The collapse was, however, a nightmare for the company’s suppliers including the aircraft operator that managed its two aircraft. Third party aircraft operators are exposed when customers fail and often end up with unpaid bills. Especially if they only have oral agreements with customers.

Bankman-Fried moved FTX’s headquarters from Hong Kong to the Bahamas in September 2021. He said this was because he preferred the Bahamian regulatory environment. This meant that one of the companies hit hardest by the collapse was Bahamian operator Island Air Capital owned by Paul Aranha. The company operates a fleet of about 10 aircraft. According to court filings, FTX and Bankman-Fried spent more than $15m with Island Air Capital when it first moved to the island.

“The aircraft loan was in the form of an unsecured, no-interest loan agreed to in a handshake deal”

At the time FTX was valued at more than $42bn [or 100 Bitcoin?] so it made sense for the firm to buy its own aircraft. The company paid for a Bombardier Global in March and an Embraer Legacy in August 2022 with help from Island Air Capital. As soon as the deal closed both aircraft were sent to the US for new interiors and to have new wi-fi installed. This was no doubt so passengers could trade cryptocurrencies or play computer games when flying. (Sequoia Capital invested in FTX after Bankman-Fried admitted playing League of Legends during a pitch according to a now-removed profile on their website). At the same time, FTX also discussed buying a $17m stake in Island Air Capital. This investment never closed.

So far this all seems simple, but when FTX filed for bankruptcy in November 2022 it all becomes a bit more complicated. It was an extremely confusing bankruptcy for everyone.

In September 2023, Island Air Capital asked the bankruptcy court to recognise that it was the owner of both aircraft. It wanted the court’s permission to operate, manage and sell the aircraft. If the court did not agree with this, it asked for the right to place maintenance liens on the aircraft (which is often the best protection an operator gets). The operator said that FTX also owed it $2.6m for flight services.

In a court filing, Island Air Capital said that Bankman-Fried had agreed that it would own the aircraft with FTX providing aircraft finance. “The aircraft loan was in the form of an unsecured, no-interest loan agreed to in a handshake deal between FTX’s then-CEO Sam Bankman-Fried and IAC’s beneficial owner, Mr. Aranha,” said the operator in the court filing. 

“The Aircraft Loan agreement was not documented, but this was not unusual”

There was no paperwork to prove this agreement. In the filing the operator said:

“The Aircraft Loan agreement was not documented, but this was not unusual for Mr. Aranha, who has financed other aircraft purchases in the past based on oral agreements.”

After FTX collapsed, Aranha flew the Legacy back to the Bahamas and started selling the Global. His company’s court filing said that without FTX as a customer or investor he was forced to pivot his business and that the Legacy would be useful for charter.

The Global was switched from the Bahamas registry to the US and Island Air Capital said it paid for scheduled maintenance and inspections. In the filing he said the aircraft attracted several offers of more than $15m. But no deal closed.

This was because US Marshalls seized the Global in February 2023. The US government wanted the aircraft as forfeiture because it was bought with cash from criminal conduct that Bankman-Fried was charged with (and later found guilty of). The Legacy was still in the Bahamas.

FTX’s debtors also pushed back against Island Air Capital’s filing. They said that there was no paperwork to prove any of this (a common problem with oral deals). They said that FTX owned the aircraft but had tried to hide ownership. The debtors said this was why it had looked at taking a stake in the operator but that it had never committed to invest in Island Air Capital.

The filing also said that FTX paid $975 for a stock of board games for Bankman-Fried to use on one of the aircraft. This is a sensible backup that other owners and operators should consider. Nothing beats Monopoly if the wi-fi is down. These court arguments were back in May 2023.

This week – the same that Bankman-Fried was sentenced – the aircraft issues have finally been resolved. Island Air Capital has agreed to the fly the Legacy to the US and hand it over to the government.

“Under the primary terms of the Stipulation and Order, IAC agrees to withdraw litigation previously filed against the FTX Debtors, Stipulation and Order,” said Damian Williams, a US attorney in a court filing this week. In return, the US government has agreed to pay Island Air Capital costs for flying the aircraft to the US and for maintenance on the aircraft before the collapse of FTX. The government is now asking for court authorisation to sell the aircraft.

Because upgrades were taking place when the company entered Chapter 11, no FTX employee flew on either aircraft. Bankman-Fried did not get to play any boardgames on board. What would he give for a Get Out of Jail Card now?