Good News For FTX Customers: The Bahamas Seized $3.5 billion in Assets

The Securities Commission of The Bahamas says it is holding these assets pending transfer to clients and creditors.

This is news that will no doubt please the customers and creditors of Sam Bankman-Fried's crypto empire. 

The authorities of the Bahamas, where the disgraced former emperor of the crypto space lived and where FTX was headquartered, have just announced that they have seized significant assets from the bankrupt cryptocurrency exchange.

The Securities Commission of The Bahamas says it seized these assets as soon as Bankman-Fried, known by the initials SBF in the crypto industry, filed for Chapter 11 bankruptcy for his empire on November 11.

The regulator explains having seized the assets of FTX for security reasons so that they do not disappear mysteriously. 

Based on information provided by Sam Bankman-Fried to the regulator concerning the cyberattacks that took place on the systems of FTX, "the Commission determined that there was a significant risk of imminent dissipation as to the digital assets under the custody or control of FTXDM to the prejudice of its customers and creditors," the authority said in a press release.

$3.5 Billion

"As a result, in the exercise of its regulatory powers, the Commission requested and obtained a Court order to safeguard the digital assets owned by or under the custody or control of FTXDM or its principals by transferring them to secure digital wallets under the exclusive control the Commission."

On 12 November, the regulator said it, therefore, took the action of directing the transfer of all digital assets of under the custody or control of FTX valued at more than US$3.5 billion, based on market pricing at the time of transfer, to digital wallets controlled by the Commission for safekeeping. 

"The digital assets transferred on 12 November 2022 to digital wallets under the exclusive control the Commission are being held by the Commission on a temporary basis, until such time as The Bahamas," the regulator says.

It added that: "Supreme Court directs the Commission to deliver them to the customers and creditors who own them."

The regulator, however, warned that "while certain token protocols may require the burning of old tokens and the simultaneous minting of new replacement tokens to effect transfer, in no case, did the process involve the creation of any additional tokens."

The Bahamian regulator's announcements are good for FTX's customers and creditors, but it is not certain that they will recover this money immediately because FTX's bankruptcy is managed in the United States according to American law, while there is a liquidation of the company in the Bahamas. 

In addition, the regulators have made it known that there was comingling of FTX's customers' funds with those of FTX and its sister company Alameda Research, a hedge fund that also acts as a trading platform for institutional investors. Alameda was also part of Bankman-Fried's empire.

Allegations

FTX, which was founded in May 2019, was unable to meet withdrawal requests from worried and panicked customers. Bankman-Fried is accused of loaning $10 billion in funds from FTX clients to Alameda Research when the two companies were supposed to be independent.

The former trader is facing a series of criminal and civil charges from regulators. SBF was extradited to the United States on Dec. 21 by the authorities of the Bahamas.

He was released after his parents, both law professors at Stanford, signed a $250 million recognizance bond pledging their California home as collateral. Two other friends with significant assets also signed, according to news reports.

"Bankman-Fried was orchestrating a massive, yearslong fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire,” the Security and Exchange Commission (SEC) alleges in its civil complaint.