FTX Crypto Worth $3.5B Held By Bahamas Regulator

Bahamas regulators took control of FTX crypto following a peculiar cyberattack as the exchange prepared to file for bankruptcy

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FTX users caught in the crypto exchange’s staggering collapse may finally have some good news by way of The Bahamas.

The Securities Commission of The Bahamas (SCB) said Thursday it managed to safeguard $3.5 billion in crypto tied to local subsidiary FTX Digital Markets (FTXDM), the firm behind Sam Bankman-Fried’s flagship global platform.

After FTX was hit by cyberattacks leading up to filing for bankruptcy in November, the Commission said it saw risks to the platform’s remaining digital assets. It obtained a court order to protect the crypto with assistance from infrastructure startup Fireblocks.

The value of the remaining assets was based on market pricing at the time of transfer, on Nov. 12. Crypto markets have stayed relatively steady since then.

The Commission will hold the assets until the Supreme Court directs it to send them onto creditors. It has now requested clearance to share information about the assets with FTX’s US-based bankruptcy proceedings, although its legal ability to do so remains in flux.

SCB said it will “continue to conduct a comprehensive and diligent investigation into the causes of FTX’s failure, act in accordance with directions issued by the Supreme Court of The Bahamas, collaborate with other supervisory authorities, and take such further actions as needed to preserve the assets of FTXDM and to safeguard the interests of customers and creditors of FTXDM.”

The Department of Justice is reportedly looking into the hacking incident, which saw nearly half a billion dollars in crypto illicitly withdrawn from FTX’s operational hot wallets.

Lawyers estimate FTX companies owe funds to between 100,000 and one million creditors, with the top 50 out-of-pocket by $3.1 billion. Bankman-Fried allegedly siphoned crypto worth billions of dollars from FTX to trading unit Alameda Research, which ultimately lost the funds via risky market strategies.

Bankman-Fried was extradited to the US from The Bahamas last week, where he’ll face a whopping eight-count indictment including fraud and conspiracy charges. Two associates, Alameda Research CEO Caroline Ellison and chief technology officer Gary Wang, have already pleaded guilty to their own charges.

Bankman-Fried is currently under house arrest at his parents’ home in California while he awaits trial. He was granted bail by a US Magistrate Court after signing a $250 million bond backed by the house.

Updated Dec. 30, 2022 at 5:27 am ET: Added context about estimated number of FTX creditors.


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