Report: Bahamian Authorities Investigating FTX

FTX, cryptocurrency, crypto exchange, Bahamas, Sam Bankman-Fried, investigation

Bahamas-based crypto exchange FTX’s troubles continued this weekend with reports that police and regulators in the Caribbean nation had interviewed former CEO Sam Bankman-Fried.

The exchange’s founder and ex-chief executive was questioned by the island’s police force and its Securities Commission to determine whether there was criminal conduct involved in FTX’s collapse. That’s according to a Saturday (Nov. 12) Bloomberg report, which cites a person with knowledge of the matter.

Bankman-Fried had been chief executive of FTX until Friday (Nov. 11), stepping down after a week that saw a run on the exchange’s assets, which triggered a liquidity crisis. At first, it seemed as though rival crypto trading platform Binance might offer FTX a lifeline via an acquisition.

However, it took just two days of due diligence for Binance to walk away from the deal, partly due to reports that other regulatory bodies — the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission — were investigating FTX.

There were also reports that Bankman-Fried had used FTX customer funds to prop up sister company Alameda Research.

The week ended with The FTX Group companies, which include, FTX US, Alameda Research, and about 130 other affiliated firms, seeking bankruptcy protection in federal court, and John J. Ray III being named new CEO.

As PYMNTS noted Saturday (Nov. 12), Ray is a restructuring lawyer who helped oversee the dissolution of energy trading company Enron, whose own collapse offers “a cautionary tale for what happens in crypto.”

It’s not yet clear whether FTX is crypto’s Enron: that is, a company where — thanks to opacity and complexity — accounting scandals persist for years and trick people into thinking the picture is rosier than reality.

It’s also not known if FTX’s collapse is to crypto what Lehman Brothers was to the 2008 financial crisis: a tipping point that begins a broad swath of failures.

However, former U.S. Treasury Secretary Larry Summers has compared FTX to Enron, where he told Bloomberg that there’s “financial error,” “whiffs of fraud” and “vast explosions of wealth that nobody understands where it comes from.”

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