A look at the dispute between FTX's new management and Bahamian regulators over who should control the company's assets, and how the fight may affect customers

Liquidators in the Bahamas are embroiled in a dispute with FTX over who has control over crypto assets held in the country

Wall Street Journal 2022-11-20

Context & Ripple Effects

The fight began after the [[a:984741|Bahamas Securities Commission froze FTX Digital Markets assets and appointed a provisional liquidator]], creating a separate Bahamian custody process just as FTX's new management sought to take control of the failed group. It matters because the same pool of crypto assets sits at the center of customer and creditor recoveries.

First-order effects

FTX's new management and Bahamian liquidators must each establish authority over assets held in the Bahamas, rather than administering them through a single process.
Customers and creditors face recoveries being shaped by the resolution of competing custody claims, since the regulator says the assets are being held for their benefit.

Second-order effects

The dispute turns asset handover into a cross-border coordination problem between FTX's U.S. bankruptcy estate and the Bahamian liquidation process.
Later claims by FTX for the return of digital assets held in the Bahamas show how control of custody can become a separate source of litigation from the underlying insolvency.

Third-order effects

The subsequent U.S. court refusal to relinquish disputed FTX assets points to a durable fault line in crypto failures: asset location and regulatory custody can divide a global platform's wind-down across jurisdictions.
If that pattern persists, customer recovery processes will depend more heavily on courts and regulators reconciling competing claims over the same on-chain assets.

The trend: FTX is an early example of regulated liquidity fragmentation, where a global crypto platform's collapse leaves asset control divided among national insolvency and regulatory regimes.

Discussion

@otteroooo @otteroooo on x
make no mistake at this point FTX hacker is NOT Bahamas authorities half of CT does not even know about the “laundryness” of renBTC much less our coconut loving friends down south 🦦 https://twitter.com/...
@anthony Anthony DeRosa on x
Remember that hack of nearly half a billion dollars in cryptocurrency from bankrupt FTX last weekend? Turns out it was actually a government asset seizure https://www.marketwatch.com/ ...
@tier10k @tier10k on x
I am here, catching up with everything Genesis rekt? Twitter shutting down?? Bahamas got Sam to hack FTX??? A video dropping today????!?
@wsj @wsj on x
FTX's new management is at odds with regulators in the Bahamas over who should control billions in cash and cryptocurrency assets that are presently out of customers' reach https://www.wsj.com/...
@jackniewold @jackniewold on x
Occam's Razor says that Sam has worked out a deal with the Bahamanian gov't for immunity, and that's why he's running his mouth. FTX at peak valuation was bigger than the yearly GDP of the Bahamas, and the $400m he's handed over is equivalent to their entire yearly tax revenue.
@paullewismoney Paul Lewis on x
...and worse. Founder of FTX transferred money to the government in the Bahamas after the firm filed for bankruptcy, administrators say. Only $740m remains and $600m is said to have disappeared https://www.thetimes.co.uk/...
@mtracey Michael Tracey on x
I'm no finance or crypto expert but the first thing that would've tipped me off about “FTX” is that they were just randomly headquartered in the Bahamas
@carnage4life Dare Obasanjo on x
The $477M moved from FTX's wallets wasn't a hack but instead the Bahamas government seizing the funds. This gets interesting given the FTX's US bankruptcy. There's going to be a battle over which jurisdiction gets to distribute the recovered funds. https://www.marketwatch.com/ ..…
@datafinnovation @datafinnovation on x
this is misleading ftx digital markets is bahamian and regulated by their securities commission. the DARE act is v clear: they control that entity now and are 100pct entitled to liquidate it. you sent your money to the f'in bahamas. play stupid games win stupid prizes. https://tw…
@bradmichelson Brad Michelson on x
If this was the case, then why did the gov put out a statement saying the opposite and why did Sam say it was a hack in the Vox DMs? Very confusing. https://www.marketwatch.com/ ...
@basedkarbon @basedkarbon on x
Live shot of me with limited funds, one laptop, and a bachelors of fine art out-trading MIT math quants who had infinite money, access to my order flow, and a no-liquidation account. https://twitter.com/...
@tree_of_alpha @tree_of_alpha on x
Okay you lost millions everyone is going insolvent and the market is dead but, Would it help if I told you the culprits are nerdy and highly intelligent?
@levinepmc Norman Levine on x
I would sure like to see the due diligence report from Ontario Teachers Pension Plan, if it even exists. FTX was in no way a suitable investment for a pension plan and OTPP shouldn't be reaching for returns: FTX was in trouble from almost the start. https://www.wsj.com/...
@mtthwrose Matthew Rose on x
“Nothing like regular amphetamine use to make you appreciate how dumb a lot of normal, non-medicated human experience is,” Alameda's boss once tweeted. https://www.wsj.com/...
@angelauyeung Angel Au-Yeung on x
Went to Nassau for a week to help the team report this FTX story out It's hard to highlight a single important moment in here. Our reporting of the timeline and details of its collapse makes one thing seem clear: it was doomed from the start https://www.wsj.com/...
@ceostroff Caitlin Ostroff on x
Lots of tidbits in this story, but here's a favorite: Starting late last year, FTX started calling Bahamian banks with an unusual offer: Deposit your cash in FTX's crypto-lending platform in exchange for interest of as much as 12%. https://www.wsj.com/...
@rebeleconprof Josh Hendrickson on x
Did anyone take the opportunity get a picture of Gary Wang? https://twitter.com/...
@bowtiednightowl @bowtiednightowl on x
How come there's no coverage of all the ppl who got wiped out by FTX? The average retail users. Why don't you interview them instead of profiling these criminals as nerds who made a bad call? Why don't you find proof that Chef Nomi was SBF? Enough of these BS character profiles
@jordannovet Jordan Novet on x
'Mr. Bankman-Fried's companies had neither accounting nor functioning human-resources departments, according to a filing in federal court by the executive brought in to shepherd FTX through bankruptcy.' https://www.wsj.com/...
@richsignorelli Richard Signorelli on x
Expect fed crim charges arising out of FTX fiasco. I predict that Caroline Ellison will be the “Sammy Gravano” of the prosecution. She has wisely stayed silent after collapse. SBF will be the ultimate target but he can't keep his mouth shut which is crazy. All presumed innocent.
@certikalert @certikalert on x
#CertiKSkynetAlert 🚨 @WSJ has reported that Gary Wang, Caroline Ellison and Nishad Singh have been removed from their positions following the appointment of John.J Ray III at FTX. For more information 👇 https://www.wsj.com/... Stay vigilant!
@jwherrman John Herrman on x
FTX, like a lot of crypto concerns, ran some Telegrams. When things started spiraling, panicked customers flooded into its support channel https://twitter.com/...
@jwherrman John Herrman on x
the worst thing about getting caught in a crypto meltdown is losing your money. but what comes next is almost as bad. you end up where you started: completely on your own, being told you should (have) know(n) better, beset on all sides by scammers https://nymag.com/...
@muststopmurad Murad on x
FTX blowing up may be bearish Ethereum, bullish Bitcoin in relative terms in the medium-term. FTX, Alameda, SBF despised Bitcoin and instantly dumped it for USD or Altcoins whenever BTC was deposited onto their platform.
@tiffanyfong_ Tiffany Fong on x
On our phone call, @SBF_FTX said his lawyer “chewed him the fuck out” for his apologetic tweets & told him to “promise that you never ever say you fucked up again”. Sam allegedly told his lawyer to “go fuck himself”. (SBF phone call 11/16) https://twitter.com/...
@ftx_official @ftx_official on x
1/ Sharing a Press Release issued early today - FTX launches strategic review of its global assets. Text below (and link). https://www.prnewswire.com/...
@altcoinpsycho @altcoinpsycho on x
Why did @SBF_FTX just like this tweet 🫠 https://twitter.com/...
@timsweeneyepic Possibly Tim Sweeney on x
The crypto collapse gels a thought I've had for a long time: Silicon Valley VCs erred by shifting investment away from nerd technologists to highly articulate hucksters. The last decade didn't build solid companies, it made Crypto Boy Bands.
@dystopiabreaker @dystopiabreaker on x
the thing that upsets me the most about ftx is that mainstream seems to think some random guy's hedge fund blowing up invalidates all the amazing zk, pl theory, cryptography, mechanism design, distsys work that so many amazing high-integrity people are working on
@adamscochran Adam Cochran on x
1/10 There is still potentially millions or even hundreds of millions in tokenized stock assets, missing from the FTX/Alameda balance sheets, and no one can find it. 1. They had a deal with CM-Equity to allow trading of tokenized stock.
@lizrhoffman Liz Hoffman on x
Perella Weinberg gets the job of figuring out exactly what on earth FTX owns https://www.prnewswire.com/...
@__justplaying Alice on x
ok now that we had the apocalypse yesterday time to go back to the FTX discourse https://twitter.com/...
@adamscochran Adam Cochran on x
2/10 2. SBF had bragged about using that for Alameda to take positions. 3. They took trading fees on those stocks, in the stock, meaning they had to have balances. 4. Users had balances in that stock at time of shutdown.
@dylanleclair_ Dylan LeClair on x
Why couldn't multi-billion dollar firm @chainalysis identify that FTX user deposits were being commingled with Alameda trading wallets while randoms on Twitter could? What exactly is the point of your service again? https://twitter.com/...
@renato_mariotti Renato Mariotti on x
Telling your lawyer to “go fuck himself” because lawyers don't “know what they're talking about” might just be the worst response to a federal criminal investigation that I've ever seen. @SBF_FTX is attacking the one person who is fighting hard to keep him out of prison. https://…
@riddle245 @riddle245 on x
Funny how the Enron liquidator was like worst shit I have seen but then trying to put on a strong face with “Solvent balance sheets”. Either way getting ready to review the potential sales. Not sure how much in assets now. Surprised FTX had 110 affiliated cos https://twitter.com/…
@tree_of_alpha @tree_of_alpha on x
[Court Filing] As of Nov 16, FTX identified 216 Debtor Bank accounts with positive balances at 36 banks worldwide. FTX does not yet know the total amount of cash they hold because of historical cash management failures. How much are y'all expecting to get on the dollar? 5c?
@followtheh Tom Hearden on x
Grab an umbrella, it's about to rain shitcoins https://twitter.com/...
@adamscochran Adam Cochran on x
10/10 Both are massive risks, and huge exposure for the US market, and something that US regulators will likely fight the Bahamas on. Right now, it seems these stock holdings aren't being counted for anyone.
@lisabraganca @lisabraganca on x
Great take by @retheauditors on what investors and accountants missed in FTX's audits - Short answer is multiple red flags. https://www.coindesk.com/... via @coindesk
@silvermanjacob Jacob Silverman on x
Has anyone checked under the bean bag chairs in the $40m penthouse for the missing money https://twitter.com/...
@adamscochran Adam Cochran on x
9/10 This means either: A) They were also lying about the sale of stocks, including US stocks, to their users. or B) There are potentially hundreds of millions of dollars in stocks hidden out there.
@zachdex Zach Dexter on x
FTX has engaged Perella Weinberg to explore spinning out LedgerX + others. “Based on our review [..], we are pleased to learn that many regulated or licensed subsidiaries [..] have solvent balance sheets, responsible management and valuable franchises” https://www.prnewswire.com/…
@olafstorbeck Olaf Storbeck on x
I have long been convinced that crypto is basically one massive fraud. But the stuff at FTX still exceeds my worst expectations. And this was a company that was regarded as one of the more serious players. So what about the others? 😬😬😬 https://enterprise-sharing.ft.com/ ...
@zerohedge @zerohedge on x
“Based on our review over the past week, we are pleased to learn that many regulated or licensed subsidiaries of FTX, within and outside of the US, have solvent balance sheets, responsible management and valuable franchises” - John J. Ray
@kenziesigalos MacKenzie Sigalos on x
New FTX updates this am: - 99 pages worth of filings added to FTX court docket today - FTX plans to sell or restructure - But in NY, Bahamas regulators still pushing for control, after seizing some of FTX's assets over the weekend More: https://www.cnbc.com/... w/@moleskinemaniac
@autismcapital @autismcapital on x
Sam has removed the bio description from his profile. https://twitter.com/...
@denniskelleher Dennis Kelleher on x
BTW, while @CFTC says this shows they did a good job & nothing else they could do, @FTX_Official @SBF_FTX's finances/financial resources were critical to its application to dangerously change clearing house rules & #CFTC should have been investigating/demanding information 1/3 ht…
@mattgoldstein26 Matthew Goldstein on x
Based on the press release just on potentially viable assets and operations this indicates that maybe regulation and better controls makes a difference? https://twitter.com/...
@alistairmilne Alistair Milne on x
Everyone's talking about ‘regulatory clampdown’ in the wake of FTX ... ... but I'm fairly sure that regulations/laws against theft, ponzis, fraud, etc. already exist globally
@pengcapital Kevin Peng on x
1) Where does Solana go from here? More than any other L1 ecosystem, the Solana ecosystem has been impacted massively by the FTX and Alameda collapse. Let's take a look at the data from the fallout of one of the biggest disasters in crypto history
@ercwl Bearica Wall on x
i wake up each morning and i can't get over the fact that that ftx raised $2b from sequoia, temasek, paradigm on the virtue of being “regulated”, “trusted” and richard heart raised $2b from trailer park ppl using MLM tactics and ftx still turned out to be the bigger scam what
@zenofdesign Damion Schubert on x
Just a reminder that most web3/blockchain/crypto stuff is absolutely 100% a scam. FTX just made the mistake of being too ambitious and getting caught. https://twitter.com/...
@emilyjnicolle Emily Nicolle on x
new: FTX is reviewing the group's assets to prepare them for sale, new CEO John J. Ray said today. a filing in Delaware showed FTX EU has the biggest cash pile identified so far, while FTX Ventures — which launched a $2bn fund in January — has >$800k https://www.bloomberg.com/...
@emilydparker Emily Parker on x
“The fact that Bankman-Fried repeatedly took to Twitter to reassure his exchange's users that everything was fine before the various stages of its fall could make any case against him easier” Good read by ⁦@nikhileshde⁩ https://www.coindesk.com/...

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