Bahamian FTX Liquidators Cite ‘Serious Fraud and Mismanagement’

Bahamian FTX Liquidators Cite ‘Serious Fraud and Mismanagement’ in Court Filings

There are signs that “serious fraud and mismanagement” occurred at crypto exchange FTX, according to court filings made by the company’s Bahamian liquidators late Wednesday.

The crypto exchange, headquartered in the Bahamas, declared bankruptcy in the U.S. after revelations from CoinDesk regarding a blurring of lines with sister trading firm Alameda Research's financials led to investor panic and significant outflows.

“The Joint Provisional Liquidators’ findings to date indicate that serious fraud and mismanagement may have been committed” with respect to the group, said the document filed in the U.S. Bankruptcy Court of the Southern District of New York. The documents were filed on behalf of Brian Simms, Kevin Cambridge, and Peter Greaves, who have been put in charge of winding up the company’s affairs in the Bahamas.

FTX filed for bankruptcy in Delaware on Nov. 11, but that has been disputed by Simms, who in a Tuesday legal filing said that the whole group was, in practice, managed from the Bahamas.

The Wednesday filing seeks to block the sale of any FTX assets provisionally, until courts reach a formal decision under Chapter 15 of the U.S. bankruptcy code, which deals with cross-border insolvency.

Media reports last week that said Alameda owes FTX around $10 billion were “essentially confirming that FTX Brand’s management misused customer deposits on the FTX digital asset exchange to extend undisclosed loans to Alameda,” the filing added, also citing the failed $500 million loan to Voyager in May.

The company, which includes around 134 subsidiaries and affiliates worldwide, is caught in messy legal proceedings to liquidate and repay as many as one million creditors.

FTX and Alameda founder Sam Bankman-Fried resigned on Friday and it is possible the company will face criminal proceedings, an official notice from the Bahamas Securities Commission said Sunday.