Key Takeaways
- Sam Bankman-Fried conducted last week’s nine-figure FTX hack under the instruction of the Securities Commission of The Bahamas.
- FTX has filed a motion with the court claiming the Commission’s actions were “unauthorized.”
- The Bahamian government is now one of the world’s biggest Ethereum holders after converting FTX’s assets.
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After ordering the FTX hack, the Bahamian agency is now one of the world’s largest ETH holders.
Bahamas Government Orders FTX “Hack”
Bahamian authorities ordered Sam Bankman-Fried, previously the main figurehead of the collapsed FTX exchange, to transfer hundreds of millions of dollars of crypto from FTX to a wallet controlled by the Securities Commission of The Bahamas.
The Commission confirmed it ordered the transfer in a Thursday press release. In the statement, the Commission said that on November 12 officials “took the action of directing the transfer of all digital assets of [FTX] to a digital wallet controlled by the Commission, for safekeeping.” The note added that FTX was ordered to move the assets “to protect the interests of clients and creditors.”
FTX filed for Chapter 11 bankruptcy on November 11 after suffering from a bank run and liquidity crisis that shook the entire crypto ecosystem. Following a freeze on customer withdrawals, it emerged that the exchange had a $9.4 billion hole in its balance sheet after lending customer funds to Alameda Research, a trading firm co-founded by Bankman-Fried.
A November 17 filing from FTX argued that the Bahamian government had obtained “unauthorized access” to FTX’s systems by directing Bankman-Fried to transfer the funds.
FTX suffered from a suspected “hack” on November 12 in which over $600 million worth of digital assets were moved to external wallets FTX.US General Counsel Ryne Miller confirmed that some assets had been moved to cold storage “to mitigate damage” following the incident.
After the assets were transferred, they were swapped for ETH. Blockchain security firm Beosin estimates that the Bahamian authority holds over $330 million, making it the 35th biggest Ethereum whale. Most of the funds are currently held in this Ethereum wallet.
Whether the Commission responded appropriately is a matter for the court to decide, but the announcement has sparked controversy within the crypto community.
FTX’s filing added that “the automatic stay has been flaunted, by a government actor no less.” According to U.S. bankruptcy law, the automatic stay provided by Chapter 11 is “a period of time in which all judgments, collection activities, foreclosures, and repossessions of property are suspended.” Given that the funds were moved just hours after the Chapter 11 was filed, it seems that the Commission and FTX overlooked that rule.
Disclosure: At the time of writing, the author of this piece owned ETH and other crypto assets.
