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FTX collapse being scrutinized by Bahamas investigators

Skylar Shaw

Nov 14, 2022 16:33

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Investigators in the Bahamas are investigating into whether any "criminal behaviour happened" in connection with the collapse of FTX, according to a statement from the Royal Bahamas Police on Sunday.


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 potential rescue deal.


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


FTX did not react right away when Reuters asked for a comment.


John J. Ray III, the newly appointed CEO of FTX, stated on Saturday that the organization was working with law authorities and regulators to address the issue and was "making every effort to safeguard all assets, wherever located."


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 been the focus of suspicions regarding his location; he shot off those claims on Twitter. He texted Reuters on Saturday to say "Nope" in response to their inquiry about whether he had traveled by plane to Argentina. 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 U.S. general counsel for FTX, tweeted on Saturday that the company was moving its digital assets into "cold storage" "to mitigate damage upon spotting unlawful activities," Miller wrote.


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


FTX International and FTX United States have lost $659 million in the previous 24 hours, according to blockchain analytics company Nansen.


FTX Trading claimed in its bankruptcy filing that firm has assets worth between $10 billion and $50 billion, liabilities between between $10 billion and $50 billion, and more than 100,000 creditors. As CEO, Ray, a restructuring specialist, was chosen.


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. Only $900 million of those assets, however, 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 cryptoasset industry, which has suffered losses all year due to the decline in bitcoin prices.


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


Its price on Saturday was about $16,5600, a significant drop from its record high of $69,000 BTC=BTSP in November of last year.