The Securities Commission of The Bahamas reported that it had taken more than $3.5 billion in digital assets from the Bahamian branch of the defunct cryptocurrency exchange FTX into its own digital wallets for “safe-keeping.” The disgraced former chief executive of FTX, Sam Bankman-Fried, informed the Bahamian regulator about cyberattacks on the systems of FTX’s Bahamian subsidiary, and on November 12 the regulator transferred the digital assets of FTX Digital Markets, valued at more than $3.5 billion based on market pricing at the time of transfer, it said.
The funds are being held by the commission on a “temporary basis” until the Supreme Court of the Bahamas directs the commission to deliver them to the customers and creditors who own them, or to the liquidators of the insolvency estate, it said.
“Based on information provided by Sam Bankman-Fried to the commission concerning the cyberattacks that took place on the systems of FTXDM, the restricted access by the employees of FTXDM to its AWS system, and other available information, the commission determined that there was a significant risk of imminent dissipation as to the digital assets under the custody or control of FTXDM to the prejudice of its customers and creditors,” read the Securities Commission of The Bahamas’ statement.
“As a result, in the exercise of its regulatory powers, the commission requested and obtained a Court order to safeguard the digital assets owned by or under the custody or control of FTXDM or its principals by transferring them to secure digital wallets under the exclusive control the commission.”
The move is the most recent development following the downfall of FTX and its former chief executive.
Mr Bankman-Fried, 30, lost his $16 billion fortune overnight, in what has been described as the biggest one-day loss on the Bloomberg Billionaires Index, after FTX filed for bankruptcy in November.
He was arrested in the Bahamas on December 12 after US federal prosecutors charged him with eight criminal counts — including conspiracy, wire fraud and money laundering — for allegedly misusing billions of dollars in customer funds before the $9 billion collapse of FTX and Alameda Research.
Prosecutors say Mr Bankman-Fried was engaging in criminal activity as far back as 2019.
The Supreme Court of the Bahamas said the commission may lawfully assist in providing assistance to a domestic regulatory authority, or overseas regulatory authority, the regulator said.
“The commission will continue to conduct a comprehensive and diligent investigation into the causes of FTX’s failure, act in accordance with directions issued by the Supreme Court of The Bahamas, collaborate with other supervisory authorities, and take such further actions as needed to preserve the assets of FTXDM and to safeguard the interests of customers and creditors of FTXDM,” it said.
In a separate statement, FTX.com and its affiliated debtors said that the commission did not identify the type of cryptocurrency seized or the valuation methodology.
“The Bahamas Commission has not provided the FTX Debtors any further information to resolve the valuation disparity,” the FTX Debtors said.
The FTX Debtors have informed the Bahamas Commission that none of Mr Bankman-Fried, FTX co-founder founder Gary Wang or the Bahamas Commission had a right to take cryptocurrency of the FTX Debtors and that the FTX Debtors will “seek the return of the seized cryptocurrency promptly to their Chapter 11 estates for the benefit of creditors.”
