Securities Regulator of the Bahamas Freezes FTX’s Assets After the Recent Collapse

The recent liquidity crisis at crypto exchange FTX has now drawn the regulatory attention. As per the latest developments, the Bahamas, where the FTX exchange is registered, has decided to freeze the assets of the crypto exchange.

In a statement on Thursday, November 10, the Bahamas Securities Commission said that the decision to freeze FTX Digital Markets was “the prudent course of action”. The securities regulator has also appointed a provisional liquidator to assess whether the company should or should not be liquidated.

Ever since the FTX unfolded over the last week, this has been first-of-its-kind actions by the securities regulator. One of the top-most crypto exchange is now facing severe liquidity issues, a hole that appears deep to billions of dollars.

In a statement, the Bahamas regulator wrote: “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.”

In the case that the FTX exchange slips into further trouble, the liquidator will take sole control of the exchange. FTX Digital Markets is the Bahamian subsidiary of FTX. This unit of FTX helps its affiliates offer derivatives, options, and other products and services to customers.

In addition to this, FTX US and trading house Alameda Research is facing major regulatory scrutiny from the U.S. Securities and Exchange Commission (SEC), over the allegation of mishandling of customers’ funds.

Sources familiar with the matter also said that the regulators are also looking into the FTX US’s relationships with other subsidiaries of the company. The sources told Bloomberg that the SEC already started its scrutiny a few months back into the crypto-lending activities of FTX’s trading house Alameda Research.

Citing a source, Bloomberg reported: “In recent days, the regulators have asked for details about the ownership structure of FTX US and FTX.com, which caters to non-American clients, according to two of the people. Regulators are interested in any overlap between management and board structures, and the financial relationship between the two entities. The agencies have also asked for details on whether customer accounts were properly segregated and the composition of the investor base at FTX".