Shalini Nagarajan

Last week, the Securities Commission of The Bahamas (SCB) <a href="https://blockworks.co/news/ftx-crypto-worth-3-5b-held-by-bahamas-regulator" target="_blank" rel="noreferrer noopener">said</a> it altogether sent FTX crypto worth $3.5 billion, valued at the time of transfer, for safekeeping on Nov. 12. 



The transfers were made shortly after FTX filed for bankruptcy in the US and amid <a href="https://blockworks.co/news/what-happened-ftx-hack" target="_blank" rel="noreferrer noopener">odd cyberattacks on the platform</a>.



FTX, under insolvency veteran John J. Ray III, challenged those figures in a Friday <a href="https://www.prnewswire.com/news-releases/ftx-debtors-provide-information-concerning-bahamas-crypto-seizure-301711610.html?tc=eml_cleartime" target="_blank" rel="noreferrer noopener">press release</a>, which said the regulator only holds crypto worth around $296 million in a single wallet with infrastructure startup Fireblocks.



According to FTX, the SCB took control of around:



<ul class="wp-block-list">
<li>195 million FTT ($166 million),&nbsp;</li>



<li>1,938 ETH ($2.35 million) and&nbsp;</li>



<li>“other miscellaneous coins that do not have substantial value.”</li>
</ul>



“The value of the same cryptocurrency at spot prices as of 2:00 PM EST on December 30, 2022 was approximately $167 million,” FTX said, assuming the FTT could be sold in full at spot prices. “There can be no assurances such a large amount of FTT could be sold at spot prices, or at all.”



Those figures align with initial <a href="https://hub.elliptic.co/analysis/477-million-in-unauthorized-transfers-from-ftx/" target="_blank" rel="noreferrer noopener">reports</a> of funds — including hundreds of millions of dollars in freshly-minted FTT — being sent to cold storage at the direction of Bahamas regulators. 



FTX requested the SCB share a detailed list of cryptocurrencies it has under its control, which it says should clear up any confusion.&nbsp;



The SCB shot back at FTX on Monday with a press release <a href="https://twitter.com/SCBgov_bs/status/1610084773472485380/photo/1" target="_blank" rel="noreferrer noopener">shared</a> via Twitter. The regulator said FTX’s figures were based “on incomplete information,” and suggested FTX should&#8217;ve filed for the information to be released with the Bahamas Supreme Court.



“Mr. Ray has not once reached out to the commission to discuss any of his concerns before airing them publicly,” the SCB said. The regulator gave no further information as to the cryptocurrency in question.



The public tit-for-tat is no doubt frustrating for FTX creditors, which could amount to as many as one million.&nbsp;



The SCB has previously said it will keep the crypto until The Bahamas Supreme Court orders it onto FTX creditors or joint provisional liquidators — whenever that may be.



David Canellis contributed reporting.



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Did The Bahamas Really Seize $3.5B in Crypto? FTX Says No

Ben Strack

FTX is now putting its trust in new CEO John J. Ray III — brought in years ago to oversee the liquidation of collapsed energy company Enron following its accounting scandal — as it seeks next steps following bankruptcy.



The bankruptcy process could take several months, one bankruptcy lawyer said, as the exchange and its affiliates formulate recovery plans. FTX founder Sam Bankman-Fried — who resigned as FTX’s CEO Friday morning — tweeted Friday he would seek to give a user recovery update “ASAP.”&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">5) I&#39;m piecing together all of the details, but I was shocked to see things unravel the way they did earlier this week. I will, soon, write up a more complete post on the play by play, but I want to make sure that I get it right when I do.&mdash; SBF (@SBF_FTX) <a href="https://twitter.com/SBF_FTX/status/1591089330323611648?ref_src=twsrc%5Etfw">November 11, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



About an hour after crypto exchange FTX said it — and roughly 130 affiliated companies — <a href="https://cms.blockworks.co/news/ftx-ceo-bankman-fried-resigns-bankruptcy-proceedings-begin/" target="_blank" rel="noreferrer noopener">had commenced Chapter 11 bankruptcy proceedings</a>, Bankman-Fried apologized in a series of tweets, putting faith behind Ray.



“This doesn&#8217;t necessarily have to mean the end for the companies or their ability to provide value and funds to their customers chiefly, and can be consistent with other routes,” he said. “Ultimately I&#8217;m optimistic that Mr. Ray and others can help provide whatever is best.”



The 134 companies filing for bankruptcy — <a href="https://www.docdroid.net/F0TqEsL/alameda-chapter-11-db-pdf#page=6" target="_blank" rel="noreferrer noopener">included in this filing</a> — exclude subsidiaries Ledger X, FTX Digital Markets, FTX Australia Pty and FTX Express Pay, the company said.&nbsp;&nbsp;



A spokesperson at FTX’s public relations agency told Blockworks it was seeking to get in touch with the company’s new leadership.



Ray was making $1.2 million a year as a full-time Enron director in 2007, <a href="https://www.chicagotribune.com/news/ct-xpm-2007-11-04-0711030650-story.html" target="_blank" rel="noreferrer noopener">the Chicago Tribune reported</a>. At the time, he was “seeking to wipe out the bankruptcy claims of institutions that bought Enron debt from banks that engaged in the alleged misconduct,” according to the publication.



The Chicago Tribune story notes that Ray started working at Chicago law firm Mayer Brown in 1984 before landing at Fruit of the Loom. He was general counsel for the apparel company when it filed for bankruptcy in 1999 and later took post-bankruptcy roles at Burlington Industries and Hayes Lemmerz International.



<h3 class="wp-block-heading">Bankman-Fried promises FTX ‘user recovery’ update post-bankruptcy</h3>



Bankman-Fried tweeted Friday morning that he hoped the bankruptcy process could bring transparency, trust and governance.&nbsp;



FTX users — some of whom said their <a href="https://cms.blockworks.co/news/ftx-users-band-together-had-entire-net-worth-on-there-oops/" target="_blank" rel="noreferrer noopener">entire net worth was tied up on the platform</a> — will be watching the bankruptcy process closely.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“I&#8217;m going to work on giving clarity on where things are in terms of user recovery ASAP,” Bankman-Fried tweeted Friday.&nbsp;</blockquote>



Daniel Besikof, a partner at Loeb &amp; Loeb, told Blockworks that FTX’s bankruptcy means, in the short-term, that its customers likely will continue to be unable to withdraw from their accounts. The exchange halted withdrawals <a href="https://cms.blockworks.co/news/ftx-re-enables-withdrawals-but-only-in-bahamas/" target="_blank" rel="noreferrer noopener">for most users</a> Tuesday.&nbsp;&nbsp;



“Longer term, it will depend on a number of things — most importantly, who owns or has claims against the coins, what coins are missing, and can those missing coins be recovered?” he said.&nbsp;



<a href="https://www.macco.group/pablo-bonjour" target="_blank" rel="noreferrer noopener">Pablo Bonjour</a>, a managing partner at restructuring firm Macco, said in an email that some of FTX’s subunits — such as FTX US — appear to be healthy and could have significant value coming out of restructuring.



“Crypto prices will continue to go lower with another wave of selling, but this opens the opportunity for other big exchanges to swoop in and pick up FTX US and other entities at discounted prices,” he added.&nbsp;



Bonjour said that following the bankruptcy filing, FTX is set to enter survival mode by cutting costs, negotiating extensions, cutting all new projects and getting a handle on their assets.



Besikof called FTX’s collapse “breathtakingly fast,” but noted that the bankruptcy process could take at least several months as the company formulates a plan that maximizes recoveries for its creditors.



FTX’s bankruptcy proceedings are not unique for the industry this year. <a href="https://cms.blockworks.co/news/voyager-files-for-bankruptcy-days-after-freezing-withdrawals/" target="_blank" rel="noreferrer noopener">Voyager Digital</a> filed for bankruptcy in early July, while crypto lender Celsius <a href="https://cms.blockworks.co/news/celsius-to-file-for-bankruptcy-imminently-report/" target="_blank" rel="noreferrer noopener">initiated bankruptcy proceedings</a> about a week later in the aftermath of the collapse of Terra’s algorithmic stablecoin.&nbsp;&nbsp;



“Because of the strain FTX’s bankruptcy will have on a huge number of people, I assume FTX will seek to push the case forward as quickly as possible,” Besikof said. “But as customers have seen from Celsius, which filed in July and is not near conclusion, bankruptcy takes time.”



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



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