The Securities Commission of the Bahamas said on Thursday that it is holding FTX assets worth $3.5-billion based on market pricing at the time of transfer on a temporary basis to deliver them to customers and creditors who own them.
The digital assets of FTX’s Bahamas unit were transferred to digital wallets under the exclusive control of the commission in November soon after the company and its hedge fund Alameda Research and dozens of affiliates filed for U.S. bankruptcy.
Upon completion of the transfer, FTX founders Sam Bankman-Fried and Gary Wang no longer had access to the tokens that were transferred or frozen, the executive director of the commission, Christina Rolle, said in an affidavit filed with the Bahamas Supreme Court.
“All transferred assets were and remain under the sole control of the commission,” Rolle said.
Lawyers for crypto exchange FTX earlier this month opposed a demand for internal records from its Bahamian business, saying they “do not trust” the Bahamian government with data that could be used to siphon off assets from the bankrupt company.
The authorities in the Bahamas, where the company had its headquarters, appointed liquidators to wind down FTX’s international trading business soon after the company announced bankruptcy.
The sheer size of the asset seizure sends mixed signals to FTX customers, according to Deborah Kovsky-Apap, a bankruptcy attorney who is not involved in the case. The Bahamian government’s action preserves assets that could otherwise be lost or stolen, but it could also deepen a dispute between the company’s U.S.-based bankruptcy proceedings and the Bahamas liquidation.
Ideally, both sides would cooperate to sort out which creditors should be repaid with the seized assets, a task that is already more difficult than normal due to FTX’s extensive commingling of customers’ funds with those of FTX and its sister hedge fund Alameda Research, Kovsky-Apap said.
“It may be impossible to unscramble that egg,” Kovsky-Apap said. “And if you can’t, the fact that a government entity has seized these assets and staked out a claim to them creates significant additional tension.”