Bahamas Securities Commission Freezes FTX Digital Markets

The Securities Commission of The Bahamas (SCB) froze the assets of FTX Digital Markets (FDM).
Also, the regulator revoked the registration of the troubled crypto exchange.
A provisional liquidator must approve any transfer, assignment, or other action on FDM assets.
FTX is also on the radar of SEC, DoJ, and CFTC.
As per leaked balance sheets, Alameda Research, founded by Sam Bankman-Fried, purportedly tied up billions in FTT.

On Thursday, the crisis befalling FTX worsened after The Securities Commission of The Bahamas (SCB), the regulator in the Bahamas, froze its digital assets, known as FTX Digital Markets (FDM). The regulator also terminated the registration of the troubled crypto exchange in the country.

It is noteworthy that the regulator applied to the Supreme Court of The Bahamas to appoint a provisional liquidator for FTX Digital Markets Ltd. The application, as reported, has been approved, with Mr. Brian Simms, K.C. (Lennox Paton Counsel and Attorney-at-Law) appointed as provisional liquidator. 

By virtue of this, any assets of FDM, client assets, or trust assets held by FDM can only be transferred, assigned, or otherwise after the approval of the appointed provisional liquidator.

“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,” SCB maintained.

Further, the agency said it has taken proactive measures to deal with the FDM issue and will continue to do so to de-escalate the crisis.

“The Commission determined that the prudent course of action was to put FDM into provisional liquidation to preserve assets and stabilize the company,” the SCB said in the statement.

FTX is also on the radar of US authorities. As a result of accusations against FTX regarding the mismanagement of investors’ funds, the U.S. Department of Justice, along with the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), is investigating the situation.

Side Notes on the FTX Saga

The saga, according to reports, started after a leaked balance sheet showed that Alameda Research, a firm founded by Sam Bankman-Fried, purportedly tied up billions of dollars of its assets in FTT, the native token of FTX. Recall that the same Sam Bankman-Fried also founded FTX.

Following the development, Binance began liquidating the tokens, citing its decision as a measure of taming risks. This was followed by mass withdrawals of funds from the exchange that drove down the FTX token by 75%. 

Around late Wednesday, Binance CEO Changpeng Zhao announced his intent to save the exchange from oblivion. However, on Thursday, Binance announced that the deal would no longer go through owing to “due diligence.”

On the Flipside

The ongoing crisis teaches us the importance of transparency. Ironically, SBF earlier advocated for less financial privacy and obscure licensing models. 

Why You Should Care

There has already been a profound impact on the industry due to Sam Bankman-Fried’s FTX exchange’s rise and fall. Even though FTX is trying to garner liquidity from certain firms, recent actions from the Bahamian regulators may hinder its efforts.

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