Respectfully, this court is not the best forum to resolve the issues this case would present."On the other side, FTX's new CEO, John J. Ray III, who also led the asset recovery efforts when Enron folded in 2001, argued in a hearing before the House Financial Services Committee on December 13 that the case needs to stay in the US in order to maximize the asset recovery for the more than 1,000 creditors who lost billions of dollars because of the company's alleged fraud. "We are working around the clock to locate and secure the property of the estate, a substantial portion of which may be missing, misappropriated, or not readily traceable due to the lack of proper record keeping," Ray told the committee. While lawyers working on the case squabble over which jurisdiction will ultimately decide the case, other bankruptcy lawyers like John Pintarelli, a partner at Pillsbury Winthrop, an international real-estate law firm headquartered in New York City, told Insider that venue may not be the most important aspect.  Presumably, Pintarelli said, regulators and judges in both countries would work to secure the biggest payout possible for the creditors who are owed money.

But, that total payout could change if regulators in one country or the other wait too long to liquidate the real estate assets, Pintarelli added. "No one wants to be sitting on 'the melting ice cube,' as we call it," Pintarelli told Insider. "If real estate values are going down, you want to sell the properties as fast as you can to recover as much as possible for the creditors."According to market data from brokerage BE Luxury Real Estate, the median sales price of Bahamian real estate grew from about $360,000 in 2020 to more than $630,000 through the first six months of 2021. FTX initially filed for Chapter 11 bankruptcy protections in Delaware on November 11. In the filing, the company speculated there are more than 100,000 creditors seeking restitution, but another filing from November 14 said FTX "may have more than 1 million creditors" and has liabilities of about $6 billion.