Investigations Into The Collapse Of The FTX Empire Under Way

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In a November 14, 2022, media release update on FTX, the Securities Commission of The Bahamas (SCB) confirmed that it had applied to the Supreme Court to appoint a court-supervised provisional liquidator for FTX and that it had obtained approval of joint provisional liquidators from PricewaterhouseCoopers (PwC).

The SCB, which is the lead authority in the Bahamas conducting investigations into the FTX saga, was exercising its regulatory powers under the Digital Assets and Registered Exchanges (DARE) Act to protect the interests of clients, creditors, and other stakeholders. The DARE Act was passed in December 2020 after examining cryptocurrencies’ status and regulatory environment in Gibraltar, Hong Kong, Malta, Switzerland and the United States.

In an earlier media release on November 10, 2022, the SCB advised that it had frozen the assets of FTX Digital Markets (FDM) and related parties and had also suspended its registration. The SCB further stated that the powers of the directors of FDM had been suspended, and no assets of FDM, client assets or trust assets held by FDM could be transferred, assigned or otherwise dealt with without the written approval of the provisional liquidator.

The SCB advised that it placed FDM into provisional liquidation to preserve its assets and to obtain the best possible outcome for the customers and other stakeholders. The SCB also advised that any actions involving the mishandling, mismanagement and transfer of clients’ assets without their consent are contrary to standard governance and potentially unlawful.

On November 11, 2022, It was reported that FTX had suffered an exploit to its cold storage wallets. The extent of the exploit has been estimated at around US$ 400-700 million. Investigations are underway to establish whether this was an external hacker’s work or an insider job.

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The Bahamian police interviewed the founder and former CEO of FTX, Sam Bankman-Fried (SBF) after he filed for bankruptcy protection. Other entities investigating FTX over breach of regulations and potential fraud include the US Security and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and the US Department of Justice (DOJ).

In the November 14, 2022, media release, the SCB confirmed that investigations regarding FTX are ongoing and will extend its full assistance to the police if and when required. In addition, the SCB stated that it should engage with other supervisory authorities on a regulator-to-regulator basis due to the multijurisdictional nature of this event.

Meanwhile, the impact of the FTX exchange’s collapse lingers on. In a November 15, 2022 tweet, another blockchain investment firm, Sino Global Capital, revealed that it had “mid-seven figures” exposure to the FTX exchange.

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