SCB addresses new FTX CEO’s ‘misstatements’

Addressing what it referred to as misstatements made by new FTX Group Chief Executive Officer John Ray, the Securities Commission of The Bahamas (SCB) yesterday said it finds it disturbing that Ray’s filings and communications continue to wrongfully confuse the government of The Bahamas, the SCB and the joint provisional liquidators (JPLs) as one.

In a statement, the SCB said Ray has referred to a redacted email correspondence between former FTX Chief Executive Officer Sam Bankman-Fried and Bahamian officials, which the commission said gives a false impression of communications between both parties.

The correspondence is in reference to Bankman-Fried’s admission that FTX segregated funds for Bahamian FTX customers for their withdrawal before Chapter 11 bankruptcy filings.

“These redactions are disturbing, as Mr. Ray is aware that the full email reveals Mr. Bankman-Fried’s acknowledgement that he had ‘not briefed the Securities Commission’. The commission has previously addressed improper distributions to Bahamian citizens in its statement dated November 12, 2022. The commission reaffirms its prior statement and notes that to the extent improper distributions were made to Bahamian citizens, such distributions will be subject to the appropriate clawback actions under the law,” the statement said.

“The commission also finds it disturbing that, either deliberately or through ignorance, Mr. Ray’s filings and communications continue to wrongfully confuse as one, the actions of the government of The Bahamas, the Securities Commission of The Bahamas and the court appointed/court supervised joint provisional liquidators.”

There is an ongoing dispute between the Bahamian appointed joint provisional liquidators and Ray over access to company files and assets.

During a hearing of the US House of Representatives’ Committee on Financial Services yesterday, investigating the collapse of FTX, Ray asserted that there has been no transparency from Bahamian authorities as he leads ongoing investigations.

“Unlike the Chapter 11 process, there’s no transparency in the process with Bahamians. We’ve repeatedly asked them for clarity about what they’ve been doing and we’ve been shut down by them,” he said in response to questions.

Asked further if he has questions that still remain unanswered by Bahamian authorities that would shed additional light into his investigation, Ray said yes. Asked if he believes Bankman-Fried was attempting to undermine the Chapter 11 process by expanding the scope when he moved assets under control of Bahamian authorities, Ray said, “It appears so.”

The SCB maintained yesterday that every action it has taken has been in strict accordance with Bahamas legislation and orders made by the Supreme Court of The Bahamas.

“These actions included securing the transfer of potentially commingled digital assets of FTX Digital Markets Ltd. and affiliates to a secure location under the authority of an order issued by the Supreme Court of The Bahamas. The commission holds those assets as trustee only [under Bahamian Law], and they will be ultimately distributed to creditors and clients of FTX, wherever they may be located, in accordance with the court’s direction,” the statement said.

As for Ray’s claims that Bahamian authorities are not being forthcoming with information in a transparent manner, the SCB said it has been Ray who has not been open to transparent communication.

“Unfortunately, it has been necessary for the Securities Commission to make a request to Mr. Ray’s representatives to not obstruct that investigation. Mr. Ray has not once reached out to the Securities Commission to discuss any of his concerns before airing them publicly,” the commission said.

“He, however, has been informed, by letter dated December 7, 2022 to his counsel, that ‘… to the extent the commission is able to assist in the efficient and mutually respectful conduct of the several pending proceedings without impairing the conduct or confidentiality of its ongoing regulatory investigation, including by participating in a meeting with your clients [i.e. FTX US debtors represented by Mr. John J. Ray III], the joint provisional liquidators and/or their respective counsel, they [i.e. the commission] are prepared to do so. An appropriate and necessary part of any arrangement reached during such meeting, would be your clients’ assurance that they will take no further action to interfere with the commission’s investigation and other regulatory measures.’ Mr. Ray has not responded to the commission to date.”

Bankman-Fried made his initial appearance in court yesterday before Chief Magistrate Joyanne Ferguson-Pratt, after the United States Department of Justice indicted him on eight criminal charges including wire fraud, commodities fraud, securities fraud, money laundering and conspiracy to defraud the United States and violate campaign finance laws.