Bahamas Securities Commission says it seized $3.5 billion in FTX assets ‘for safekeeping’

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Brown Rudnick’s partner Hailey Lennon discusses the potential regulatory holes highlighted by the collapse of FTX and the push from lawmakers for increased crypto regulation.

The Bahamas Securities Commission said on Thursday that the agency seized all digital assets under the control of FTX’s Bahamian subsidiary, FTX Digital Markets Ltd.

The regulator said in a press release that the funds were moved to digital wallets under its sole control on November 12, the day after FTX filed for Chapter 11 bankruptcy, after determining “there was a risk material of imminent dissipation” of assets under FTXDM’s control based on information provided by disgraced founder Sam Bankman-Fried regarding cyberattacks on the system.

The Bahamas securities watchdog revealed on Thursday that it has seized more than $3.5 billion in digital assets controlled by FTX Digital Markets Ltd. after the collapse of the crypto exchange. ((AP Photo/Marta Lavandier, File)/AP Newsroom)

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The funds are being held “on a temporary basis”, the SCB said, pending instructions from the Supreme Court of the Bahamas on whether the assets should be “returned to customers and creditors who own them” or to court. has appointed Joint Provisional Liquidators (JPL) in charge of the settlement of FTXDM.

The seizure of funds by the Bahamas watchdog has been a source of contention between the agency and new FTX CEO John Ray III, who replaced Bankman-Fried and filed for Chapter 11 bankruptcy for FTX in the States. States after taking control of the company. Bahamas-based FTXDM separately filed for Chapter 15 bankruptcy which was merged into Chapter 11 – and the two sides have clashed throughout the proceedings so far.

John Ray III, CEO of FTX Cryptocurrency Derivatives Exchange, speaks during a House Financial Services Committee hearing investigating the collapse of FTX in Washington, DC, Tuesday, December 13, 2022. (Al Draco/Bloomberg via Getty Images/Getty Images)

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The Bahamas Safety Commission admitted last month to seizing assets from FTXDM, but did not put a dollar amount on the figure at the time.

During his testimony before Congress in mid-December, Ray accused Bahamian officials of taking the funds with the help of former FTX executives and claimed authorities were uncooperative.

“We repeatedly asked them for clarification on what they were doing,” Ray said of Bahamian officials. “We were shut down by them.”

Sam Bankman-Fried leaves federal court in New York on Thursday, Dec. 22, 2022. The former CEO of FTX and Alameda was released on $250 million bail. (Charles Guérin/Abaca for Fox News Digital/Fox News)

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Ray also said it appears that Bankman-Fried, who was arrested hours before the hearing on multiple charges related to the collapse of FTX, tried to undermine the US bankruptcy process by moving assets from company to accounts under the control of Bahamian authorities.

Bahamian officials said in court documents that they requested a criminal investigation into FTX on Nov. 9 after FTXDM co-CEO Ryan Salame informed them in a phone call of alleged money transfers from exchange clients at sister company Alameda Research.

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