Bahamas takes control of bankrupt exchange FTX’s assets
Bahamian regulators ordered FTX’s former CEO Sam Bankman-Fried to provide “unauthorized access” to the exchange’s systems and transfer of all digital assets to a wallet owned by the Bahamian government.
Authorities in the Bahamas — where FTX is headquartered —justified the move to take control of assets, citing “urgent interim regulatory action was necessary to protect the interests of clients and creditors of FDM.”
The filing said that the Securities Commission of the Bahamas (SCB) exercised its power as a regulator acting under the authority of a Supreme Court order for safekeeping the bankrupt exchange’s assets. In an interview with Vox, Bankman-Fried expressed serious disdain for regulators but said he already transferred those funds to the SCB’s custody.
“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 JPLs and recognition of the Chapter 15 Case are thus in serious question,” the filing continued.
The move came after the lawyer overseeing FTX’s bankruptcy said the initial conclusions show a massive mismanagement and potentially fraudulent acts. It was also expected after the appointment of a provisional liquidator followed the Bahamian securities regulator suspending FTX’s registration status and freezing its local subsidiary’s assets on November 10. The provisional liquidation is a regulatory act to safeguard all assets for the time being, as opposed to distributing the company’s assets to creditors.
FTX’s new CEO, John Ray, who previously oversaw Enron’s liquidation and other bankruptcy cases, painted the picture of a crypto empire with unreliable financial statements, mishandling confidential data and the use of corporate funds to buy homes for employees in the Bahamas.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” he wrote about the chaos at the crypto exchange in a court filing Thursday.
The new head at FTX also revealed that his team has only been able to locate about $564 million in cash. That compares with a roughly $8 billion shortfall that Bankman-Fried reportedly told investors last week that FTX would need.