FTX Digital Markets

FTX under ‘active’ civil and criminal investigation: Bahamas AG

Bahamian Securities Commission, the Prime Minister’s financial intelligence unit and a financial crimes unit are all involved in the FTX investigation.

The Bahamas Attorney General (AG) and Minister of Legal Affairs Ryan Pinder has confirmed that the collapsed crypto exchange FTX is the focus of an “active and ongoing” investigation by authorities from the Caribbean nation.

In a national statement that was delivered live on the Facebook page of the Office of the Prime Minister on Nov. 27, Pinder explained that the “affairs of FTX Digital Markets” are under scrutiny from both “civil and criminal authorities,” and Bahamian authorities are working with “a number of specialists and experts and will continue to do so as the need arises.”

“The Securities Commission, our financial intelligence unit, and the financial crimes unit of the Royal Bahamas Police Force will continue to investigate the facts and circumstances regarding FTX’s insolvency crisis and any potential violations of Bahamian law,” he added.

Pinder also revealed the relevant Bahamian authorities would try to hold to account any companies or individuals found to have committed any wrongdoing during the investigation, while they will cooperate with other regulatory agencies and law enforcement bodies around the world.

“These events remind us of the lessons learned from securities and other financial regulation about the need for strong cross-border cooperation. The public worldwide will be best served by a strong international regulatory cooperation,” he said.

The Securities Commission of the Bahamas suspended FTX Digital Markets (FDM) license to conduct business and stripped its directors of their power on Nov. 10.

On Nov. 12 they ordered the transfer of all FDM digital assets to a digital wallet owned by the commission for “safekeeping.”

Pinder mentioned the country’s regulatory authority has taken further protective measures approved by the Supreme Court but declined to elaborate further until “we are confident that doing so will not jeopardize any aspect of the ongoing investigations.”

Pinder also took the chance to slam the Nov. 17 emergency motion by FTX Trading Limited, which called out the “Bahamian government” for “directing unauthorized access to the Debtors’ systems” after the commencement of Chapter 11 bankruptcy filings in the United States.

He called the allegations “extremely regrettable” for misrepresenting “the timely action taken by the Securities Commission,” while also defending all the steps taken by the country‘s regulator so far.

The Bahamas has encouraged crypto companies to the island country to aid its economy but it’s since been shaken by FTX’s collapse.

It was also hard hit by 2019’s Hurricane Dorian and the COVID-19 pandemic starting in 2020, ground its heavily tourism-based economy to a halt. With FTX gone, so have many jobs in the small nation.

But, Pinder outlined his belief that despite the “personal tragedies” associated with the collapse of FTX, he expects “little contagion beyond the digital asset sphere both here in the Bahamas and around the world.”

He referenced a Nov. 22 Standard & Poor’s ratings for the Bahamas, which forecast a stable outlook, citing the tourism sector’s performance.

“Standards and Poor has projected a stable outlook for our economy resting in part on the assumption that there will be no material adverse impact on the Bahamas from the worldwide collapse of FTX,” Pinder said.

Bahamian securities regulator ordered the transfer of FTX’s digital assets

The Bahamian securities regulator clarified it directed FTX to move its digital assets to a wallet owned by the commission on Nov. 12.

The Securities Commission of the Bahamas (SCB) said it had ordered the transfer of all digital assets of FTX Digital Markets (FDM) to a digital wallet owned by the commission on Nov. 12.

In a Nov. 17 statement, the SCB said it exercised its power as a regulator acting under the authority of a Supreme Court order — moving the assets to a “digital wallet controlled by the Commission, for safekeeping.”

Securities Commission of The Bahamas Assumes Control of Assets of FTX Digital Markets Ltd. pic.twitter.com/IzW4PGZSJm

— Securities Commission of The Bahamas (@SCBgov_bs) November 18, 2022

SCB justified last week’s move by stating that “urgent interim regulatory action was necessary to protect the interests of clients and creditors of FDM.”

The latest revelation could shed some light on certain movements of funds detected last week.

On Nov. 11, the crypto community flagged a number of suspicious transactions in wallets tied to FTX and FTX.US, with analysts reporting around $663 million drained. $477 million were suspected to be stolen, while the remainder was believed to have been moved to secure storage by FTX themselves.

The SCB statement however did not make any mention of how much of FDM’s digital assets were moved as a result of their order.

Cointelegraph has reached out to SCB for clarity but has not received a response by the time of publication.

The commission’s order would have been made only two days after the commission froze FDM’s assets on Nov. 10, suspended FTX’s registration in the country and stripped the FTX directors of their power.

At the time, it also stated that FDM’s assets could only be moved by obtaining the approval of a provisional liquidator appointed by the Supreme Court.

The FTX bankruptcy drama has continued to unfold over the last week.

On Nov. 15, FDM filed for Chapter 15 bankruptcy protection in a New York-based court in order to seek U.S. recognition of the Bahamian liquidation proceedings.

Brian Simms, the court-appointed provisional liquidator overseeing the bankruptcy proceedings of FTX Digital Markets in the Bahamas, argued in the filing that FDM wasn’t authorized to file for Chapter 11 in the United States and rejected the validity of the filing.

On Nov. 17, an emergency motion by FTX Trading Limited argued that both the Chapter 11 case and all proceedings related to Chapter 15 filings should take place in the Delaware-based U.S. Bankruptcy Court in order to “end the chaos and to ensure that assets can be secured and marshalled in an orderly process.”

The same filing also claimed they 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.”

Bahamian liquidators reject validity of FTX’s US bankruptcy filing

The provisional liquidator overseeing the FTX Digital Markets bankruptcy proceedings says FTX wasn’t authorized to file for bankruptcy in the U.S without his approval.

Brian Simms, the court-appointed provisional liquidator overseeing the bankruptcy proceedings of FTX Digital Markets in The Bahamas, has called into question the validity of a Chapter 11 bankruptcy filing by subsidiary FTX Trading and 134 other affiliates in a Delaware court on Nov. 14.

In the Nov. 15 document, Simms filed for Chapter 15 Bankruptcy in the United States Bankruptcy Court in the Southern District of New York, which is used when a foreign representative of the debtor seeks recognition in the U.S. for a pending foreign insolvency proceeding.

In the filing Simms notes FTX Digital is not part of the Delaware Petition, and says as the provisional liquidator he is the only one, “authorized to take any act including, but not limited to, filing the Delaware Petition,” adding:

“The Provisional Liquidation Order divests FTX Digital’s directors’ of the ability to act, or exercise any functions, for or on behalf of FTX Digital unless expressly instructed to so by me in writing.”

The Bahamas-based lawyer argues because he “did not authorize or approve, in writing or otherwise,” he rejects the “validity of any purported attempt to place FTX Affiliates in bankruptcy.”

He further notes, “The entire FTX Brand was ultimately operated from a single location: The Bahamas. All core management personnel likewise were located in The Bahamas.”

FTX’s digital asset exchange was founded in May 2019 by Sam Bankman-Fried (SBF) in Hong Kong but after China’s crypto ban, SB relocated the company to the Bahamian capital of Nassau in Sept. 2021.

Simms has not asked the court to dismiss the U.S. bankruptcy proceedings, stating “no provisional relief seeking the injunction or dismissal of the Chapter 11 is presently sought” but requests the U.S courts recognize the legal actions taking place in The Bahamas.

However, he notes “it is conceivable that the FTX Affiliates that filed Chapter 11 will be impacted by the provisional relief sought,” by his filing.

Chapter 11 is used by businesses to help them reorganize their debts and repay creditors while continuing their operations.

The appointment of provisional liquidators followed the Bahamian securities regulator suspending FTX’s registration status and freezing its local subsidiary’s assets on Nov. 10.

Bahamian liquidators reject validity of FTX’s US bankruptcy filing

The provisional liquidator overseeing the FTX Digital Markets bankruptcy proceedings says FTX wasn’t authorized to file for bankruptcy in the U.S without his approval.

Brian Simms, the court-appointed provisional liquidator overseeing the bankruptcy proceedings of FTX Digital Markets in the Bahamas, has called into question the validity of a Chapter 11 bankruptcy filing by subsidiary FTX Trading and 134 other affiliates in a Delaware court on Nov. 14.

The Bahamas-based lawyer argues because he “did not authorize or approve, in writing or otherwise,” he rejects the “validity of any purported attempt to place FTX Affiliates in bankruptcy.”

He further notes, “The entire FTX Brand was ultimately operated from a single location: The Bahamas. All core management personnel likewise were located in The Bahamas.”

FTX’s digital asset exchange was founded in May 2019 by Sam Bankman-Fried (SBF) in Hong Kong, but after China’s crypto ban, SBF relocated the company to the Bahamian capital of Nassau in Sept. 2021.

Simms has not asked the court to dismiss the U.S. bankruptcy proceedings, stating that “no provisional relief seeking the injunction or dismissal of the Chapter 11 is presently sought” but requests the U.S courts recognize the legal actions taking place in the Bahamas.

However, he notes “it is conceivable that the FTX Affiliates that filed Chapter 11 will be impacted by the provisional relief sought,” by his filing.

Chapter 11 is used by businesses to help them reorganize their debts and repay creditors while continuing their operations.

The appointment of provisional liquidators followed the Bahamian securities regulator suspending FTX’s registration status and freezing its local subsidiary’s assets on Nov. 10.