The noose is tightening for FTX. The platform was forced to transfer all digital assets to a digital wallet owned by the Bahamian Financial Markets Regulatory Authority.
FDM’s digital assets transferred to a secure SCB digital wallet
The Bahamian Financial Markets Regulator has ordered the transfer of all digital assets from FTX Digital Markets (FDM) to a digital wallet owned by the Securities Commission of The Bahamas (SCB).
The transfer of assets took place on November 12thso only two days after freezing the assets and suspending the license of the crypto currency platform FTX in the country.
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
Commission press release does not specify the amount of digital assets of FTX Digital Markets which have moved as a result of this transfer of assets.
A preventive measure to protect creditors
According to the Commission, a urgent regulatory action was necessary to protect the interests of creditors and customers from FTX Digital Markets. Many customers and creditors no longer have confidence in the management of the company.
Let us not forget, indeed, that the platform cryptocurrency not only used funds from its clients to finance risky bets from its subsidiary Alameda Research, but in addition it was also the victim of a massive hack where more than 600 million dollars were stolen.
By order of the Supreme Court, the SCB thus exercises its power as a regulatory authority. This is clearly a preventive measure to ensure that the remaining funds will not be illegally transferred to a third-party wallet. The objective being of course to protect the creditors of the FTX platform.
More than a million creditors affected by the FTX shock wave!
A recent estimate from the WSJ newspaper estimates that more than a million creditors are affected by the liquidity crisis of the trading platform. The reimbursement of the platform’s creditors (customers, investors, affiliates) is one of the Commission’s priorities.
This preventive measure, however, is only one simple step in creditor protection. The Commission has already warned that it will work with other financial regulators, located in other jurisdictions, to shed light on the liquidity crisis and address issues affecting creditors and customers.
The next steps in the FTX liquidation procedure
We do not yet know all the details regarding the liquidation procedure, but it is clear that the FTX shock wave will continue to propagate in the crypto markets for a few more weeks.
The liquidation procedure promises to be perilous!
The liquidation procedure is announced particularly long and perilous. Freezing and transferring digital assets is only the first step in this process. FDM’s creditors are unlikely to be repaid for a few years.
The FTX platform’s bankruptcy filing looks suspiciously like the resounding bankruptcy of the Mt Gox platform. This company had filed for bankruptcy on February 28, 2014 and it took more than 7 years before the creditors obtained a partial refund.
The recognition by the American authorities of the liquidation procedure
Through its new CEO, John Ray, FTX Digital Markets recently filed for protection of the Chapter 15 of the United States Bankruptcy Law in a New York court. It is in particular question of obtaining the recognition by the American authorities of the procedure of liquidation in progress in the Bahamas.
SBF’s responsibility soon engaged?!
Bahamian Securities Regulatory Commission will continue to work with other financial authorities in order to determine the part of the responsibility of the former directors of FTX in the liquidity crisis of the company.
It is very likely that the responsibility of Sam Bankman-Fried will be engaged. The new CEO of the FTX company. John Ray, has also criticized SBF for the poor management of the company due in particular to the lack of financial guarantees and reliable data. Embezzlement is in any case a serious fault that will be invoked by the judicial authorities.
One thing that is certain, Sam Bankman-Fried, as well as several people who have been actively involved in the FTX business, are going to have to take a class action which assesses the amount of damage suffered by the defrauded investors at more than 11 billion dollars. The appeal was filed in Florida by attorney Adam Moskowitz. To be continued !
Cryptocurrency investing is offered by eToro (Europe) Ltd as a PSAN, registered with the AMF. Cryptocurrencies are very volatile. No consumer protection.
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