Key Takeaways
- Court filings accuse Bahamian officials of asking Bankman-Fried to mint new tokens and transfer them to government control
- The Securities Commission of the Bahamas (SCB) has pushed back against claims that tokens under its control were stolen
- It’s difficult to determine the truth of every allegation, but everyone remotely connected to FTX looks worse as this saga unfolds — including the Bahamian regulator
In the months since FTX’s spectacular collapse, numerous startling revelations have emerged. One of the most troubling, at least to me, is the allegation that Bahamian officials worked with Sam Bankman-Fried to create new tokens in the aftermath of the exchange’s failure.
Lawyers allege Bahamian officials sought to mint new tokens
FTX’s legal team said in a December court filing that Bahamian officials asked Bankman-Fried to mint new digital assets worth “hundreds of millions of dollars,” and requested that the disgraced CEO transfer those newly created tokens into the control of government officials.
A Bloomberg report outlining the filings also stated that Bahamian officials attempted to help Bankman-Fried regain access to critical FTX platform systems. The filing accused officials of “directing unauthorized access” to systems in order to take control of some digital assets held on the FTX platform.
The allegations were particularly alarming because funds were clearly moving on-chain after FTX’s collapse. A reported “hack” moved roughly $477 million in crypto in the days following the bankruptcy filing, with the attacker attempting to bridge assets between different accounts and currencies.
(1/2) Exchanges should be aware that certain funds transferred from FTX Global and related debtors without authorization on 11/11/22 are being transferred to them through intermediate wallets.
— FTX (@FTX_Official) November 20, 2022
Whether these transfers are connected to the Bahamian officials’ alleged pressure on Bankman-Fried remains speculative. To be clear, there is no evidence linking the government directly to the on-chain movements.
Today the Bahamian regulator issued a statement strongly rebutting comments made by John J. Ray III, the representative for the U.S.-based FTX debtors. The statement said it was necessary to “once again correct significant misinformation” attributed to Mr. Ray in both the media and court filings.
The SCB’s statement described Ray’s sworn court filings as “unsupported by evidence,” and flatly denied that officials instructed Bankman-Fried or FTX employees to mint new tokens — including an allegation that staff were told to mint $300 million in new FTT tokens. The regulator also disputed claims that digital assets under the SCB’s control were “stolen.”
What really happened?
It is impossible at this stage to know exactly what occurred. What is clear, however, is that the whole affair continues to cast a worsening shadow over the cryptocurrency industry. Each new allegation makes everyone tangentially connected to FTX look worse, and the Bahamian regulator is no exception.
The situation points to a significant regulatory failure in the Bahamas, and the SCB is being rightly scrutinized as a result. Whether other specific allegations will be substantiated remains uncertain; time and further evidence will determine their validity.
With more than one million creditors, roughly $8 billion in missing customer funds, and countless lives affected, the scale and gravity of the FTX collapse are difficult to overstate. The priority now must be to clear up the mess, identify failings beyond Bankman-Fried, and allocate responsibility where it is due.