In November, as cryptocurrency exchange FTX was facing collapse, Bahamas securities regulators seized digital assets valued at $3.5 billion from the company’s local operations. Christina Rolle, executive director of the Securities Commission of the Bahamas, stated in an affidavit that the commission took control of the assets held by FTX Digital Markets Ltd. following a hacking attempt reported by FTX co-founder Sam Bankman-Fried.
The affidavit, filed with the Supreme Court of the Bahamas, also revealed that the Securities Commission relied on Bankman-Fried and co-founder Gary Wang to facilitate the transfers. However, FTX’s US managers have disputed the valuation assigned to the seized assets by Bahamian officials.
According to Christina Rolle, executive director of the Securities Commission of the Bahamas, regulators in the Bahamas responded to the collapse of FTX by transferring the company’s local assets to government-controlled wallets. Rolle stated in an affidavit that the assets were valued at $3.5 billion at the time of the transfer. However, FTX’s US management has disputed this valuation, estimating the worth of the assets at $296 million when they were transferred or $167 million based on more recent spot prices.
FTX’s US management has been criticizing Bahamian officials for weeks, alleging that they directed unauthorized transfers of company assets. In response, the US management announced that it plans to seek the retrieval of the seized cryptocurrency from the Bahamas.
This situation has led to the question of which courts, either US or Bahamian, will divide the assets amassed by FTX. FTX is a global company that is based in the Bahamas. A list of the top 50 creditors, which was filed in US bankruptcy court, shows that these creditors are owed a total of $3.1 billion. It is unclear at this time how the assets will be divided and which court will have jurisdiction over the matter.
The digital assets that were transferred to government-controlled wallets in the Bahamas by the Securities Commission include approximately 195 million of FTX’s FTT tokens, 1,938 Ethereum, and other miscellaneous coins that do not hold significant value, according to a statement made by FTX on Friday. In the statement, FTX also requested that the Securities Commission clarify any confusion caused by their recent statements and provide accurate information to the public regarding the seized cryptocurrency and its valuation.
According to an affidavit by Christina Rolle, executive director of the Securities Commission of the Bahamas, Sam Bankman-Fried and Gary Wang, co-founders of FTX, transferred the assets out of the exchange’s local unit based on a court order obtained by the Securities Commission. Rolle stated that “there was no other timely option available” to the Securities Commission in order to comply with the court order. The assets are currently being held in wallets hosted by Fireblocks, an institutional digital asset custodian, and the Securities Commission is awaiting direction from the Bahamian Supreme Court on how to proceed with the assets. It is possible that the court could require the assets to be delivered to customers and creditors who own them or to the local liquidators of FTX Digital Markets.
The transfers were made a day after Bankman-Fried resigned as CEO of FTX and his successor, John J. Ray III, filed for Chapter 11 bankruptcy for over 100 FTX affiliates in the US Bankruptcy Court in Wilmington, Delaware. FTX Digital Markets was not included in the bankruptcy filing and has instead been overseen by Bahamas court-appointed liquidators.
The Securities Commission has faced criticism from FTX’s US management and bankruptcy lawyers, who have questioned the independence of the Bahamian liquidation proceedings and claimed that the crypto transfers removed assets that belong to FTX’s Chapter 11 estate. Rolle defended the actions of the Securities Commission and denied allegations from FTX lawyers that Bahamian officials directed the creation of new tokens as the exchange was collapsing. She stated that these allegations are “unsubstantiated and untrue” and have the effect of damaging the reputation of the Bahamas and its public institutions.
Rolle also revealed that the Securities Commission did not publicly disclose the details of its actions in November sooner due to a confidentiality order initially obtained from the court in order to avoid alerting parties potentially connected to FTX Digital Markets. Earlier this month, an FTX lawyer stated in a bankruptcy court hearing that the company’s management team is negotiating with Bahamian authorities to resolve a dispute over access to the failed crypto exchange’s electronic records. Rolle also revealed that the Securities Commission rejected an offer by Bankman
