•On December 30, 2022, FTX Trading Ltd. and its affiliated debtors provided information on the cryptocurrency of the FTX Debtors in the control of the Securities Commission of The Bahamas.
• On November 12, 2022, after the commencement of the chapter 11 cases of the FTX Debtors, the cryptocurrency of the FTX Debtors were transferred without their authorization to a single digital wallet at Fireblocks.
• Based on the evidence in possession of FTX Debtor’s counsel, it is believed that on November 12th, 2022, the Bahamas Commission instructed Mr. Bankman-Fried and Mr. Wang to transfer digital assets to a Fireblocks wallet which currently holds $296 million USD worth
of cryptocurrency belonging to FTT customers. The value as of 2:00 PM EST on December 30th,2022 has decreased by $167 million USD according to etherscan.io due largely in part to FTT’s recent market performance.
On December 30, 2022, the Bahamas Commission (the “Commission”) released a press release informing the public that it had taken several actions against FTX Trading Ltd. (“FTX”), an online cryptocurrency trading platform based in the United States, and its affiliated debtors. As part of these actions, Fireblocks was contracted to transfer cryptocurrency belonging to FTX debtors in order to protect their investments from potential losses caused by the company’s Chapter 11 proceedings.
It has been two months since the commencement of the FTX Debtors’ chapter 11 cases and it has become apparent that a large amount of cryptocurrency was transferred on November 12, 2022 without their authorization. This consists of approximately 195 million FTT, 1,938 ETH and other miscellaneous coins that do not have substantial value, now residing in a single digital wallet at Fireblocks. Interestingly, the Securities Commission of The Bahamas acknowledged that they were behind this transfer and currently hold those assets stored at Fireblocks. It appears that FTX Debtors are taking steps to make sure the transferred crypto was obtained rightfully, so this story will be an important one to watch moving forward.
The Bahamas Commission’s Role
The Bahamas Commission is responsible for monitoring and regulating all forms of financial activity within its jurisdiction. In order to protect investors from potential risks associated with investing in companies like FTX, the Commission took several steps to ensure that those who used the platform were not subjected to any unexpected losses due to their involvement with the company.
Specifically, Fireblocks was contracted by the Commission on December 30th, 2022 in order to transfer any cryptocurrency belonging to FTX debtors away from their wallets and into secure storage provided by Fireblocks itself. This was done as a precautionary measure in order to prevent any potential losses that could arise from FTX entering into Chapter 11 proceedings.
Action Taken by The Bahamas Commission
In addition to contracting Fireblocks for transferring cryptocurrency belonging to FTX debtors, The Bahamas Commission also took other steps such as freezing accounts owned by certain individuals and requiring additional disclosure forms for those who used FTX services prior to December 30th, 2022. These measures were taken in order to ensure that all investors were aware of what their rights are when it comes to dealing with a company like FTX which is facing Chapter 11 proceedings. Additionally, these steps were intended to prevent any further losses or harm that may be caused by continued use of the platform while it is undergoing bankruptcy proceedings.
A new battle begins
An unexpected twist has been added to the story of the Bahamas Commission’s cryptocurrency being valued at up to $3.5 billion. Despite their press release not furnishing any detail concerning the specific type of cryptocurrency seized and its valuation methodology, the FTX Debtors are now calling on them to clarify any confusion and make clear what is really going on.
The FTX Debtors have proclaimed that they have rights over this cryptocurrency, and are taking steps to reclaim it. It is important that the method employed by the Bahamas Commission in determining the worth of this crypto be made public so that everyone may understand what went on here, and all involved parties can feel satisfied with how everything is progressing.
In light of their desire to protect the interests of creditors, FTX Trading and their affiliated debtors publicly declared on Friday that they intend to restore the cryptocurrency owned by the Bahamas Securities Commission (BSC) back to the chapter 11 estates. Unbeknownst to many involved, the BSC had been in possession of assets worth an estimated $3.5 billion since November 12th.
Unfortunately, this situation seemed more confusing than rescuable after a press release failed to provide any indications as to what type of bitcoin was confiscated or how it was valued systematically. FTX Debtors are adamant in calling out the BSC for not providing ample information and thus request them to speak truthfully and clarify any knowledge gaps that occurred due to this announcement.
Media Response
The press release issued by The Bahamas Commission was met with mixed reactions from media outlets worldwide. Some applauded The Bahamas Commission for taking proactive steps towards protecting investors while others argued that such measures could stifle innovation in the space and potentially lead to more stringent regulations regarding cryptocurrencies worldwide. Overall though, most commentators agreed that these measures were necessary given how volatile and unpredictable cryptocurrencies can be when dealing with companies like FTX which are facing significant legal challenges such as bankruptcy proceedings.
Impact of FTX Trading Ltd’s Chapter 11 Cases on Cryptocurrency Values
As a result of The Bahamas Commission’s actions, there has been a noticeable decrease in values for FTT customers who purchased units at spot prices or unsold altogether due to market uncertainty surrounding this event. Additionally, there has been speculation about whether or not illegal transfers have taken place using accounts affiliated with FTP debtors which could further depress market prices for FTT units sold at spot prices or unsold altogether depending on how much is transferred illegally without proper authorization.
FTX’s Chapter 11 case has had a significant impact on current cryptocurrency values due to both legal actions taken as well as speculation around illegal transfers taking place using accounts affiliated with FTP debtors resulting in a decreased market performance for FTT customers who purchased units at spot prices or unsold altogether due to market uncertainty surrounding this event.
Furthermore, tighter regulations may be imposed upon cryptocurrencies worldwide if similar events continue which could hinder future innovation within this space. It remains yet unclear what will happen next but one thing is certain – close attention must be paid regarding events happening around FTX and other firms going forward so we can best prepare ourselves accordingly.
