FTX Unit Sees Its Digital Assets Seized By The Bahamas Government
The bankrupt crypto exchange revealed in a court filing that former CEO Sam Bankman-Fried was instructed by “Bahamas regulators” to transfer said assets to government custody.
Even in bankruptcy, FTX and its former CEO Sam Bankman-Fried still attract controversy. The Bahamas Securities Commission stated Thursday night that it had ordered the transfer of all digital assets of FTX Digital Markets, a Bahamas-based FTX company that filed for Chapter 15 bankruptcy protection two days ago.
“The Securities Commission of The Bahamas, in the exercise of its powers as regulator acting under the authority of an Order made by the Supreme Court of The Bahamas, took the action of directing the transfer of all digital assets of FTX Digital Markets Ltd. (FDM) to a digital wallet controlled by the Commission, for safekeeping,” the country’s regulatory body said in a statement. “Urgent interim regulatory action was necessary to protect the interests of clients and creditors of FDM.”
On November 15, FDM filed for chapter 15 bankruptcy in the United States, just days after the majority of the FTX group filed for chapter 11. Even stranger, the Bahamian unit filed for bankruptcy in the Southern District of New York, as opposed to Delaware, where the rest of the corporations did.
This follows after the crypto exchange entered evidence in its own Chapter 11 proceedings indicating that Bahamian regulators urged Bankman-Fried to get “unauthorized access” to FTX systems in order to obtain digital assets belonging to the company after it filed for bankruptcy protection.
The Bahamas regulators said it is not in its understanding that it is party to FTX’s Chapter 11 bankruptcy filing.
In addition, FTX argued that this incident puts “in serious question” a request by Bahamian regulators to be recognized as liquidators in the bankruptcy.
“The Debtors thus have credible evidence that the Bahamian government is responsible for directing unauthorized access to the Debtors’ systems for the purpose of obtaining digital assets of the Debtors—that took place after the commencement of these cases. The appointment of the [joint provisional liquidators] JPLs and recognition of the Chapter 15 Case are thus in serious question,” the filing read.
Further, FTX accused Bankman-Fried of “supporting efforts by the JPLs to expand the scope of the FTX DM proceeding in the Bahamas, to undermine these Chapter 11 Cases, and to move assets from the Debtors to accounts in the Bahamas under the control of the Bahamian government.”
Earlier this week, the Bahamian commission clarified in a statement that it had not “directed, authorized or suggested to FTX Digital Markets” to prioritize withdrawals for users in the Bahamas, adding that “such transactions may be characterized as voidable preferences under the insolvency regime and consequently result in clawing back funds from Bahamian customers.”
In an interview with Vox’s Kelsey Piper, Bankman-Fried admitted that his lobbying for ethical cryptocurrency regulation was “just PR.”
“There’s no one really out there making sure good things happen and bad things don’t,” the former FTX chief said. “F*ck regulators. They make everything worse.”
Currently, FTX is in the process of filing for bankruptcy, where around one million creditors are expected to chase the liquidation. Bankman-Fried has already stepped down from management and was replaced by Enron liquidator John J. Ray III as CEO.
Ray was reportedly shocked upon seeing “a complete failure of corporate controls and such a complete absence of trustworthy financial information” in the crypto exchange.
Information for this briefing was found via CNBC, CNN, Coindesk, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.