Nassau: Investigators from the Bahamas government are probing whether any "criminal misconduct occurred" in connection with the collapse of cryptocurrency exchange FTX, according to a statement from the Royal Bahamas Police on Sunday.
In one of the most high-profile cryptocurrency meltdowns, FTX filed for bankruptcy on Friday as traders rushed to pull US$6 billion off the platform in just 72 hours and rival exchange Binance abandoned a planned rescue deal .
In a statement released on Sunday, the Royal Bahamas Police said: "A team of financial investigators from the Financial Crimes Investigation Branch is working closely with the Bahamas Securities Commission to determine whether in light of the collapse of FTX globally whether or not there has been any criminal misconduct. Provisional Liquidation of FTX Digital Markets Limited."
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The company is working with law enforcement and regulators to mitigate the issue, and newly appointed FTX Chief Executive John J. Ray III, a restructuring specialist who took over after the bankruptcy filing, said on Saturday that it " Is doing everything possible to secure all assets, wherever they are located."
Known for wearing shorts and a T-shirt, Sam Bankman-Fried, the 30-year-old founder of the exchange, has become the face of the cryptocurrency industry's successes, resulting in the protagonist of the sector's biggest crash. Dramatic fall from grace of Exchange.
Bankman-Fried, who lives in the Bahamas, has also come under scrutiny regarding his whereabouts. On Twitter, he dismissed rumors that he had traveled to South America. When asked whether he had traveled to Argentina by plane, he wrote to Reuters on Saturday to say "no". He claimed to be in the Bahamas.
The turmoil at FTX has caused at least US$1 billion of client funds to disappear from the platform, according to sources who spoke to Reuters on Friday. According to sources, Bankman-Fried transferred $10 billion in client funds to his trading firm, Alameda Research.
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Raine Miller, FTX's U.S. general counsel, tweeted on Saturday that the company's digital assets were being moved to "cold storage" to "mitigate losses upon witnessing unauthorized transactions," Miller wrote. This created new issues.
To protect against hackers, cold storage refers to cryptocurrency wallets that are not connected to the internet.
Blockchain analytics firm Nansen reported on Saturday that FTX International and FTX US had lost $659 million on the previous day.
On Sunday, cryptocurrency exchange Kraken announced via Twitter that it had frozen the accounts of FTX, Alameda Research and their executives "to protect its creditors."
An inquiry for comment about the holding of those accounts did not elicit an immediate response from the exchange.
FTX Trading claimed in its bankruptcy petition that it had assets of between $10 billion and $50 billion, liabilities of between $10 billion and $50 billion, and more than 100,000 creditors.
According to a document shared with investors on Thursday by Bankman-Fried and examined by Reuters, FTX had US$14.6 billion in assets and US$13.86 billion in liabilities. However, only US$900 million of those assets were liquid, creating a cash crunch that resulted in the company declaring bankruptcy.
Investors were taken by surprise by the collapse, which renewed calls for regulation of the crypto industry, which has suffered throughout the year due to falling cryptocurrency prices.
The bitcoin price fell below $16,000 on Wednesday for the first time since 2020 after Binance pulled out of its hedge deal with FTX.
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It was trading at around US$16,400 on Sunday, down more than 75% from its all-time high of US$69,000 in November last year.
