scb

Bahamas regulator denies asking crypto exchange FTX to mint new tokens

Bahamas regulator fights back against being “publicly challenged” by FTX against incorrect calculations of digital assets transferred under its control

The Securities Commission of The Bahamas (SCB) has denied FTX debtors’ claims and expresses concern that the investigation has been “impeded.”

According to a statement released on Jan. 3, the SCB has had to correct material misstatements made by John J. Ray III, the representative of the United States-based FTX debtors, in press and court filings.

The document stated that the Chapter 11 Debtors had “publicly challenged” the Commission’s calculations of digital assets transferred to digital wallets under the Commission’s control in Nov. 2022.

It argued that these statements were based on “incomplete” information and the debtors did not do due diligence by requesting information from the Joint Provisional Liquidators.

The statement added that the FTX CEO John J. Ray III made public statements alleging that the Commission instructed FTX to “mint a substantial amount of new tokens” under “oath” during a court filing before the United States House of Financial Services Committee.

The Chapter 11 Debtors have also alleged that the digital assets controlled by the Commission in the trust of FTX customers and creditors were “stolen,” without providing any substantiated bases for these claims.

The Commission shared concern that its investigation is being compromised by the Chapter 11 Debtors’ refusal to allow the Court Supervised Joint Provisional Liquidators access to FTX’s AWS System.

The SCB is hoping that the Chapter 11 Debtors will proceed with matters in good faith and in the best interest of customers and creditors of FTX, the announcement reads.

The Bahamian securities regulator’s announcement comes after news from court filings in December 2022, where FTX lawyers claimed the Bahamas government reportedly requested that the former CEO of FTX, Sam Bankman-Fried (SBF), issue a new cryptocurrency controlled by local officials.

The initial reports claimed that the Bahamas regulator asked SBF to mint new digital assets worth hundreds of millions of dollars.

FTX Bahamas co-CEO Ryan Salame blew the whistle on FTX and Sam Bankman-Fried

Court filings show Ryan Salame tipped off the Bahaman securities regulator, telling them that FTX was sending customer funds to Alameda Research.

A high-ranking executive at FTX’s Bahamian entity tipped off local regulators of potential fraud perpetrated at the cryptocurrency exchange just two days before the exchange was forced to close.

According to Bahamian court records filed on Dec. 14, Ryan Salame, the former co-CEO of FTX Digital Markets (FDM), told the Securities Commission of the Bahamas (SCB) on Nov. 9 that FTX was sending customer funds to its sister trading firm Alameda Research.

Salame said the funds were to “cover financial losses of Alameda” and the transfer was “not allowed or consented to by their clients.”

He also told the SCB only three people had the access required to transfer client assets to Alameda: Former FTX CEO Sam Bankman-Fried, FTX co-founder Zixiao “Gary” Wang and FTX engineer Nishad Singh.

*Ryan Salame alerted the securities regulator in the Bahamas regulator to fraudulent activities. Image:* *Twitter*

The allegation spurred SCB executive director Christina Rolle to contact the commissioner of the Royal Bahamas Police Force to request an investigation, as the information “may constitute misappropriation, theft, fraud or some other crime.”

The next day, on Nov. 10, the SCB froze FDM’s assets, suspended its registration in the country and the Bahamian Supreme Court appointed a provisional liquidator attempting to preserve the company’s assets.

The records reveal the first known instance of an executive from FTX or Alameda assisting authorities.

Salame is believed to be in Washington D.C., according to the filings, and has not spoken publicly since the collapse of the exchange.

His last public tweet was on Nov. 7 in which he replied “lol [sic]” to Binance co-founder Yi He, after He explained the reason that the exchange sold its FTX Token (FTT) holdings.

Another former executive from FTX’s affiliated companies is also thought to have been assisting authorities in recent weeks

On Dec. 4, speculation abounded after pictures purported to show Alameda CEO Caroline Ellison in a New York coffee shop a short walk away from the U.S. Attorney’s Office, leading some to believe she may have been cutting a deal with authorities in the wake of the FTX collapse.

Bankman-Fried is the only person from FTX and Alameda to have been charged so far, adding credence to the speculation that executives from both firms are assisting authorities.

He faces charges related to money laundering and political campaign finance violations, along with wire and securities fraud.

Bankman-Fried, Wang, Singh and Ellison are reported to have operated a group chat on the encrypted messaging app Signal called “Wirefraud” used to send secret information about FTX and Alameda’s operations. Bankman-Fried denied any knowledge or involvement in the group.

Update (Dec. 15, 5:40 am UTC): Further information from the court filing was added along with additional background information.

Breaking: Bahamas securities regulator freezes FTX assets

The Securities Commission of The Bahamas said FTX’s assets could not be moved without the approval of a Supreme Court-appointed liquidator.

The Securities Commission of The Bahamas (SCB) — the country’s securities regulator — froze the assets of FTX Digital Markets (FDM) and “related parties” on Nov. 10 and suspended FTX’s registration in the country.

In a statement, the SCB said it was aware of “public statements suggesting that clients’ assets were mishandled, mismanaged and/or transferred to Alameda Research.”

Alameda is a trading firm founded by FTX CEO Sam Bankman-Fried. And a leaked balance sheet from the firm showed it held large amounts of the FTX exchanges’ native token, FTX Token (FTT), and rumors it was funding trades using FTX user funds led to a “bank-run” on FTX, causing a liquidity crisis for the exchange.

The SCB has now stripped powers from the directors of FTX and said it determined the “prudent course of action” was to put FTX into a provisional liquidation “to preserve assets and stabilize the company.”

According to the statement, the Bahamian Supreme Court appointed a provisional liquidator and said, “no assets of FDM, client assets, or trust assets held by FDM can be transferred, assigned, or otherwise dealt with, without the written approval of the provisional liquidator.”

FTX is headquartered in the Bahamas and FTX Digital Markets is the Bahamian subsidiary of the exchange with FTX US a separate United States-based entity.

The SCB said it will work with the appointed liquidator to “obtain the best possible outcome for the customers and other stakeholders of FTX.”

Cointelegraph contacted FTX and the SCB for comment but did not get an immediate response.

The crisis with FTX has also drawn scrutiny from regulators in the U.S. with the House of Representatives Financial Services Committee chair, Maxine Waters, pushing for greater consumer protection and more federal oversight of cryptocurrency trading platforms.

The White House also said U.S. President Joe Biden was aware of the crypto market situation, with White House Press Secretary Karine Jean-Pierre alluding to FTX’s liquidity crisis that highlighted “why prudent regulation of cryptocurrencies is indeed needed.”

Update Nov. 11, 4:00 AM UTC: The article incorrectly referenced the Securities Commission of The Bahamas (SCB) and has been updated to reflect the correct term.