FTX collapse being investigated by Bahamas authorities

The Bahamas authorities are investigating the collapse of the bitcoin exchange FTX to see if any criminal behaviour occurred.

One of the most high-profile cryptocurrency meltdowns, FTX filed for bankruptcy on Friday after traders rushed to remove $6 billion off the platform in only 72 hours and rival exchange Binance abandoned a planned rescue package.

In a statement on Sunday, the Royal Bahamas Police said: “In light of the collapse of FTX globally and the provisional liquidation of FTX Digital Markets Ltd, a team of financial investigators from the Financial Crimes Investigation Branch are working closely with the Bahamas Securities Commission to investigate if any criminal misconduct occurred.”

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— Royal Bahamas Police Force (@RBPFPolice) November 13, 2022

Newly appointed FTX Chief Executive John J. Ray III, a restructuring expert who took over after the bankruptcy filing, said on Saturday that it is making “every attempt to safeguard all assets, wherever found.”

Sam Bankman-Fried, the exchange’s 30-year-old founder who is well known for wearing shorts and a T-shirt, has gone from being the face of the cryptocurrency industry’s accomplishments to the main character of the sector’s worst crash as a result of the exchange’s rapid fall from grace.

Bankman-Fried, a resident of the Bahamas, has also come under scrutiny regarding his movements. On Twitter, he shot down allegations that he had travelled to South America. He texted Reuters on Saturday to say “Nope” when asked if he had been to Argentina by plane. He claimed to be in the Bahamas to Reuters.

At least $1 billion in customer cash have disappeared from the platform due to the upheaval at FTX, sources told Reuters on Friday. According to the sources, Bankman-Fried had transferred $10 billion in customer cash to his trading firm, Alameda Research.

Ryne Miller, the US general counsel for FTX, tweeted on Saturday that the company’s digital assets were being transferred into “cold storage” “to mitigate damage upon seeing unlawful activities”.

In order to protect against hackers, cold storage refers to cryptocurrency wallets that are not connected to the internet.

The blockchain analytics company Nansen reported that it had seen $659 million leave FTX International and FTX US the previous day. On Sunday, the cryptocurrency exchange Kraken announced on Twitter that it has “protected its creditors” by freezing the accounts of FTX, Alameda Research, and their management.

An inquiry for comment regarding the holdings of the accounts received no immediate response from the exchange.

FTX Trading claimed in its bankruptcy filing that the firm has assets worth between $10 billion and $50 billion, liabilities between $10 billion and $50 billion, and more than 100,000 creditors.

According to a document provided by Bankman-Fried with investors on Thursday and seen by Reuters, FTX has $14.6 billion in assets and $13.86 billion in liabilities. However, only $900 million of those assets were liquid, creating a liquidity shortage that resulted in the company declaring bankruptcy.

Investors were surprised by the drop, which renewed calls for regulation of the crypto asset industry, which has suffered losses all year due to the decline in bitcoin prices.

After Binance reneged on its rescue agreement with FTX on Wednesday, Bitcoin plummeted below $16,000 for the first time since 2020.

Its price on Sunday was around $16,400, down more than 75% from its record high of $69,000 in November of last year.

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