Bahamas regulator defends FTX actions as bankruptcy tensions mount

The Bahamas’ financial regulator has defended its treatment of FTX in the face of allegations it gained unauthorized access to the failed crypto exchange’s systems. 

The Securities Commission of The Bahamas (SCB) said John Ray — who took over as FTX’s CEO after Sam Bankman-Fried’s resignation on Nov. 11 — had misrepresented its “timely action” through “intemperate and inaccurate allegations,” in a statement issued Wednesday.

Ray’s scathing review of how FTX had been run, in Chapter 11 bankruptcy documents filed Nov. 17, “reinforces the wisdom of the Commission’s prompt action to secure these digital assets,” the SCB said.

The news comes amid efforts to consolidate separate bankruptcy proceedings relating to FTX. In a filing on Nov. 17, FTX Trading Ltd. called for Chapter 15 bankruptcy proceedings in New York to be transferred to Delaware. The request related to FTX Digital Markets Ltd., the firm’s Bahamas unit, which had earlier filed for Chapter 15 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York.

That filing fell under “foreign proceeding” law, meaning the assets and affairs of the debtor are under the control of a foreign court. FTX’s Bahamas division had been placed into provisional liquidation by the SCB on Nov. 10.

In a promising sign, court-appointed liquidators for FTX in the Bahamas agreed to transfer the bankruptcy case to Delaware earlier this week. Yet tensions between those now running FTX and authorities in the Bahamas remain.

In the transfer request filing, FTX said it had “credible evidence that the Bahamian government is responsible for directing unauthorized access to the Debtors’ systems for the purpose of obtaining digital assets of the Debtors — that took place after the commencement of these cases,” thus calling the Chapter 15 proceeding into “serious question.”  

The SCB said in its latest statement that it is “concerning that the Chapter 11 debtors chose to rely on the statements of individuals they have (in other filings) characterized as unreliable sources of information and potentially ‘seriously compromised.’”