A new document issued by the Securities Commission of the Bahamas reveals that FTX Digital Markets has transferred all of its assets to the financial regulator and therefore to the Bahamian government. At the same time, the latter does not recognise the bankruptcy of the Bahamian branch under the protection of the American jurisdiction, and a tug of war could now begin between the two countries.
New twist in the FTX case
The ramifications of the FTX case continue to multiply in a sad way, as we learn today that the Securities Commission of the Bahamas, the body in charge of financial regulation in the Bahamas, has ordered FTX Digital Markets (the Bahamian arm of the exchange) to transfer all of its assets to the local government.
Securities Commission of The Bahamas Assumes Control of Assets of FTX Digital Markets Ltd. pic.twitter.com/IzW4PGZSJm
– Securities Commission of The Bahamas (@SCBgov_bs) November 18, 2022
The Securities Commission of the Bahamas, in the exercise of its regulatory powers acting under the authority of an order of the Supreme Court of the Bahamas, has taken the step of ordering the transfer of all digital assets of FTX Digital Markets Ltd. to a digital portfolio controlled by the Commission for safekeeping. Urgent interim regulatory action was necessary to protect the interests of FDM’s customers and creditors. “
Thus, many questions arise: why did the Bahamas’ financial watchdog wait so long to issue this statement, and when were the transfers in question made? Moreover, the document does not reveal details such as the amounts transferred by FTX Digital Markets.
The financial regulator claims that the measure, taken under the guise of the Digital Assets and Registered Exchanges Act of 2020, aims to “protect the interest of customers”.
The timing of the events also contributes to sow doubt as we learned on 13 November, the day after the transfer order, that the Bahamas police had placed FTX under police investigation.
Opposition between Bahamas and US
One line in the document issued by the Securities Commission of the Bahamas, while short, is of major importance: the financial watchdog does not recognise the nature of the Chapter 11 bankruptcy filing by FTX Digital Markets.
This procedure, which is specific to the US jurisdiction and widely used by companies reporting significant liquidity crises, allows them to operate under the strict control of the competent regulators.
Thus, according to the Securities Commission of the Bahamas, the FTX Digital Markets case will not be resolved – or at least not exclusively – on US soil.
Beyond these troubling elements that will need to be clarified by a clear legal review, it is even more troubling that FTX Digital Markets filed for bankruptcy in the Southern District of New York and not in Delaware, where all other FTX branches have filed their respective petitions.
In sum, the further FTX’s case progresses, the more it appears to be filled with contradictions and troubling internal elements, which unfortunately can only leave us spectators to a nameless disaster whose collateral damage will not leave the cryptocurrency ecosystem unscathed.
