Brown Rudnick’s partner Hailey Lennon discusses the potential regulatory holes highlighted by the collapse of FTX and the push from lawmakers for increased crypto regulation.
The Bahamas Securities Commission said on Thursday that the agency seized all digital assets under the control of FTX’s Bahamian subsidiary, FTX Digital Markets Ltd. — to the tune of more than $3.5 billion — “for safekeeping” following the cryptocurrency exchange collapse.
The regulator said in a press release that the funds were transferred to digital wallets under its sole control on November 2. On December 12, the day after FTX filed for Chapter 11 bankruptcy, after determining “there was a material risk of imminent dissipation” of assets under FTXDM’s control based on information provided by the founder in disgrace, Sam Bankman-Fried, regarding cyberattacks on the system.
The Bahamas securities watchdog revealed on Thursday that it has seized more than $3.5 billion in digital assets controlled by FTX Digital Markets Ltd. after the collapse of the crypto exchange. ((AP Photo/Marta Lavandier, File)/AP Newsroom)
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The funds are being held “on a temporary basis,” SCB said, pending directions from the Bahamas Supreme Court on whether the assets should be “returned to customers and creditors who own them” or to court. appointed Joint Provisional Liquidators (JPL) in charge of the settlement of FTXDM.
The Bahamian watchdog’s seizure of funds has been a source of contention between the agency and new FTX CEO John Ray III, who replaced Bankman-Fried and filed for Chapter 11 bankruptcy of FTX in the United States after taking control of the company. Bahamas-based FTXDM separately filed for Chapter 15 bankruptcy which was merged into Chapter 11 – and the two sides have clashed throughout the proceedings so far.
John Ray III, CEO of FTX Cryptocurrency Derivatives Exchange, speaks during a House Financial Services Committee hearing investigating the collapse of FTX in Washington, DC, Tuesday, December 21. 13, 2022. (Al Drago/Bloomberg via Getty Images/Getty Images)
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The Bahamas Safety Commission admitted last month to seizing FTXDM’s assets, but did not put a dollar amount on the figure at the time.
During his testimony before Congress In mid-December, Ray accused Bahamian officials of taking the funds with the help of former FTX executives and claimed authorities were uncooperative.
“We repeatedly asked them for clarification on what they were doing,” Ray said of Bahamian officials. “We were shut down by them.”
Sam Bankman-Fried leaves federal court in New York on Thursday, Dec. 22, 2022. The former CEO of FTX and Alameda was released on $250 million bail. (Charles Guérin/Abaca for Fox News Digital/Fox News)
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Ray also said it appears that Bankman-Fried, who was arrested hours before the court hearing multiple charges linked to the collapse of FTX, had attempted to undermine the bankruptcy process in the United States by transferring the company’s assets to accounts under the control of Bahamian authorities.
Bahamian officials said in court filings that they requested a criminal investigation into FTX on Nov. 2. 9 after then – co-CEO of FTXDM Ryan Salame warned them during a phone call about alleged transfers of funds from exchange clients to sister company Alameda Research.
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