FTX: Court filings note “serious fraud and mismanagement”

Sahana Kiran
Source – Reuters

It looks like the downfall of the once prominent crypto exchange, FTX will continue to make headlines. The crypto industry witnessed the collapse of an array of projects this year. Bankruptcy filings were the theme of this bear market. While this trend persists, a revelation was made by the firm’s Bahamian liquidators.

As per court filings, it was brought to light that FTX entailed signs of “serious fraud and mismanagement.” These filings were put forth by Bahamian liquidators. According to the document submitted in the United States Southern District of New York’s bankruptcy court, “The Joint Provisional Liquidators’ findings to date suggest that severe fraud and mismanagement may have been committed” with regard to the group.

It should be noted that the people in charge of closing down the company’s affairs in the Bahamas, Brian Simms, Kevin Cambridge, and Peter Greaves, filed the paperwork on the liquidators’ behalf. These were the Bahamas-based lawyers that the Bahamas Supreme Court had appointed.

On November 11, FTX filed for bankruptcy in Delaware, but Simms has challenged that, claiming in a legal statement on Tuesday that the whole group was actually run from the Bahamas. Therefore, he contested that FTX wasn’t authorized to file for bankruptcy in the US.

With accusations of fraud and mismanagement, the court is speculated to bar the sale of FTX assets for the moment. Or, until the court gives out a verdict about the bankruptcy filing.

Would the Bahamas have been able to stop FTX from failing?

The downfall of FTX has reached governments across the globe. The Prime Minister of the Bahamas Philip Davis noted that the government couldn’t have prevented the whole FTX debacle. Davis made this statement while noting how there were no “deficiencies” in its crypto regulations.

He stated,

“Based on the analysis and understanding of the FTX liquidity crisis to date, we have not identified any deficiencies in our regulatory framework that could have avoided this.”

However, the Bahamas securities regulator went on to address the issue immediately due to the existing framework in place.