On November 10, the Bahamas Securities Commission (BSC), the country's securities regulator, froze the assets of FTX Digital Markets (FDM) and "relevant entities" and stopped the platform’s registration.
The BSC stated in a statement that it was aware of public statements implying that patrons' assets were mismanaged, mismanaged, and/or transferred to Alameda Research.
Alameda is a financial firm founded by Sam Bankman-Fried. A circulated balance sheet from the firm revealed that it held large amounts of the exchange's native token, FTX Token, and rumors that it was financing trades with user funds caused a "bank-run" on the platform, resulting in a liquidity crisis for the exchange.
The BSC has now stripped FTX's directors of their powers and stated that the prudent course of action was to place FTX in provisional liquidation to safeguard assets and sustain the company.
The Bahamian Supreme Court hired a provisional liquidator, as per the statement, and stated that no FDM assets, client assets, or trust assets held by FDM could be transmitted, designated, or otherwise dealt with without the explicit authorization of the provisional liquidator.
FTX is headquartered in the Bahamas, and FTX Digital Markets is the exchange's Bahamian subsidiary, with FTX US being a separate legal entity based in the United States.
The BSC stated that it would collaborate with the liquidator to achieve the best possible result for customers and other stakeholders.
The crisis has also drawn scrutiny from regulators in the United States, with House Financial Services Committee Chair Maxine Waters advocating for greater consumer security and more federal oversight of cryptocurrency trading platforms.
The White House also stated that United States President Joe Biden was aware of the crypto market situation, with White House Press Secretary Karine Jean-Pierre referring to FTX's liquidity crisis as an example of why prudent regulation of cryptocurrencies is required.
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