The securities regulator in the Bahamas conceded that it is holding FTX assets worth $3.5 billion based on market pricing at the time they ordered the transfer of the exchange’s holdings from its wallets into their own custody.
In a press statement Thursday evening, the SCB said it had exercised its powers as a regulator and directed the transfer of all digital assets of FTX Digital Markets, a Bahamian subsidiary of the now-defunct crypto empire.
The watchdog added that it’s holding these assets on a temporarily basis as it sought directions from the Bahamian Supreme Court to deliver them to customers and creditors, or to liquidators of the insolvency estate.
Authorities in the Bahamas — where FTX is headquartered —justified the move to take control of assets on November 12, citing “urgent interim regulatory action was necessary to protect the interests of clients and creditors of FDM.” In an interview with Vox, Bankman-Fried expressed serious disdain for regulators but said he already transferred those funds to the SCB’s custody.
The move came after the lawyer overseeing FTX’s bankruptcy said the initial conclusions show a massive mismanagement and potentially fraudulent acts. It was also expected after the appointment of a provisional liquidator followed the Bahamian securities regulator suspending FTX’s registration status and freezing its local subsidiary’s assets on November 10. The provisional liquidation is a regulatory act to safeguard all assets for the time being, as opposed to distributing the company’s assets to creditors.
The revelation also comes shortly after the US Department of Justice launched investigations into the hack that drained about $372 million out of bankrupt cryptocurrency exchange.
The mystery theft took place on November 11 shortly after the exchange and its 130 affiliated entities filed for bankruptcy. Both the hack and new probe added insult to injury of FTX, a once $32 billion crypto empire, whose founder and former CEO Sam Bankman-Fried is sued in a separate fraud case.
According to a Bloomberg report, federal prosecutors from the Justice Department’s National Cryptocurrency Enforcement and Manhattan authorities are tracking the stolen assets. Per the report, they already managed to freeze some tokens, but amount of funds frozen is described as a “fraction” of the overall amount.
At the time of the hack, some blockchain security firms documented suspicious transfers of $600 million worth of tokens from FTX, which may have been the result of a hack or theft. Hackers allegedly sent 180,000 ether (ETH) coins, worth nearly $200 million to at least a dozen digital wallets. The suspicious hack marked a new twist in a dramatic series of events as some experts claimed that some clues point to a high-level insider.