Bahamas Securities Regulator Freezes Assets of Beleaguered FTX Exchange

KEY POINTS

FTX Digital Markets (FDM) is a local subsidiary of the embattled cryptocurrency exchange FTX
The regulator has called for a provisional liquidator to be appointed
The Bahamas has canceled FDM's in-country registration

The Bahamas securities regulator has frozen the assets of FTX Digital Markets (FDM), a local subsidiary of the troubled crypto exchange FTX.

The Securities Commission of the Bahamas said Thursday that it would suspend FDM's registration in the West Indies nation.

"Since the unfolding of events involving FDM, the Commission has proactively dealt with the situation and continues to do so," per a press release from the regulator.

JUST IN: The Securities Commission of The Bahamas has frozen the assets of FTX Digital Markets and related parties. pic.twitter.com/Kvsslqy8v0
— Eyewitness News Bahamas (@ewnewsbahamas) November 10, 2022

The supervisory authority said that the company is suspected of having embezzled customer funds.

"The commission is aware of public statements suggesting that clients' assets were mishandled, mismanaged and/or transferred to Alameda Research. Based on the commission's information, any such actions would have been contrary to normal governance, without client consent and potentially unlawful," the statement added.

The Bahamas securities watchdog granted the digital asset business license to FDM in September 2021 under the "DARE Act"- registration of cryptocurrency exchanges. FTX has been headquartered on the island since April.

Earlier Friday, FTX announced that it is re-enabling withdrawals only in the Bahamas. The embattled crypto exchange took to Twitter saying that it has begun to facilitate withdrawals of Bahamian funds.

1) Per our Bahamian HQ's regulation and regulators, we have begun to facilitate withdrawals of Bahamian funds. As such, you may have seen some withdrawals processed by FTX recently as we complied with the regulators.
— FTX (@FTX_Official) November 10, 2022

Insolvency Administrator to Take Over the Settlement

Further, the statements read that Brian Simms, a partner at the Nassau law firm Lennox Paton, is appointed as provisional liquidator by the Bahamian Supreme Court. Simms will ensure the preservation of the company's assets.

No assets of FDM, client assets or trust assets held by the firm can be transferred, assigned or dealt with, without the signed approval of Simms, the statement added.

"The Commission is committed to working with the provisional liquidator to endeavor to obtain the best possible outcome for the customers and other stakeholders of FTX," said the agency.

It is still unclear where and how FTX insolvency proceedings could take place.

The regulator is determined that the "prudent course of action" to put FDM into provisional liquidation is to "preserve assets and stabilize the company."

In the wake of the collapse of Sam Bankman-Fried's crypto trading empire, the FTX US arm has warned of halting trading in a few days. Under the same thread, Bankman-Fried announced that Alameda Research, another related entity, would be winding down.