The Securities Commission of the Bahamas said on Thursday that the agency has declared all digital assets under the control of FTX’s Bahamian subsidiary FTX Digital Markets Ltd. – at a cost of more than $3.5 billion – seized “for safekeeping” after the cryptocurrency exchanges to collapse.
The regulator said in a press release that the money was transferred to digital wallets under its exclusive control on Nov. 12, the day after FTX filed for Chapter 11 bankruptcy, after determining that “there was significant risk of imminent dissipation” of the assets under FTXDM’s control based on information provided by disgraced founder Sam Bankman-Fried about cyber attacks on the system.
The funds are being held “on a temporary basis,” the SCB said, while it awaits instructions from the Bahamas Supreme Court on whether the assets should be “delivered to the customers and creditors who own them” or to the court. appointed Joint Provisional Liquidators (JPLs) charged with the settlement of FTXDM.
The seizure of the funds by the Bahamian watchdog has been a source of contention between the agency and FTX’s new CEO, John Ray III, who replaced Bankman-Fried and filed for FTX’s Chapter 11 bankruptcy in the US after taking control of the company. Bahamas-based FTXDM separately filed for Chapter 15 bankruptcy that is included in Chapter 11 — and so far both parties have put their heads together during the proceedings.
The Bahamas Security Commission admitted last month to seizing FTXDM’s assets, but did not post a dollar amount at the time.
During his congressional testimony in mid-December, Ray accused Bahamian officials of taking the money with the help of former FTX leadership, claiming that authorities were uncooperative.
“We have repeatedly asked them to clarify what they have done,” Ray said of the Bahamian officials. “We’ve been knocked out by them.”
Ray also said it resembles Bankman-Fried, who was arrested hours before the hearing multiple loads related to the collapse of FTX, had attempted to undermine the US bankruptcy process by moving corporate assets into accounts controlled by Bahamian authorities.
Bahamian officials said in court filings that they filed a criminal investigation into FTX on Nov. 9 after FTXDM’s then-co-CEO Ryan Salame tipped them off in a phone conversation about alleged transfers of client funds from the exchange to sister company Alameda Research.