The Securities Commission of The Bahamas once again corrects material misstatements made by Mr. John J. Ray III, the representative of the U.S. FTX debtors (“Chapter 11 Debtors”), in both the press and court filings

Securities Commission of The Bahamas Corrects Material Misstatements made by Chapter 11 Debtors 

Nassau, The Bahamas, Monday 2 January 2023 – The Securities Commission of The Bahamas must once again correct material misstatements made by Mr. John J. Ray III, the representative of the U.S. FTX debtors (“Chapter 11 Debtors”), in both the press and court filings. 

On 30 December 2022, the Chapter 11 Debtors publicly challenged the Commission's calculations of the digital assets which were transferred to digital wallets controlled by the Commission on 12 November 2022 for safekeeping in the exercise of its powers as regulator acting under the authority of an Order made by the Supreme Court of The Bahamas. 

Such public assertions by the Chapter 11 Debtors were based on incomplete information.  The Chapter 11 Debtors chose not to utilize their ability to request information from the Joint Provisional Liquidators pursuant to a court order of the Supreme Court of The Bahamas that the Commission obtained in an effort to allow the Chapter 11 Debtors to obtain this information. 

The US Debtors’ continued lack of diligence when making public statements concerning the Commission is disappointing, and reflects a cavalier attitude towards the truth and towards The Bahamas that has been displayed by the current officers of the Chapter 11 Debtors from the date of their appointment by Sam Bankman-Fried. 

Previously, Mr. Ray made public statements alleging that the Commission gave instructions to “mint a substantial amount of new tokens.”  These statements were made in a court filing on 12 December 2022, without evidence, and then made again under oath, on 13 December, before the United States’ House Financial Services Committee. 

Statements suggesting that Bahamian officials directed FTX employees to mint USD300 million in new FTT tokens were widely reported by the international press.  Such unfounded statements have the impact of promoting mistrust of public institutions in The Bahamas. 

The Commission addressed the process by which it took possession of digital assets under the custody or control of FTX Digital Markets Ltd. (“FTXDM”) or its principals, both in a court filing and, its statement of 29 December 2022. 

The Chapter 11 Debtors have also alleged that the digital assets controlled by the Commission in trust for the benefit of customers and creditors of FTXDM were stolen, without providing any substantiated bases for such claims, particularly, as to their claims to ownership of the assets. 

Per US Debtors’ own court filings, they appear to recognise that there are disputed claims to those assets.  

As the Chapter 11 Debtors' own filings reveal, Ryne Miller, General Counsel of FTX US, stated "As long as it's custodied somewhere safe, we can sort it out as the time goes."  Mr. Miller correctly recognized what the Commission recognized at the time: that it was vital that assets be custodied somewhere safe to secure those assets, and allow any disputed claims to those assets to be resolved at a later date. 

Mr. Ray has not once reached out to the Commission to discuss any of his concerns before airing them publicly.  The Commission has still not received a response to its 7 December 2022 letter to Mr. Ray offering cooperation with Chapter 11 Debtors. 

The Commission is extremely concerned that its investigation (particularly the gathering of critical supporting evidence) is being impeded by the Chapter 11 Debtors’ insistence on not allowing the Court Supervised Joint Provisional Liquidators access to FTX’s AWS system. 

The Commission notes that proceedings being conducted by the authorities in relevant jurisdictions should have the dual aim of pursuing justice and ensuring that all customers and creditors of FTX be made whole, with the support and cooperation among supervisory authorities in each country. 

To this end, the Commission hopes that the Chapter 11 Debtors proceed with these matters in good faith and the best interest of customers and creditors of FTX. 

Prior releases issued by the Securities Commission of The Bahamas may be viewed at: https://www.scb.gov.bs/media/newsroom/media-releases/.

Securities Commission of The Commonwealth of The Bahamas Addresses Misstatements made by Mr. John J. Ray III, The Representative of the U.S. FTX debtors

Securities Commission of The Bahamas Addresses Misstatements in FTX's US Bankruptcy Case

Nassau, The Bahamas, Tuesday 13 December 2022 – Regrettably, the Securities Commission of The Bahamas must once again correct key misstatements made by Mr. John J. Ray III, the representative of the U.S. FTX debtors, which do not appear to be concerned with facts but rather, appear intended only to make headlines and advance questionable agendas.

To be clear, the Securities Commission of The Bahamas was the first regulator in the world to take strong, decisive action to protect the customers and creditors of FTX – regardless of where they may be located.  Every action taken by the Securities Commission of The Bahamas was in strict accordance with our country’s legislation and with orders made by the Supreme Court of The Bahamas.  These actions included securing the transfer of potentially commingled digital assets of FTX Digital Markets Ltd. and affiliates to a secure location under the authority of an Order issued by the Supreme Court of The Bahamas.  The Commission holds those assets as trustee only (under Bahamian Law), and they will be ultimately distributed, to creditors and clients of FTX, wherever they may be located, in accordance with the court’s direction.

Mr. Ray has referred to redacted email correspondence by and between Mr. Bankman-Fried and Bahamian officials.  Those redactions were designed to create a false impression of communications between Mr. Bankman-Fried and the Commission.  These redactions are disturbing as Mr. Ray is aware that the full email reveals Mr. Bankman-Fried’s acknowledgement that he had “not briefed the Securities Commission.”  The Commission has previously addressed improper distributions to Bahamian citizens in its statement dated 12 November 2022.  The Commission reaffirms its prior statement and notes that to the extent improper distributions were made to Bahamian citizens, such distributions will be subject to the appropriate claw back actions under the law.

The Commission also finds it disturbing that, either deliberately or through ignorance, Mr. Ray’s filings and communications continue to wrongfully confuse as one, the actions of the Government of The Bahamas, the Securities Commission of The Bahamas and the Court Appointed/Court Supervised Joint Provisional Liquidators. 

The Securities Commission continues to conduct a comprehensive and diligent investigation into the causes of FTX’s failure, working in cooperation with law enforcement and regulatory authorities both in The Bahamas and other jurisdictions.  The Securities Commission will make all appropriate findings and recommendations, in the appropriate forum, at the conclusion of its investigation.  Persons who are found to have engaged in misconduct will be held accountable in accordance with Bahamian law.  Unfortunately,  it has been necessary for the Securities Commission to make a request to Mr. Ray’s representatives to not obstruct that investigation.

Mr. Ray has not once reached out to the Securities Commission to discuss any of his concerns before airing them publicly.  He, however, has been informed, by letter dated 7 December 2022 to his counsel, that –  “… to the extent the Commission is able to assist in the efficient and mutually respectful conduct of the several pending proceedings without impairing the conduct or confidentiality of its ongoing regulatory investigation, including by participating in a meeting with your clients [i.e. FTX US Debtors represented by Mr. John J. Ray III], the Joint Provisional Liquidators and/or their respective counsel, they [i.e. the Commission] are prepared to do so.  An appropriate and necessary part of any arrangement reached during such meeting, would be your clients’ assurance that they will take no further action to interfere with the Commission’s investigation and other regulatory measures.”

(Emphasis Added). 

Mr. Ray has not responded to the Commission to date. 

Editor’s Information:

1. The Securities Commission of The Bahamas (the Commission) is a statutory body established in 1995 pursuant to the Securities Board Act, 1995.  That Act has since been repealed and replaced by new legislation.

2. The Commission’s mandate is defined in the Securities Industry Act, 2011 (SIA, 2011).

3. The Commission is responsible for the administration of the SIA, 2011 and the Investment Funds Act, 2019 (IFA), which provides for the supervision and regulation of the activities of the investment funds, securities and capital markets.

4. The Commission is responsible for the administration of the Financial and Corporate Service Providers Act, 2020.

5. The Commission is responsible for the administration of the Digital Assets and Registered Exchanges Act, 2020.

6. The Commission is responsible for the administration of the Carbon Credit Trading Act, 2022.

7. The functions of the Commission are to: advise the Minister on all matters relating to the capital markets and its participants;

•  maintain surveillance over the capital markets and ensure orderly, fair and equitable dealings in securities;
•  foster timely, accurate, fair and efficient disclosure of information to the investing public and the capital markets;
•  protect the integrity of the capital markets against any abuses arising from financial crime, market misconduct and other unfair and improper practices;
•  promote an understanding by the public of the capital markets and its participants and the benefits, risks, and liabilities associated with investing;
•  create and promote conditions that facilitate the orderly development of the capital markets; and
•  perform any other function conferred or imposed on it by securities laws or Parliament (SIA, 2011, s.12).

The FTX Customers of Our World

Viewing The Global Distribution Of FTX Clients

By Dennis Dames

I have seen the pie chart from, https://twitter.com/whalechart/status/1595384133827854336... – about the global distribution of FTX customers as of “The Petition Date”. It was noted with great interest that one third of the FTX global customer base is stationed in two small Caribbean countries – namely: Cayman Islands, and Virgin Islands. Cayman Islands have 22% and Virgin Islands have 11% of the total FTX worldwide customer base – as of the (Bankruptcy) petition date.

Interesting, isn’t it? Take note, that China with a population of more than one billion people – accounts for 8% of FTX customer base – while India with a population of more than a billion people also, accounts for zilch percent of the FTX customer base – and the US and Great Britain together only account for 10% of FTX Base.

The following Barack Obama quote from more than a decade ago comes immediately to mind: "You've got a building in the Cayman Islands that supposedly houses 12,000 corporations. That's either the biggest building or the biggest tax scam on record."

The Cayman and Virgin Islands corporations business Links, tranactions and connections with FTX will be interesting to unravel no doubt.

Additionally, when we add the FTX customer bases of two Small Island Nations in the North Atlantic Territory – namely Bermuda with 5% and The Bahamas with 4%, we have a total of 42% of FTX customer base registered in four Small Island Nation of the world! That’s 4.2 out of 10 FTX customers; while at the same time, the following countries combined - account for 2.8 out of 10 of FTX clients: China, Hong Kong, Korea, Singapore, Taiwan, India and Japan. It’s indeed a very fascinating picture about, ‘money goes – where money lies.’