FTX is in deeper trouble with the Bahamas Securities Commission which has ordered it to freeze its assets and liquidate the same in the presence of a provisional liquidator. There are allegations that the exchange platform used its customers’ assets to bail out its sister concern.
The update is a mighty blow to FTX, which was once a ruling exchange platform in the industry. Troubles rooted further when the venture announced it was going through a liquidity crunch, unable to meet the customers’ withdrawal demands. The commission has published a statement in its stand saying that FDM, short for FTX Digital Markets, cannot assign, transfer, or otherwise deal with the assets of clients and its own unless there is written approval of the provisional liquidator.
The Bahamas Securities Exchange has appointed a provisional liquidator. Brian Simms of Lennos Paton Counsel has taken over the job amid the suspension of all the directors of FTX. Adding further to its statement, the commission said it determined the prudent course to put the venture into provisional liquidation to preserve assets and stabilize the company.
The commission has suspended, effective November 10, the local licenses of FTX, and an application has been submitted to the Supreme Court to assign the task of managing the company’s assets to the provisional liquidator.
Reports of FTX mishandling its customers’ funds are doing rounds, something the commission is aware of.
The Bahamas Securities Commission has addressed that issue in its statement by underlining that mishandling funds of customers, including any transfers done to Alameda Research, would potentially be unlawful.
FTX, earlier this week, reported the suffering of the bank run after the financial documents revealed that the balance sheet was 40% FTT tokens. The financial documents were reportedly leaked, raising concerns if it was enough to pay its debt worth $7.4 billion.
The figures stand true to the end of the second quarter.
Meanwhile, FTX has come forward to share that it is running short of funds by $8 billion. What has made things worse for the exchange platform is Binance backing out from the deal of acquiring its non-US operations.
Reserves of FTX are reportedly depleting when customers accelerate their attempts to withdraw funds. Withdrawal requests, as on November 06, 2022, have been reported to be $5 billion.
It was not until November 09, 2022, when Sam Bankman-Fried broke the news that FTX could not service withdrawal requests.
However, a letter of intent signed with Binance went in vain. Regulators are now circling around FTX to analyze how deep the problem is and if there is an immediate need to secure customers’ and investors’ interests.
Freezing and liquidating assets will assure customers that relevant authorities are involved in all the necessary actions.