National Address On Behalf Of The Government Of The Bahamas On The Developments Of FTX In The Bahamas

• Published date: 12 December 2022
• Subject Matter: Finance and Banking, Technology, Financial Services, Fin Tech
• Law Firm: Bahamas Financial Services Board
• Author: Bahamas Financial Services Board

Senator Ryan Leo Pinder

Attorney General

Commonwealth of The Bahamas

November 27, 2022

Good Evening, Ladies and Gentlemen.

Thank you for joining me this evening as I offer a National Statement on behalf of The Government of The Commonwealth of The Bahamas, on the current situation regarding FTX Digital Markets Limited.

As Attorney-General and Minister of Legal Affairs, I wish to start by asserting one of the most fundamental principles of our jurisdiction.

The Bahamas is a place of laws.

The rule of law, and the exercise of due process, characterise the integrity of our jurisdiction.

As the third-oldest democracy in the western hemisphere, our legal, regulatory and financial sectors have stood the test of time.

Tonight, while I speak on behalf of The Government, it is in fact The Securities Commission of The Bahamas which is the lead actor in respect of the present situation, as they are the statutory regulator of companies like FTX Digital Markets, who operate in the digital asset space.

To date, The Securities Commission has issued two significant statements concerning the provisional liquidation proceedings involving FTX, and other related matters. I encourage you all to read those statements for yourselves, as they are definitive accounts of the known facts, and the application, of the relevant laws and regulatory regime in relation to FTX.

These statements should be also read in conjunction with the Communication made to The House of Assembly by Prime Minister Davis on November 22 nd , also concerning FTX Digital Markets.

While cryptocurrency and digital assets are part of a new and complex industry, on a basic level, recent events involving the insolvency crisis experienced by the FTX group of companies have been experienced around the world in practically every sector. To that extent, what happened can be more readily understood as a case of a very large business failure as a result of questionable internal management practices and corporate governance.

Recent Events

Given how quickly things have moved, it is hard to believe that it was only 25 days ago, on November 2 nd , that an article first appeared on the news site CoinDesk, with the details of a leaked financial statement of Alameda Research, a trading company also founded by Sam Bankman-Fried.

I want to pause here to emphasize that among the over 100 companies located in dozens of jurisdictions around the world, FTX Digital Markets is the only entity regulated in The Bahamas. Alameda Research is NOT regulated in The Bahamas.

To the extent Alameda Research is found to have committed any improprieties in The Bahamas, then of course it will be subject to our jurisdiction.

The balance sheet of Alameda Research, CoinDesk reported at that time, revealed that a large portion of their assets were held in FTT, a token issued by an FTX entity, that granted token holders a discount on trading fees.

Four days later, on November 6 th , Binance, a crypto exchange that is a major rival to FTX, announced that it was selling off all its substantial holdings in the FTT token.

This announcement prompted a large number of FTX investors to withdraw hundreds of millions of dollars in digital assets from FTX - causing a liquidity crunch. In short, FTX was experiencing the equivalent of a "run on the bank", when customers all rush to withdraw assets simultaneously.

Two days later, on November 8 th , it was reported that Binance had entered a nonbinding agreement to buy FTX. However, the very next day, November 9 th , Binance pulled out of the deal. One day later, November 10 th 2022, the Securities Commission of The Bahamas, announced that it had taken action to freeze the assets of FTX Digital Markets, had suspended the registration of FTX Digital Markets as a licensee under The Digital Assets and Registered Exchanges Act, also known as the "DARE Act", and applied to the Supreme Court of The Bahamas, pursuant to its regulatory authority under the DARE Act, to...