NASSAU, BAHAMAS – The Bahamas Securities Commission (SCB) last night defended its decision to transfer all of FTX’s digital assets into digital wallets under its control for the benefit of FTX Digital Markets’ clients and creditors.
In a statement, the commission said it was “unfortunate” that in the Chapter 11 filings, the new CEO of FTX Trading Ltd misrepresented the action.
The SCB said it determined that clients and creditors of FTX Digital Markets needed DARE protection on November 10, 2022. The commission suspended FDM’s license to operate and subsequently filed a petition with the Supreme Court of the Bahamas to place FDM in pre-trial detention. liquidation.
“This action – the first filed globally against an FTX entity – placed FDM under the control of a court-appointed trustee and removed the exercise of authority over FDM from the previous management,” said the Commission.
The commission said it determined that putting FDM into liquidation was not sufficient to protect FDM’s customers and creditors given the nature of digital assets and the risks associated with hacking and compromise.
“As a result, on November 12, 2022, the Commission sought an additional order from the Supreme Court of the Bahamas to authorize, under the DARE Act, to transfer all digital assets of FTX into digital wallets under the sole control of the Commission for the benefit of FDM customers and creditors,” he continued.
“It is unfortunate that in the Chapter 11 filings, the new CEO of FTX Trading Ltd. misrepresented this timely action through the untimely and inaccurate allegations filed in the transfer request. It is also concerning that the Chapter 11 debtors have chosen to rely on statements from individuals whom they have (in other documents) characterized as unreliable and potentially “seriously compromised” sources of information.
The commission said: “Furthermore, statements made by the purported executives of FTX Trading Ltd. and other so-called Chapter 11 debtors — that they suffered major thefts, their systems were compromised, and they continue to face new hacking attempts — reinforces the wisdom of the Commission’s quick action to secure these digital assets,” the Commission said.
John Ray III took over the management of FTX after the resignation of its founder Sam Bankman-Fried.
Ray said: “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of reliable financial reporting as has happened here. From the compromised integrity of systems and flawed regulatory oversight overseas to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.
SCB said it will continue to assess FTX’s situation, continue to act in accordance with directions issued by the Supreme Court of the Bahamas, work with other supervisory authorities, and take additional steps as necessary to safeguard FTX’s assets. FDM and safeguard the interests of FDM’s customers and creditors.
“Furthermore, the Commission will continue to investigate the facts and circumstances regarding FTX’s liquidity crisis and any potential violations of Bahamian law and will hold all responsible companies and individuals accountable, in cooperation with other law enforcement agencies. regulators and law enforcement in the Bahamas and other affected countries as part of their own investigations,” the commission said.
“The Commission also looks forward to continuing to cooperate with authorities in other jurisdictions to ensure the cooperative and vigorous resolution of all proceedings necessary to achieve these objectives.”
FTX’s Chapter 15 bankruptcy petition filed in New York by Bahamian-appointed joint liquidators has been transferred to a Delaware bankruptcy court.
FTX Trading Ltd. had filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on November 11. However, liquidators appointed by the Supreme Court of the Bahamas later filed a Chapter 15 lawsuit in the Southern District of New York for FTX. Digital Markets its Bahamian subsidiary.
At the first hearing into FTX’s collapse on Tuesday, the provisional liquidators agreed to transfer their bankruptcy case to the Delaware court.
James Bromley, a partner at the Sullivan & Cromwell law firm hired by FTX’s creditors, told a hearing yesterday that FTX had spent about $300 million buying homes in the Bahamas for senior executives. He also claimed that a substantial amount of FTX’s assets were either missing or stolen, calling FTX a “personal fiefdom” of co-founder Sam Bankman-Fried.
According to court documents, the cryptocurrency exchange owes creditors $3.1 billion. FTX reportedly claimed in filings that it had between $10 billion and $50 billion in estimated liabilities and assets.
The Securities Commission took action to freeze the assets of FTX Digital Markets and related parties, following the company’s collapse.
FTX moved its headquarters from Hong Kong to the Bahamas last year and earlier this year announced plans to invest approximately $60 million in the development of a boutique hotel, shopping center and its new headquarters on nearly five acres of land in Bayside Executive Park.