Bahamas regulators now confirm they have asked SBF to move assets

Bahamas regulators now confirm they have asked SBF to move assets

At least some of the millions of dollars in FTX client funds that were mysteriously moved from the exchange last week were moved at the direction of regulators in the Bahamas. That claim was made in a new filing by the embattled company and confirmed late Thursday by the Bahamas Securities and Exchange Commission itself.

“[There is] credible evidence that the government of the Bahamas is responsible for directing the unauthorized access to the debtors’ systems for the purpose of obtaining the debtors’ digital assets—which occurred after the commencement of these cases,” the filing, signed by the new FTX CEO John Ray. , famous for his handling of the Enron liquidation.

The company went on to say that co-founders Sam Bankman-Fried and Gary Wang were recorded as saying that Bahamian regulators instructed the pair to make “certain transfers after the report” and that such assets were “held in FireBlocks under the control of [the] Government of the Bahamas”.

SBF’s Alameda Moved $89M worth of Crypto to New Wallet

It was not the first time the accusation had been leveled at the island nation, which has previously denied it. But this time, Bahamian regulators reversed course.

“The Securities and Exchange Commission of The Bahamas, in the exercise of its powers as a regulatory authority acting under the authority of an order issued by the Supreme Court of The Bahamas, undertook to direct the transfer of all digital assets of FTX Digital Markets Ltd. a digital wallet controlled by the Commission, for safekeeping,” the agency said Thursday.

The regulator said it took these actions to protect the interests of customers and creditors under its jurisdiction.

The move is the latest twist in the fight to secure what’s left of FTX assets, the latest developments coming as US regulators called Bankman-Fried to testify before a House Financial Services Committee in December to answer for the collapse of FTX.

In its latest filing, FTX said it “has secured only a fraction of the FTX Group’s digital assets they hope to recover,” saying it now has $740 million in a new cold wallet. However, they failed to account for three main gaps in the monitored assets:

“These balances exclude cryptocurrencies that are not currently under the control of the debtors as a result of (a) at least $372 million in unauthorized transfers that began on the Reporting Date, (b) the dilutive “cut” of approximately $300 million in FTT tokens from unauthorized source after the Reporting Date and (c) the failure of the co-founders and potentially others to locate additional wallets believed to contain assets of the debtor.”

Hundreds of millions of dollars drained from FTX overnight in ‘unauthorised’ transfers

The unauthorized transfers were spotted on November 11, the same day FTX filed for bankruptcy, and were tracked in real-time by blockchains on Twitter, leading to a flurry of speculation. At the time, the transfers, which totaled $650 million, were believed to be part of a massive hack targeting the bankrupt company.

At 2 a.m. EST that evening, FTX US general counsel Ryne Miller called the transfers “unauthorized” and said FTX had begun moving the company’s remaining assets into cold storage to “mitigate the damage.”

The Bahamas Securities and Exchange Commission had earlier issued a press release saying it was taking steps to freeze the assets of FTX Digital Markets. On the same day, FTX released its own statement saying it had begun allowing the withdrawal of funds from the Bahamas to comply with the country’s regulators.

However, as rumors circulated that the unauthorized transfers were the work of Bahamian authorities, the Bahamas Securities and Exchange Commission issued a statement pushing back against FTX’s claim, saying it “has not directed, authorized or recommended to FTX Digital Markets Ltd. the prioritization of withdrawals for customers from the Bahamas”.

The statement acknowledged that such action could constitute “revocable preferences” under bankruptcy rules and could require “recovery of funds from Bahamian customers.”

“In any case, the Commission does not approve of the preferential treatment of any investor or client of FTX Digital Markets Ltd. or otherwise,” the agency said.

The individuals or groups responsible for the unauthorized transfers remain unknown, then, but blockchain watchers are posting their theories on Twitter, attributing some of the withdrawals to “white hat FTX employees” and others “perhaps controlled by [Bankman-Fried and Wang].”

FTX’s Bahamas subsidiary FTX Digital Markets Ltd. filed for Chapter 15 bankruptcy on November 15, requesting cooperation between US and foreign courts as the foreign bankruptcy proceedings involved the United States.

Bahamas regulators want control of FTX’s bankruptcy proceedings

The Bahamas Securities and Exchange Commission says it does not believe FTX Digital Markets, Ltd., is a party to FTX’s U.S. Chapter 11 bankruptcy proceeding. The agency says it will work with other regulators and authorities “across multiple jurisdictions” to address issues affecting FTX Digital Markets’ creditors, clients and stakeholders.

Brian Simms, a partner at Nassau law firm Lennox Paton, has been appointed as interim liquidator. He said FTX was not authorized to file for bankruptcy in the U.S. — and asked that FTX’s U.S. assets be turned over to liquidators from the Bahamas.

The collapse of FTX and the subsequent spread of contagion in cryptocurrencies has led regulators around the world to call for stricter regulation of cryptocurrencies.

Leave a Reply

Your email address will not be published. Required fields are marked *