Court Filing Shows FTX Bahamas Arm Is An Extension Of Bankman-Fried’s Fraud Scheme
In another move toward restructuring the bankrupt crypto exchange, FTX wants its Bahamas arm to be stripped of any claim to its assets. In a recent court filing, the exchange’s US management alleged that the FTX Bahamas subsidiary is a shell set up to facilitate fraud activities for its former CEO, Sam Bankman-Fried.
Is FTX Bahamas A Shell Company?
According to the recent court filing by the US executives of the now-collapsed crypto exchange, FTX Bahamas is a shell outlet established by the disgraced former owner, Sam Bankman-Fried. In addition, the court filings allege that the Bahamian authority was attempting to aid the former CEO in escaping justice.
If these allegations are true, observers expect the revelations to trigger a fresh wave of legal and diplomatic tension between the two countries. FTX Digital Markets, the Bahamas arm of the US crypto firm, was announced insolvent on November 10 by the Bahamas courts.
The firm’s parent company filed for Chapter 11 bankruptcy on November 11 in Delaware, United States—the confusing event led to disputes about who has the right to access FTX’s central data. On March 19, FTX, under the supervision of the restructuring expert John. J Ray filed a motion for the Delaware courts to strip the firm’s Bahamas liquidators of their roles.
In addition, the expert wants the courts to rule out FTX DM as an economic and legal “nullity” without any legitimate assets to resolve. Moreover, the filing added that FTX DM was established as an offshore haven to aid the continuous fraudulent schemes orchestrated by Bankman-Fried.
The filing cited the transfer of $143 million made to FTX DM bank accounts during the time of Bankman-Fried as CEO. Accordingly, the filing noted that rather than FTX DM being part of corporate operations, the firm was a short-lived conduit pipe created in May 2022 by the embattled former CEO.
Flirting With Bahamas Authority
According to the filings, Bankman-Fried and his associates nurtured and maintained a close relationship with the Bahamian law enforcement agencies. The individuals and entities reportedly aiding Bankman-Fried’s fraud include the Prime Minister, the Securities Commission, and the Attorney General, as revealed by the filings.
Moreover, the filings added that Bankman-Fried intends to leverage these relationships to downplay his criminal activities if the massive fraud becomes public knowledge. However, the disgraced CEO has reportedly pleaded not guilty to wire fraud charges linked to his tenure at FTX.
Other firm executives have already pleaded guilty to the criminal charges against them. Representatives from the Bahamian government agencies involved in the case are yet to respond to the latest development.
Meanwhile, the Bahamian regulatory agency was reported to have previously slammed the new FTX chief executive over his allegations. The agency states that the expert has a “cavalier approach to the truth.”
However, early this year, Ray and the FTX Bahamas liquidators reportedly reached a deal to collaborate on a restructuring plan for the once-famous crypto firm.