Law enforcement in the Bahamas revealed on Thursday that officials had seized assets belonging to the former cryptocurrency platform FTX and transferred them to a government-controlled wallet for “safeguarding”.
The cryptocurrency platform, which was controlled by young multi-billionaire Sam Bankman-Fried, filed for bankruptcy last week after users discovered that trading firm Alameda Research, a company run by the former love of Bankman-Fried, Caroline Ellison, allegedly used FTX consumer holdings. make investments.
In the days following the FTX implosion, cryptocurrency assets mysteriously began to disappear in what was widely reported as a hack. Authorities in the Bahamas confirmed in a press release that authorities acted pursuant to an order from the Supreme Court of the Bahamas to transfer “all digital assets” held by FTX to a digital wallet controlled by the Securities Commission. from the country.
“Urgent interim regulatory action was necessary to protect the interests of customers and creditors,” the government said.
Lawyers representing FTX’s debtors have filed an emergency motion acknowledging that US and Bahamian officials need to coordinate closely before asserting that all bankruptcy proceedings should take place in the District of Delaware. “Having two bankruptcy courts consider related issues simply makes no sense,” the lawyers wrote. “It would lead to potentially inconsistent opinions, duplication of effort and unnecessary expense.”
The fallout from the bankruptcy has prompted calls in the United States for stricter regulation of the cryptocurrency sector and will be the subject of a bipartisan hearing organized by the House Financial Services Committee next month. Bankman-Fried, whose fortune disappeared overnight when the company filed for bankruptcy, is reportedly asking investors for $8 billion to cover withdrawal requests made by clients.
John Ray III, the corporate attorney who once represented plaintiffs affected by the collapse of fraudulent energy company Enron, has since replaced Bankman-Fried as chief executive to handle the bankruptcy proceedings. In a court document filed with the United States Bankruptcy Court for the District of Delaware, Ray claimed that the team that ran the cryptocurrency empire was shockingly inept.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of reliable financial reporting as has happened here,” the seasoned attorney wrote. “From the compromised integrity of systems and faulty regulatory oversight overseas, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented. “
Ray also revealed that Bankman-Fried and other senior employees lacked disbursement controls “appropriate for a commercial enterprise”, allowing them to “purchase homes and other personal items for employees and advisors” in the Bahamas. using company money. Bankman-Fried moved FTX to the island nation last year.
House Financial Services Chair Maxine Waters (D-CA) and Ranking Member Patrick McHenry (R-NC) announced that the committee would seek to hear testimony from Bankman-Fried, as well as Binance’s corporate management. , a competitor to FTX that nearly acquired the company amid the liquidity crunch spurred by consumers worried about the safety of their holdings. “Unfortunately, this event is just one of many examples of cryptocurrency platforms that have collapsed in the past year,” Waters noted in a press release. “We need legislative action to ensure that digital asset entities cannot operate in the shadows outside of strong federal oversight and clear rules of conduct.”
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