AG defends FTX handling

‘Any attempt to blame The Bahamas over FTX collapse is an oversimplification of reality’

As he defended The Bahamas’ response in the wake of the collapse of crypto giant FTX, Attorney General Ryan Pinder asserted last night that any attempt to lay the blame of the company’s fall at the feet of The Bahamas is an “oversimplification of reality”.

In a televised national address on FTX’s failure, Pinder said The Bahamas is a country of laws and that those who believe its reluctance to communicate the details of an investigation into FTX means nothing is happening are “deeply misguided”.

“…As our investigations continue, I must emphasize that ill-informed speculation is not helpful: neither to the customers of FTX, nor their creditors, nor their investors or the general public,” Pinder said.

“Any attempt to lay the entirety of this debacle at the feet of The Bahamas, because FTX is headquartered here, would be a gross oversimplification of reality.

“The dozens and dozens of companies involved, registered in numerous jurisdictions across the world, the scope of related parties, including some of the world’s most sophisticated investors, demonstrate the cross-border, multi-jurisdictional nature of this event.

“And it is deeply misguided to conclude that reluctance to communicate the details of an active investigation means that nothing is happening; in fact, the government’s discretion stems from how seriously we take our commitment to the rule of law and the independence of the securities regulator.

“We have been shocked at the ignorance of those who assert that FTX came to The Bahamas because they did not want to submit to regulatory scrutiny; in fact, the world is full of countries in which there is no legislative or regulatory authority over crypto, but The Bahamas is not one of them.

“We have been able to assert our leadership in this new field because in the digital assets arena, what matters is not the size of your land mass, or the size of your GDP, but the ingenuity and rigor of your people and jurisdiction. When a respected risk and market integrity firm ranked the world’s digital assets regulatory regimes earlier this year, our country was first, and for good reason.

“The digital asset sector is a high-profile, embryonic sector of the Bahamian financial services sector, an area where The Bahamas has demonstrated global leadership for decades.

“As a world-leading destination for tourism, we have been audacious before in asserting that it’s better in The Bahamas. We will not hesitate to do so again.”

FTX Digital Markets was incorporated in The Bahamas in July 2021 and the company moved its headquarters from Hong Kong to The Bahamas in September 2021, weeks after the Davis administration came to power.

Earlier this month, following a liquidity crisis, the Securities Commission of The Bahamas (SCB) froze FTX’s assets and applied to the Supreme Court to put the company into liquidation.

Among his final acts as FTX CEO, Sam Bankman-Fried filed for Chapter 11 bankruptcy protection in the US on November 11.

FTX Trading’s new CEO, John Ray III, asserted in court documents that FTX US has “credible evidence that the Bahamian government is responsible for directing unauthorized access to the debtors’ (FTX group) systems for the purpose of obtaining digital assets of the debtors – that took place after the commencement of these cases”.

The Securities Commission called his comments a misrepresentation of what happened. It said that it acted in accordance with a court order to transfer all digital assets of FTX into a digital wallet for safekeeping.

Pinder noted last night that there is both an active civil and criminal investigation into the affairs of FTX Digital Markets.

“As is provided for under our regulatory framework, we are already working with a number of specialists and experts, and will continue to do so as the need arises,” he said.

“There are a number of protective measures which the regulator has taken under the authority conferred by the Supreme Court of The Bahamas.

“For the time being, we will not set out those measures in any further detail, until we are confident that doing so will not jeopardize any aspect of the ongoing investigations.

“We urge all authorities, here and abroad, at a minimum, to exercise at least the same amount of prudence and restraint in their public commentary as we do, so as not to prejudice the proceedings.

“It is extremely regrettable that in chapter 11 filings for bankruptcy protection made in New York last week, that the new chief executive of FTX Trading Ltd. – not The Bahamas-based FTX Digital Markets – but an affiliate company incorporated in Antigua and Barbuda – misrepresented the timely action taken by the Securities Commission and used inaccurate allegations lodged in the transfer motion to do so.

“It is possible that the prospect of multimillion-dollar legal and consultant fees is driving both their legal strategy and the intemperate statements.

“In any case, we urge prudence and accuracy in all future filings. As for what comes next: the Securities Commission, 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.

“They will hold accountable any responsible companies and individuals, and act in cooperation with other regulatory agencies and law enforcement bodies, both here in The Bahamas, and in other countries affected.

“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 strong international regulatory cooperation.

“That means more jurisdictions taking up the challenge, following our lead, and implementing strong regulatory frameworks. We will, as we always do, cooperate with international regulatory and enforcement agencies.”

Since the fall of FTX, The Bahamas has taken a hit to its reputation.

In an interview with the Wall Street Journal last week, Bruce Zagaris, an attorney who has worked on Caribbean financial matters and international white-collar crime, said, “The fact that they’ve (The Bahamas) attracted the number three digital exchange and it quickly went from success to bankruptcy has jeopardized the new product and the new innovation that The Bahamas has undertaken, unfortunately.”

The video feature noted, “Having regulations and enforcing them are two different things.”

In an interview with CoinDesk last week, Commissioner of the US Commodity Futures Trading Commission Kristin Johnson, who was appointed by US President Joe Biden and confirmed by the US Senate, said, “If FTX had been a regulated entity under our regulatory umbrella, customer bonds would’ve been protected, there would’ve been liquidity reserve requirements in place [and] there would’ve been monitoring and surveillance that is not immediately available.”

But Pinder stressed that the SCB acted swiftly to wind up FTX.

“The commission was the first regulator in the world to take significant steps with respect to the FTX group of companies, which has operations, and regulated activities throughout the world,” he said.

“This was done for the purpose of protecting the interests of FTX’s customers and creditors, as well as the integrity of the Bahamian financial services industry. The Securities Commission was able to move so quickly because of the strength of the legislative framework which was already in place in The Bahamas to regulate digital asset companies like FTX Digital Markets.

“No other jurisdiction in the world moved or could have moved this quickly in circumstances such as these.”

Pinder said the country stands behind its decision to regulate the digital assets sector and believes that The Bahamas “will emerge and be held in even higher esteem”.

“Those entrepreneurs who are ready to create new financial products that serve a broader range of consumers remain welcome to come to The Bahamas. They can be certain that we have in place a principled, fair, comprehensive and ethical regulatory regime.

“They can also be certain we will act quickly and decisively to enforce it, if and when our laws and regulations are breached.

“They will see that The Bahamas is a place of laws.”

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Travis Cartwright-Carroll

Travis Cartwright-Carroll is the assistant editor. He covers a wide range of national issues. He joined The Nassau Guardian in 2011 as a copy editor before shifting to reporting. He was promoted to assistant news editor in December 2018.

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