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Regulator fires back at FTX US

Securities Commission says US CEO misrepresented local actions taken

The Securities Commission of The Bahamas (SCB) last night fired back at the representatives of FTX US who have continued to raise concern over the commission’s decision to transfer some of FTX’s assets to a digital wallet SCB controls.

In the face of continued hacks on the cryptocurrency exchange, the commission said it made the right choice.

FTX Trading and over 100 other affiliate companies, which filed for Chapter 11 bankruptcy protection in the US, appeared in court on Tuesday and raised the issue once again.

“… As we noted in our pleadings to transfer, we do have evidence that there have been movement of assets out of the debtors’ estates to The Bahamas,” James Bromley, the proposed co-council for FTX Trading said.

“There have been somewhat cryptic comments that have been issued by the government of The Bahamas as to the actions they have taken with respect to certain assets.”

In court filings last week, FTX’s new CEO John Ray III, who was appointed after Sam Bankman-Fried resigned, was more frank.

“The debtors thus 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,” he said.

But the Securities Commission said this was a misrepresentation.

“Given the nature of digital assets, and the risks associated with hacking and compromise, the commission determined that placing FDM into liquidation was not sufficient to protect the customers and creditors of FDM,” it said.

FTX Digital Markets (FDM) the Bahamian-based branch of FTX, and the company Bahamian liquidators say is the nerve center of the entire FTX operation, was placed into liquidation on November 10.

The commission said, “Accordingly, on 12 November 2022, the commission sought an additional order from the Supreme Court of The Bahamas for authority under the DARE Act to transfer all digital assets of FTX into digital wallets under the exclusive control of the Commission for the benefit of clients and creditors of FDM.

“It is unfortunate that in Chapter 11 filings, the new CEO of FTX Trading Ltd. misrepresented this timely action through the intemperate and inaccurate allegations lodged in the transfer motion.

“It is also concerning that the Chapter 11 debtors chose to rely on the statements of individuals they have (in other filings) characterized as unreliable sources of information and potentially ‘seriously compromised’.”

“Further, the statements made by the purported officers of FTX Trading Ltd. and the other purported Chapter 11 debtors – that they have suffered significant thefts, that their systems were compromised, and that they continue to face new hacking attempts – reinforces the wisdom of the commission’s prompt action to secure these digital assets.

“The commission will continue to evaluate the situation, continue to 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 FDM and to safeguard the interests of customers and creditors of FDM.

“In addition, the commission will continue to investigate the facts and circumstances regarding FTX’s liquidity crisis and any potential violations of Bahamian law and hold any responsible companies and individuals accountable, in cooperation with other regulatory agencies and law enforcement both in The Bahamas and in other affected countries in connection with their own investigations.

“The commission also looks forward to continuing to cooperate with the authorities in other jurisdictions to ensure the cooperative and vigorous resolution of all necessary proceedings to effectuate those ends.”

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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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