The Securities Commission of The Bahamas on Thursday announced it that for the purpose of “safe keeping”, it has transferred all digital assets of FTX Digital Markets Ltd. to a digital wallet controlled by the government.
The Commission stated:
The Securities Commission of The Bahamas (“the Commission”), 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. Urgent interim regulatory action was necessary to protect the interests of clients and creditors of FDM.
According to the official press release, the decision was taken last Saturday, 12 November.
In another press release from 12 November, the Commission clarified that it has not directed FTX to resume withdrawals for Bahamian residents in response to a statement made by the crypto exchange on Twitter on 10 November. In it FTX stated that it is working to enable withdrawals for its userbase.
FTX said:
The amounts withdrawn comprise a small fraction of the assets we currently hold on hand and we are actively working on additional routes to enable withdrawals for the rest of our userbase. We are also actively investigating what we can and should do across the world.
The Bahamian regulator responded:
The Commission wishes to advise that it has not directed, authorized or suggested to FTX Digital Markets Ltd. the prioritization of withdrawals for Bahamian clients. The Commission further notes that such transactions may be characterized as voidable preferences under the insolvency regime and consequently result in clawing back funds from Bahamian customers. In any event, the Commission does not condone the preferential treatment of any investor or client of FTX Digital Markets Ltd. or otherwise.
Meanwhile, in a in interview with Variety, FTX former CEO and founder, Sam Bankman-Fried explained that FTX did not invest customer funds on the exchange. However, Alameda Research, FTX’s sister company, had borrowed more money from the exchange’s balance sheet than he realized, leaving FTX vulnerable. Bankman-Fried said that the issue was not caught on time, because of “messy accounting.”
In a new FTX court filing from Thursday, the new CEO of FTX, John Ray III, criticized the management, governance structure, and record-keeping of the exchange under Bankman-Fried. Ray III, who hasmore than 40 years of experience in legal and restructuring called the collapse of the exchange “a complete failure of corporate controls”.
He said:
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. From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.
The Australian regulator suspended the AFS license of FTX earlier this week.
