The collapse of cryptocurrency exchange FTX is the subject of scrutiny from government investigators in the Bahamas, who are looking at whether any “criminal misconduct occurred,” the Royal Bahamas Police said on Sunday.
FTX filed for bankruptcy on Friday, one of the highest profile crypto blowups, after traders rushed to withdraw $6 billion from the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue deal.
In a statement on Sunday, the Royal Bahamas Police said: “In light of the collapse of FTX globally and the provisional liquidation of FTX Digital Markets Ltd, a team of financial investigators from the Financial Crimes Investigation Branch are working closely with the Bahamas Securities Commission to investigate if any criminal misconduct occurred.”
FTX did not respond to Reuters’ request for comment.
FTX’s newly appointed Chief Executive John J. Ray III, a restructuring expert who took over after the bankruptcy filing, said on Saturday that the company was working with law enforcement and regulators to mitigate the problem, and was making “every effort to secure all assets, wherever located.”
The exchange’s dramatic fall from grace has seen its 30-year-old founder Sam Bankman-Fried, known for his shorts and T-shirt attire, morph from being the poster child of crypto’s successes to the protagonist of the industry’s biggest crash.
Bankman-Fried, who lives in the Bahamas, has also been the subject of speculation about his whereabouts and he denied rumors on Twitter that he had flown to South America. When asked by Reuters on Saturday whether he had flown to Argentina, he responded in a text message: “Nope”. He told Reuters he was in the Bahamas.
The turmoil at FTX has seen at least $1 billion of customer funds vanish from the platform, sources told Reuters on Friday. Bankman-Fried had transferred $10 billion of customer funds to his trading company, Alameda Research, the sources said.
New problems emerged on Saturday when FTX’s U.S. general counsel Ryne Miller said in a Twitter post that the firm’s digital assets were being moved into so-called cold storage “to mitigate damage upon observing unauthorized transactions.”
Cold storage refers to crypto wallets that are not connected to the internet to guard against hackers.
Blockchain analytics firm Nansen said on Saturday it saw $659 million in outflows from FTX International and FTX U.S. in the preceding 24 hours.
Crypto exchange Kraken said on Twitter on Sunday that it froze the accounts of FTX, Alameda Research and their executives in order “to protect its creditors.”
The exchange did not immediately reply to a request for comment on the holdings of those accounts.
In its bankruptcy petition, FTX Trading said it has $10 billion to $50 billion in assets, $10 billion to $50 billion in liabilities, and more than 100,000 creditors.
A document that Bankman-Fried shared with investors on Thursday and was reviewed by Reuters showed FTX had $13.86 billion in liabilities and $14.6 billion in assets. However, only $900 million of those assets were liquid, leading to the cash crunch that ended with the company filing for bankruptcy.
The collapse shocked investors and prompted fresh calls to regulate the cryptoasset sector, which has seen losses stack up this year as cryptocurrency prices collapsed.
Bitcoin fell below $16,000 for the first time since 2020 on Wednesday, after Binance abandoned its rescue deal for FTX.
On Sunday it was trading around $16,400, down by more than 75% from the all-time high of $69,000 it reached in November last year.
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