NASSAU, BAHAMAS — Attorney General Ryan Pinder yesterday praised the Securities Commission for its “swift and decisive” decisions in response to the abrupt collapse of crypto exchange giant FTX, stating that any attempt to lay the entirety of the blame for FTX debacle on this nation is a “gross oversimplification of reality.”
Pinder, during a national address on behalf of the government on the FTX developments, slammed what he called “ill informed” speculation on the matter as he dismissed assertions that FTX came to The Bahamas because it did not want to submit to regulatory scrutiny.
Asserting that The Bahamas is “place of laws” whose integrity is characterised by the rule of law and exercise of due process, Pinder said that FTX’s collapse was easily described as a case of a very large business failure as a result of questionable internal management practices and corporate governance.
“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,” said Pinder. He noted that the FTX Group controls over 100 companies in jurisdictions around the world, with Bahamas-based FTX Digital Markets being one of them.
Pinder also noted that Alameda Research- a crypto trading firm owned by FTX’s founder Sam Bankman-Fried is not regulated in The Bahamas and that to the extent Alameda Research is found to have committed any improprieties in The Bahamas, it will be subject to this jurisdiction.
A large portions of the assets of Alameda Research, were reportedly in FTT, FTX’s token which granted token holders a discount on trading fees. On November 6, Binance, a major crypto exchange rival to FTX, announced that it was selling off all its substantial holdings in the FTT token, an announcement which prompted a large number of FTX investors to withdraw hundreds of millions of dollars in digital assets from FTX – causing a liquidity crunch. Pinder noted that on November 8 it was reported that Binance had entered a non- binding agreement to buy FTX, however, the very next day, Binance pulled out of the deal.
“One day later, November 10, 2022, the Securities Commission of The Bahamas, announced that it had taken action to freeze the assets of FTX Digital Markets, had suspended the registration of FTX Digital Markets as a licensee under The Digital Assets and Registered Exchanges Act, also known as the “DARE Act”, and applied to the Supreme Court of The Bahamas, pursuant to its regulatory authority under the DARE Act, to place the company into provisional liquidation,” said Pinder.
The Attorney General said that the speed at which the SCB was able to move was “remarkable” by any standard.
“The Securities Commission deserves the highest praise for moving so swiftly and decisively to suspend FTX Digital Markets’ license and appoint the provisional liquidators,” said Pinder, adding, “No other jurisdiction in the world moved or would have moved as quickly in circumstances such as these.”
Pinder noted that this year has been one of “booms and busts” for the crypto industry which has seen its total market capitalisation fall from three trillion dollars to $800 billion or lower. He noted that for a time it appeared as though FTX would bail out and acquire the assets of some of the distressed crypto companies but instead could not avoid the “cascading failures and faced its own severe insolvency crisis.”
Pinder noted that there is an active civil and criminal investigation into the affairs of FTX and said that it is “regrettable” that in Chapter 11 filings last week, the new FTX chief executive John Ray III misrepresented the actions of the SCB and used “inaccurate allegations” in the transfer motion to do so.
“It is possible that the prospect of multi-million 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,” said Pinder.
He added, “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 rigour 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.”
Pinder expressed confidence that as matters progress, and the activities of the FTX group are either restructured or wound down, The Bahamas will emerge, held in even higher esteem.