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Bahamas AG says FTX is under civil and criminal investigation, rebukes new FTX CEO

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(Kitco News) - Bahamas Attorney General Ryan Pinder said on Sunday that FTX is under both civil and criminal investigation, criticized FTX’s new U.S. management, and fired back at critics of his country’s actions since the collapse of the exchange.

Pinder, who is also a Senator and the country’s Minister of Legal Affairs, delivered a nationally-televised statement Sunday night.

“While cryptocurrency and digital assets are part of a new and complex industry, on a basic level […] what happened can more readily be understood as a case of a very large business failure as a result of questionable internal management practices and corporate governance,” he said of the sudden bankruptcy.

Pinder said that of FTX’s over 100 companies located around the world, FTX Digital Markets (FDM) is the only entity regulated in the Bahamas. “Alameda Research is not regulated in the Bahamas,” he added, but that “to the extent Alameda Research is found to have committed any improprieties in the Bahamas, then of course they will be subject to our jurisdiction.”

The Attorney General stated that the government of the Bahamas “deserves the highest praise for moving so swiftly and decisively to suspend FTX Digital Markets’ license and appoint the provisional Liquidators,” and defied critics to name any other country or regulator who could have acted in a timelier manner.

“The speed at which the Securities Commission was able to move was remarkable by any standard,” he said. “Over the course of eight days market confidence was lost in a company which at one point had a $32 billion valuation.”

Pinder said the Securities Commission was able to move quickly because the Bahamas had a legislative framework to regulate digital asset companies like FTX already in place, and noted that despite rapid growth of crypto, many countries still have not introduced any regulation for digital assets.

“We have been shocked at the ignorance of those who assert that FTX came to the Bahamas because they did not want to submit to regulatory scrutiny,” Pinder said. “In fact, the world is full of countries in which there is no legislative or regulatory authority over the crypto and digital asset business, but I must say the Bahamas is not one of these countries.”

Referring to the Digital Asset and Registered Exchanges (DARE) act which became law in 2020, Pinder said “it is the provisions of the DARE act which gave the authority the to the Securities Commission to act as quickly and decisively as it did in the case of FTX Digital Markets.”

Pinder said that in recent weeks “the basic facts have been obscured by guessing games and rumors.” He said the Bahamas government decided early on that “what was most important was not to engage with speculation or gossip but instead to proceed methodically and deliberately” in a way that respects due process and the rule of law.

“There's an active and ongoing investigation of the affairs of FTX Digital Markets involving both civil and criminal authorities,” he said. “We are already working with a number of specialists and experts and will continue to do so as the need arises.”

Pinder acknowledged that markets and creditors are clamoring for updates but said they will need to be patient. “As with any active inquiry, we seek to share updates in a way that does not compromise or constrain investigators.”

He urged “all authorities here and abroad to exercise at least the same amount of prudence and restraint in their public commentary as we do,” before taking aim at the new FTX management in the United States led by CEO John J. Ray III.

“It is extremely regrettable that in chapter 11 filings for bankruptcy protection made in New York last week that the new Chief Executive of FTX Trading Limited, not the Bahamas-based FTX Digital Markets, but an affiliate company incorporated in Antigua and Barbuda, misrepresented the timely action taken by the Securities Commission and used inaccurate allegations lodged in the transfer motion they had filed to do so,” he said.

“It is possible that the prospect of multi-million dollar legal and consultancy fees is driving both their legal strategy and their intemperate statements. In any case we urge prudence and accuracy in all future filings in all matters.”

Looking ahead, Pinder said that the Securities Commission and the Financial Crimes unit of the Royal Bahamas Police will continue to investigate “the facts and circumstances regarding FTX's insolvency crisis and any potential violations of Bahamian law they will hold accountable any responsible companies and individuals.”

Pinder’s statements are the latest in a series of developments that have set up a tug-of-war between the Bahamas and the United States, with hundreds of millions in crypto at stake.

FDM filed for Chapter 15 bankruptcy protection in New York on Nov. 15 in an attempt to seek U.S. recognition of the bankruptcy proceedings in the Bahamas. Chapter 15 applies to bankruptcies for non-U.S. companies, so the filing is essentially a claim that FDM, and all the assets in the SCB’s possession, are under Bahamian jurisdiction.

The following day, FTX Trading Ltd., also known as, filed an emergency motion arguing that the Chapter 15 filings should also take place in the Delaware court that is handling their Chapter 11 filing to “end the chaos and to ensure that assets can be secured and marshaled in an orderly process.”

The filing also claimed there is “credible evidence that the Bahamian government is responsible for directing unauthorized access to the Debtors’ systems for the purpose of obtaining digital assets of the Debtors,” and that these actions “took place after the commencement of these cases.”

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