Deborah Kovsky-Apap, a partner in Troutman Pepper’s Financial Restructuring + Insolvency Practice Group, is quoted in the December 30, 2022 Reuters article, “Bahamas Regulator Holds FTX Assets Pending Delivery to Customers, Creditors.”

The sheer size of the asset seizure sends mixed signals to FTX customers, according to Deborah Kovsky-Apap, a bankruptcy attorney who is not involved in the case. The Bahamian government’s action preserves assets that could otherwise be lost or stolen, but it could also deepen a dispute between the company’s U.S.-based bankruptcy proceedings and the Bahamas liquidation.

Ideally, both sides would cooperate to sort out which creditors should be repaid with the seized assets, a task that is already more difficult than normal due to FTX’s extensive commingling of customers’ funds with those of FTX and its sister hedge fund Alameda Research, Kovsky-Apap said.

“It may be impossible to unscramble that egg,” Kovsky-Apap said. “And if you can’t, the fact that a government entity has seized these assets and staked out a claim to them creates significant additional tension.”