FTX Says Bahamas-Based Entity Was ‘Offshore Haven’ for Fraud

FTX Says Bahamas-Based Entity Was ‘Offshore Haven’ for Fraud

Time Stamp: March 21, 2023 1:27 AM
Source Node: 2022481

FTX’s liquidators are suing the liquidators of the Bahamas-based FTX Digital Markets (DM), alleging that they have wrongly claimed rights over the firm’s assets. 

In a court filing on Sunday, FTX’s new management accused FTX DM of being a legal nullity that was merely created as a front to facilitate fraud. 

“It was formed and functioned as an offshore haven for a continuous fraudulent scheme, as well as a conduit through which the fruits of that fraudulent scheme could be channeled to insiders and third parties outside of the reach of any independent and effective regulatory authority,” said the FTX debtors of the Bahamas entity. 

In their view, actions by the Bahamas regulators to claim ownership over FTX’s assets and demand rights to liquidation proceedings does nothing but waste the firm’s resources.

The FTX debtors highlighted the approximately $143 million that was transferred by Sam Bankman-Fried out of FTX Trading and Alameda’s accounts to FTX DM through Farmington State Bank and Silvergate Bank. The transfer of such a significant sum to a shell entity was not part of the ordinary course of business, and was done to defraud creditors and benefit insiders, said FTX. 

The debtors further argued that FTX DM’s entire existence fell within the scope of criminal conspiracy, to which several of Bankman-Fried’s co-conspirators have already pleaded guilty. They alleged that FTX DM was the centerpiece of this fraudulent scheme, used to funnel customer deposits out of the reach of American regulators. 

“Mr. Bankman-Fried, and others at his direction, maintained a close, accommodating relationship with Bahamian law enforcement agencies, including, among others, the Commission, and with the Attorney General and Prime Minister of The Bahamas,” stated FTX.

They alleged that the former FTX CEO wanted to leverage that relationship to minimize his criminal and civil exposure in the event that this fraud was discovered.

Last week, the FTX debtors published a report disclosing that Bankman-Fried and other insiders had been paid out a collective amount of $3.2 billion in personal expenses. These loans did not include $240 million spent on the luxury penthouse in the Bahamas that they resided in.

Time Stamp:

More from Unchained