FTX rebuked as customers able to rescue cash from failing firm

THE embattled cryptocurrency exchange FTX has been rebuked by regulators in the Bahamas after it claimed local laws meant it had to allow customers in the Caribbean to make withdrawals even as others around the world were locked out.

The Securities Commission of the Bahamas said it had “not directed, authorised or suggested” that Bahamian clients be given priority and be allowed to withdraw their cash last week, as the company was teetering on the brink.

Before FTX filed for bankruptcy protection last week, the exchange had temporarily stopped clients from being able to access their money, but it said on Thursday it was allowing withdrawals of funds from clients in the Bahamas “per our Bahamian HQ’S regulation and regulators”.

It said: “As such, you may have seen some withdrawals processed by FTX recently as we complied with the regulators.” This had raised the prospect of employees in the Bahamas being allowed to withdraw funds while ordinary customers elsewhere could not.

It is not known whether any employees were able to pull their cash from the platform in recent days. One former FTX worker was asked whether he had been allowed to withdraw his funds to which he responded that he hadn’t “withdrawn a cent, nor will I”.

FTX is based in the Bahamas and Sam Bankman-fried, chief executive, is said to have been living there.

The denial by regulators in the Bahamas that it had directed FTX to allow for withdrawals comes amid growing scrutiny of the exchange’s operations, with reports over the weekend claiming that the company is working with law enforcement over unauthorised withdrawals from some of its crypto wallets.

Reuters reported that at least $1bn (£845m) worth of customer funds had disappeared from the platform.

FTX was thrown into crisis last week after a liquidity crunch meant it was unable to meet customer demands for billions of dollars worth of withdrawals. FTX filed for bankruptcy protection in the US on Friday, while in the Bahamas the securities regulator froze the assets of its subsidiary. The Bahamas’s Securities Commission said it had also applied to appoint a provisional liquidator of the company.

In the update over the weekend, the Bahamas regulators said any withdrawals involving clients in the Bahamas may be void and that funds may be clawed back as part of the insolvency efforts. FTX did not respond to requests for comment.