FTX: A subject of criminal investigation in the Bahamas

    TheMorningCrypto Desk
    TheMorningCrypto Desk
    Published on November 14, 2022 6:53 PM

    Updated on January 25, 2023 5:04 PM

    The Bahamas Securities Commission is conducting an investigation into FTX Digital Markets Ltd. with the assistance of financial investigators from the Royal Bahamas Police Force in Nassau.
    FTX: A subject of criminal investigation in the Bahamas
    Source: ThePrint

    The Bahamas Securities Commission is investigating illegal activity

    The Securities Commission of the Bahamas on Thursday halted FTX's registration and froze its assets to "preserve assets and stabilize the company," according to a statement from the Commission. 

    According to a statement from the Royal Bahamas Police Force provided to Reuters on November 13, financial investigators and the Bahamas securities authorities are looking into potential criminal activity related to the bankruptcy of cryptocurrency exchange FTX.

    As reported by the Royal Bahamas Police:

    Financial investigators from the Financial Crimes Investigation Branch are collaborating closely with the Bahamas Securities Commission to look into any instances of criminal misconduct in light of the collapse of FTX internationally and the provisional liquidation of FTX Digital Markets Ltd.

    The collapse of one of the world's largest crypto exchanges

    Following a liquidity issue that caused one of the biggest cryptocurrency exchanges in the world to go bankrupt, Bankman-Fried resigned as CEO of FTX last week, and the company—along with more than 100 associated entities—started Chapter 11 bankruptcy procedures.

    After Changpeng Zhao, CEO of rival Binance, declared that his company would sell all of its assets in the FTX cryptocurrency token, Bankman-Fried claimed the company experienced roughly $5 billion in withdrawals in a single day.

    Later, it was revealed by numerous news organizations that FTX had lent Alameda billions of dollars, including some client monies.

    Following the withdrawals, the price of FTX's token dropped 86% in three days, sending the price of bitcoin, ethereum, and Coinbase shares down 20% or more. To "help cover the liquidity crunch," Binance made a brief acquisition of FTX on Tuesday. 

    However, the company later withdrew from the deal due to "due diligence" and "news reports regarding mishandled customer funds and alleged US agency investigations," which paved the way for FTX to file for bankruptcy.

    The investigation follows the regulator's weekend public denial of FTX claims. On November 11, FTX tweeted that it had received instructions from "Bahamian HQ's regulatory and regulators" to make it easier for Bahamians to withdraw their money.

    SC denied FTX authorization for withdrawals

    A day later, the securities commission denied giving FTX the order or authorization to provide domestic clients' withdrawals top priority.

    The SCB's Twitter page issued the following statement:

    The Commission informed that the priority of withdrawals for Bahamian clients has not been directed, authorized, or suggested to FTX Digital Markets, Ltd.

    Related: Kraken freezes FTX and Alameda's accounts

    Aftermaths of the collapse:

    • According to a November 9 Wall Street Journal article, the Securities and Exchange Commission and the US Department of Justice are looking into the collapse of the cryptocurrency exchange.
    • On November 10, the California Department of Financial Protection and Innovation (DFPI) said that it had begun investigating the "apparent failure" of the exchange.
    • Sam Bankman, the former CEO of FTX, Gary Wang, the co-founder, and Nishad Singh, the director of engineering, are believed to be in The Bahamas and are "under surveillance" by local law enforcement.
    • Bankman resigned from his role as CEO, and John Ray will take over in his place. The exchange "now has liabilities worth $8.8 billion," as reported on Twitter by Zane Tackett, the former head of the institutional division at FTX.