The Securities Commission of The Bahamas said on Thursday that it had directed all digital assets of FTX Digital Markets Ltd (FDM) to be transferred to a digital wallet controlled by the Commission.
The SCB had earlier frozen assets belonging to FTX Digital Markets- another subsidiary of FTX exchange, since the parent company came under scrutiny as different regulatory bodies tried to determine if it had defrauded investors.
In a press release issued on Nov 17, the SCB said it was exercising its power as regulator acting under the authority of an Order made by the Supreme Court of The Bahamas,
“Urgent interim regulatory action was necessary to protect the interests of clients and creditors of FDM,” the Commission said, adding that the assets would be held in their custody for safekeeping.
The SCB added that it would collaborate with other authorities and regulators across various jurisdictions as time goes on.
FTX co-founder had filed an emergency legal complaint, accusing Bahamian regulators of giving Sam Bankman-Fried unauthorized access to the FTX system.
FTX Claims Bahamian Regulators Gave SBF Authorized Access
FTX filed an emergency legal document, citing evidence suggesting the Bahamian regulators directed San-Bankman Fried to gain authorized access to the company’s system.
The accusation was put forward in a motion in the United States Bankruptcy Court in Delaware, adding that the request by Bahamian regulators for recognition as liquidators in the bankruptcy had to be scrutinized appropriately.
Some have also speculated that the Commission’s decision to take control of FTX digital assets, in its claim to “protect the interests of clients and creditors,” might be linked to the recent hacks.
FTX Wallets Drained of ~ $600 million
More than $600 million was drained from FTX’s crypto wallets on Nov 11, soon after the exchange announced that its Telegram channel had been compromised, warning users not to install any new upgrades and to delete all FTX apps.
Before the announcement, FTX had filed for Chapter 11 bankruptcy in the Southern District of New York, and Sam Bankman-Fried officially resigned as CEO.
The procedure allowed the company to organize its subsidiaries and other arms so that funds could be returned to creditors as fully as possible.
“FTX has been hacked. FTX apps are malware. Delete them. Chat is open. Don’t go on the FTX site as it might download Trojans,” wrote an account administrator in the FTX Support Telegram chat.
Crypto watchdog Certik Alert shared in a tweet screenshot of transactions carried out from multiple FTX addresses, both US and international, sending assets to the FTX Drainer Address.
While some crypto investigators saw it as a consequence of the declared bankruptcy, speculations ran high on the possibility of it being an inside job.
This was further bolstered when one of the addresses from which FTX funds were transferred was labeled as FTX on Etherscan.
Dyma Budorin, founder and chief executive of security firm Hacken, told Coindesk on Tuesday the attacker had access to all the FTX cold storage wallets that were exploited. To do so, the hacker would have needed access to the private keys in the hands of FTX executives.
Bahamas Liquidators Rejects FTX Digital Markets Claim For Bankruptcy
On Nov 15, liquidators for TX Digital Markets filed for Chapter 15 bankruptcy in New York, asking The court to recognize its bankruptcy in the Bahamas.
The liquidators asked the court to obtain records from FTX and block asset transfers to protect creditors of the Bahamas-based company, as they “reject the validity” of the crypto exchange bankruptcy proceedings in the US.
Foreign companies use Chapter 15 proceedings to seek US courts’ cooperation in cross-border bankruptcy cases.
The provisional liquidator, Brian Simms, challenged the validity of a Chapter 11 bankruptcy filing by subsidiary FTX Trading and 134 other affiliates in a Delaware court on Nov 14.
Simms, appointed by the court on Nov 10, said in the filings that because he did not “authorize or approve, in writing or otherwise,” he rejects the “validity of any purported attempt to place FTX Affiliates in bankruptcy.”
This, he exercised, as his right to being the only person authorized to take any actions, including but not limited to the Delaware petition.
“The Provisional Liquidation Order divests FTX.
Digital’s directors’ of the ability to act, or exercise any functions, for or on behalf of FTX Digital unless expressly instructed to so by me in writing.”