Bahamas Regulators Own $3.5 Billion of FTX Customer Assets

The Bahamas’ regulators have retained $3.5 billion in FTX assets. They claim they are to be transferred at the request of those monetarily impacted by the crypto-fallout. Customers of the company have filed a lawsuit in order to receive their dues.

An unknown attacker stole tokens worth $372 million from crypto exchange FTX in November after it filed for bankruptcy. According to the former CEO’s information about the cyberattack, Sam Bankman-FriedThe Securities Commission of The Bahamas concluded that there was no a “significant risk of imminent dissipation” FTX has digital assets under its control.

The commission thus requested, and subsequently obtained, a court order to safeguard these assets by transferring them to secure digital wallets that are under its exclusive control, according to a press release (pdf) on Dec. 29.

“On 12 November 2022, the Commission, in the exercise of its powers as regulator acting under the authority of an Order made by the Supreme Court of The Bahamas, took the action of directing the transfer of all digital assets of under the custody or control of FTXDM or its principals, valued at more than US$3.5 billion, based on market pricing at the time of transfer, to digital wallets controlled by the Commission, for safekeeping,” The release stated.

The digital assets transferred will be kept under temporary control by the commission until the Supreme Court orders the commission to release them to creditors or customers.

Alternativly, the commission could also transfer assets to joint provisional liquidators JPL to be administered according to the rules related to insolvency for the FTX estate.

Creditors of FTX

FTX filed Chapter 11 bankruptcy following concerns about its balance sheet. This triggered a large withdrawal of funds by depositors and pushed the firm to a liquidity crisis.

Initial estimates by the company were that 100,000 creditors would be affected by the collapse. However, it was later increased to over a million.

In late December, FTX customers filed a class-action lawsuit against the company and its former top executives seeking a declaration that the firm’s digital asset holdings belong to customers.

The lawsuit claims that FTX promised to segregate customer accounts but instead allowed them be misappropriated. According to the lawsuit, customers should be reimbursed first.

“Customer class members should not have to stand in line along with secured or general unsecured creditors in these bankruptcy proceedings just to share in the diminished estate assets of the FTX Group and Alameda,” The lawsuit was filed.

Other Lawsuits

Bankman-Fried’s criminal case on the FTX collapse was recently reassigned to U.S. District Judge Lewis Kaplan, who is known to have earlier handled a sexual abuse lawsuit against Britain’s Prince Andrew and defamation lawsuits against former President Donald Trump.

The U.S. Department of Justice is accusing the ex-FTX CEO of causing billions of dollar in losses as a result of the fallout. He was recently granted bail on a $250 million bond and is required to remain under detention in his parents’ California home. Bankman-Fried is not yet pled guilty.

Gary Wang, co-founder of FTX, as well as Caroline Ellison, former co-CEO of Bankman-Fried’s Alameda Research, are facing charges. They have pleaded guilty to federal charges, and are cooperating with the prosecutors.

Naveen Athrappully, a news reporter at The Epoch Times, covers business and global events.