FTX Bankruptcy Jurisdiction Fight: Bahamas Regulators Now Confirm They Directed SBF to Move Assets

At least some of the millions of dollars in FTX customer funds mysteriously moved off the exchange last week were moved at the direction of regulators in the Bahamas. That assertion was made in a new filing by the embattled company, and confirmed late on Thursday by the Securities Commission of the Bahamas itself.

"[There is] credible evidence that the Bahamian government is responsible for directing unauthorized access to the Debtors' systems for the purpose of obtaining digital assets of the Debtors—that took place after the commencement of these cases," read the filing, signed by new FTX CEO John Ray, famous for handling the liquidation of Enron.

The company went on to say that its co-founders Sam Bankman-Fried and Gary Wang were recorded saying that Bahamanian regulators instructed the pair to make "certain post-petition transfers" and that such assets were "custodied on FireBlocks under control of [the] Bahamian government."

SBF's Alameda Moved $89 Million Worth of Crypto Into a New Wallet

In the past 24 hours, Alameda Research has moved $2.7 million worth of Serum, FTX, and Uniswap tokens into a wallet where the now-bankrupt trading desk has amassed $89 million worth of assets, according to on-chain data. As of this writing, none of the wallets—all labeled as belonging to Sam Bankman-Fried’s crypto trading firm Alameda Research by blockchain analytics firm Nansen—have tried to move the funds since yesterday. The transactions are just the most recent unexplained transfers by walle...

It wasn’t the first time the accusation had been leveled at the island nation, which previously denied it. But this time, Bahamanian regulators reversed course.

"The Securities Commission of the Bahamas, in the exercise of its powers as regulator acting under the authority of an Order made by the Supreme Court of the Bahamas, took the action of directing the transfer of all digital assets of FTX Digital Markets Ltd. to a digital wallet controlled by the Commission, for safekeeping" the agency said on Thursday.

The regulator said it took these actions to protect the interests of clients and creditors under its jurisdiction.

The back and forth is the latest twist in the scramble to secure what’s left of FTX assets, the latest developments coming as U.S. regulators have called Bankman-Fried to testify before a House Financial Services Committee in December to answer for the collapse of FTX.

In its latest filing, FTX said that it has "secured only a fraction of the digital assets of the FTX Group that they hope to recover," saying it has $740 million now held in a new cold wallet. However, they were unable to account for three main gaps in tracked assets:

"These balances exclude cryptocurrency not currently under the Debtors' control as a result of (a) at least $372 million of unauthorized transfers initiated on the Petition Date, (b) the dilutive 'minting' of approximately $300 million in FTT tokens by an unauthorized source after the Petition Date, and (c) the failure of the co-founders and potentially others to identify additional wallets believed to contain Debtor assets."

Hundreds of Millions of Dollars Drained From FTX Overnight in 'Unauthorized' Transfers

Several wallets allegedly belonging to FTX were drained of hundreds of millions of dollars in coins late on Friday night, with much of the funds transferred from Tether (USDT) into stablecoin DAI, and from staked Ethereum (stETH) into Ethereum (ETH). It was the same day that FTX filed for Chapter 11 bankruptcy, and it looked too soon, too late at night, and too sophisticated for the actions to be attributed to liquidators. The exodus, all visible on blockchain tracker Etherscan, totaled around $...

The unauthorized transfers were spotted on Nov. 11, the same day FTX declared bankruptcy, and were tracked in real-time by blockchain sleuths on Twitter, leading to a flurry of speculation. At the time, the transfers, which totaled $650 million, were thought to be a part of a massive hack targeting the bankrupt company.

At 2 am EST that night, FTX US general counsel Ryne Miller called the transfers "unauthorized" and said that FTX had begun moving the company’s remaining assets to cold storage to "mitigate the damage."

The Securities Commission of The Bahamas had earlier issued a press release saying it was taking action to freeze the assets of FTX Digital Markets. That same day, FTX released its own statement saying that it had begun allowing the withdrawal of Bahamian funds to comply with the nation’s regulators.

But as rumors swirled that the unauthorized transfers were the work of Bahamian authorities, the Securities Commission of The Bahamas issued a statement pushing back on FTX's claim, saying that "it has not directed, authorized, or suggested to FTX Digital Markets Ltd. the prioritization of withdrawals for Bahamian clients."

The statement acknowledged that such an action could constitute "voidable preferences" under bankruptcy rules and could have required "clawing back funds from Bahamanian customers."

"In any event, the Commission does not condone the preferential treatment of any investor or client of FTX Digital Markets Ltd. or otherwise," the agency said.

The people or groups responsible for the unauthorized transfers remain unknown, then, but blockchain watchers have been posting their theories on Twitter, attributing some of the withdrawals to “white hat FTX employees” and others “maybe controlled by [Bankman-Fried and Wang].”

FTX's Bahamian subsidiary FTX Digital Markets Ltd. filed for chapter 15 bankruptcy proceedings on Nov. 15, asking for cooperation between U.S. courts and foreign courts as its foreign bankruptcy proceedings involved the United States.

Bahamas Regulators Want Control of FTX Bankruptcy Proceedings

Regulators in the Bahamas want to take control of FTX’s bankruptcy proceedings in what could become a messy process. Yesterday, FTX Digital Markets Ltd., the exchange’s Bahamian subsidiary, filed for chapter 15 in New York bankruptcy court on Tuesday. A Chapter 15 filing asks for cooperation between U.S. courts and foreign courts when foreign bankruptcy proceedings involve the U.S.  Bahamas-based lawyer Brian Simms, who will help with the insolvency, said in the filing that FTX was not authoriz...

The Securities Commission of the Bahamas says that it does not believe that FTX Digital Markets, Ltd., is a party to the U.S. Chapter 11 Bankruptcy proceedings of FTX. The agency says they will engage with other regulators and authorities "in multiple jurisdictions" to address matters affecting the creditors, clients, and stakeholders of FTX Digital Markets.

Brian Simms, a partner at the Nassau law firm Lennox Paton, was appointed as provisional liquidator. He said that FTX was not authorized to file for bankruptcy in the U.S.—and asked for FTX's assets located in the U.S. to be handed over to Bahamian liquidators.

FTX's collapse and the subsequent contagion spreading across crypto have regulators worldwide calling for stricter regulation of crypto.