FTX bought two aircraft – the Legacy and a Bombardier Global aircraft. The Legacy has been in the Bahamas since the collapse of FTX.

Island Air Capital, a Bahamian air charter company, had argued in bankruptcy filings that it owned the aircraft. It has now agreed to the fly the aircraft to the US.

“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. In return the US government has agreed to pay 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 Legacy.

Paul Aranha, the owner of Island Air Capital, had argued that Island Air Capital owned both the Legacy and the Bombardier Global. In a filing, Island Air Capital had said that it owned the aircraft using financing from FTX.  “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 a court filing.  

In the filing Island Air Charter said it provided charter flights, aircraft upgrades and other services worth more that $15m to FTX and its founder Sam Bankman-Fried. Island Air Charter said that FTX did not wish to own the aircraft and agreed to finance two more aircraft for them.

The Bombardier Global was bought in March 2022 and the Legacy in August 2022. Both aircraft were being fitted with new interiors and connectivity when FTX filed for bankruptcy.

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Around 200 business people and members of the Saudi royal family were detained in November with most being released in January. A significant number of the people in the Ritz-Carlton owned business jets with several being arrested after their private aircraft had landed at Riyadh airport.

The Saudi attorney general says that 381 individuals were arrested. Some 56 are still in custody.

Some were released without charges, with others reaching financial agreements with the government. A statement released by the Saudi Press Agency said: “The attorney general has indicated that the estimated value of settlements currently stands at more than SAR 400 billion ($1 billion) represented in various types of assets, including real estate, commercial entities, securities, cash and other assets.”

These assets include a significant number of large business jets. “Principals that cannot meet monetary demands were asked to hand over assets, including aircraft, art, real estate, fancy cars, etc as compensation,” says one business aviation consultant with Saudi clients.

It is unclear how many business jets were handed over as part of the settlement. “We have heard that it could be as many as 30 aircraft,” says one Saudi-based market expert. “We have been told that they (the state) will no longer take business jets as they have too many.”

Some aircraft that have been transferred also been financed by international banks. These banks are now demanding that aircraft be returned to them.

Banks own title to the aircraft so could seize any aircraft that flies outside Saudi Arabia for maintenance or flights. The country has also ratified the Cape Town Convention, an international treaty that recognises the rights of aircraft financiers, but banks would rather use other courts.

“Part of the problem is that every lawyer in Riyadh tells you they are conflicted,” says one banker who believes an aircraft his bank financed has been transferred. “But we are taking this very seriously. The only thing that we have seen close to this is when an aircraft was seized by a government in Africa during a war.”

Lawyers say that financiers may also be able to claim that aircraft have been seized under their insurance policies.

Advisers say that they expect many Saudi Arabian owners to move aircraft out of the country and register them in different jurisdictions.

Also read: Many Saudi-owned aircraft still grounded after Ritz-Carlton crackdown

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