Securities Commission freezes assets of FTX

NASSAU, BAHAMAS — The Securities Commission of The Bahamas said yesterday that it had taken action to freeze assets of FTX Digital Markets and related parties, as the crypto exchange is teetering on the verge of collapse due to liquidity fears.

The Commission in a statement said that it also suspended the registration and applied to the Supreme Court of The Bahamas for the appointment of a provisional liquidator of FTX Digital Markets Ltd. (FDM). Brian Simms, K.C. (Lennox Paton Counsel and Attorney-at Law) was appointed as provisional liquidator.

The Commission also noted that “the powers of the directors of FDM have been suspended and no assets of FDM, client assets or trust assets held by FDM, can be transferred, assigned or otherwise dealt with, without the written approval of the provisional liquidator”.

Vice President of Communications and Corporate Social Responsibility for FTX Digital Market Valdez Russell yesterday said the Securities Commission’s swift action demonstrated the importance of their role in maintaining the integrity and jurisdictional reputation of The Bahamas.

“As FTX strives to do right for customers, investors and employees, the involvement of a provisional liquidator will prove helpful in a process that facilitates the requisite due diligence that will contribute to a better future for digital assets in a global landscape,” Russell said in a statement.

FTX which moved its headquarters to The Bahamas last year, revealed earlier this year that it was looking to invest around $60 million towards the development of a boutique hotel, commercial centre, and its new headquarters on nearly five acres of land at Bayside Executive Park.

According to information seen by Eyewitness News, the company purchased more than $74 million worth of local real estate this year, including its offices currently housed at the Meridian Corporate Centre.

The Securities Commission statement continued: “The Commission is aware of public statements suggesting that clients’ assets were mishandled, mismanaged and/or transferred to Alameda Research. Based on the Commission’s information, any such actions would have been contrary to normal governance, without client consent and potentially unlawful. Since the unfolding of events involving FDM, the Commission has proactively dealt with the situation and continues to do so.

The Commission said it determined that the prudent course of action was to put FDM into provisional liquidation to preserve assets and stabilize the company, adding that it is committed to working with the provisional liquidator to endeavour to obtain the best possible outcome for the customers and other stakeholders of FTX.

FTX, founded by Sam Bankman-Fried, has warned of bankruptcy if the firm can’t secure funds to cover a shortfall of as much as $8 billion. On Wednesday rival exchange Binance abruptly backed out of a deal to acquire the company which has its headquarters in The Bahamas.  FTX’s downfall has sent shockwaves through the cryptocurrency market and the fate of its plans in The Bahamas remains in doubt. Bankman-Fried yesterday in a series of tweets apologised for the FTX’s liquidity crisis and collapse.

Commenting on the developments regarding FTX, former Deputy Prime Minister and Former Minister of Finance K Peter Turnquest said: “In my view, the legislation is good and was thoroughly vetted locally and internationally so I’m not worried about that. This may highlight some tweaks that will be necessary. The actual supervision of the industry however needs to be reviewed to see if there were lapses or gaps that were not detected and if so, if there was negligence on the part of the regulator.”