New FTX management indicates SBF transferred assets to Bahamas post Bankruptcy

• FTX filed for bankruptcy on November 11th.
• It is headquartered in the Bahamas and registered elsewhere.
• FTX’s new CEO has experience in restructuring such companies.

In an emergency court filing, insolvent cryptocurrency exchange FTX revealed that former CEO Sam Bankman Fried was ordered by Bahamian authorities to gain “unauthorized access” FTX funds and transfer those to the custody of Bahamian authorities. This happened after FTX had filed for bankruptcy protection.

In the filing, an interview of SBF in which he strongly criticized regulators by a US-based news agency was cited. The assets have been transferred to the Bahamian government.

John J Ray III is the new CEO of FTX. He saw through the liquidation phase of energy firm Enron.

Ray’s statements regarding FTX are disturbing.

“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” he added.

“From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.”

“In the Bahamas, I understand that corporate funds of the FTX Group were used to purchase homes and other personal items for employees and advisors. I understand that there does not appear to be documentation for certain of these transactions as loans, and that certain real estate was recorded in the personal name of these employees and advisors on the records of the Bahamas,” Ray added.

″[I]n connection with investigating a hack on Sunday, November 13, Mr. Bankman-Fried and [FTX co-founder Gary] Wang, stated in recorded and verified texts that “Bahamas regulators” instructed that certain post-petition transfers of Debtor assets be made by Mr. Wang and Mr. Bankman-Fried (who the Debtors understand were both effectively in the custody of Bahamas authorities) and that such assets were “custodied on FireBlocks under control of Bahamian gov’t,” the filing noted.

“The Debtors thus have 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. The appointment of the JPLs and recognition of the Chapter 15 Case are thus in serious question,” the filing added.

In the interview, SBF claimed that his biggest mistake was to file chapter 11 filings. SBF’s tweets have been erratic, containing apologies and thoughts. People are not amused, and are demanding he be brought to justice. However, the burning issue is the need for regulatory clarity.

Bitcoin whale Michael Saylor remarked in an interview that the FTX mess would put pressure on lawmakers and authorities to develop regulatory frameworks for cryptocurrency and blockchain based services sooner.

Apart from FTX’s mess, SBF’s connections with the ruling party and regulatory officials are also under the scanner.

Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.

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