According to court documents released yesterday, Ryan Salame, former co-CEO of FTX Digital, informed the Bahamas Securities and Exchange Commission on November 9 that FTX Digital had transferred funds to Alameda Research. Salami was in Washington at the time. That was the same day that Binance withdrew his offer to buy FTX.

The former co-CEO also claimed that the only three people who could authorize such transfers were Sam Bankman-Fried (SBF), Nishad Singh or Gary Wang.

However, the transfers and mixing are claimed to have occurred from day one in court cases filed yesterday by the US Department of Justice, the SEC and the CFTC.

Salame reported that the transfers were contrary to FTX Digital’s normal corporate governance. That raises the question of Salame’s awareness of possible past transfers. Especially since Salame must know what is acceptable, since he is a US Qualified Accountant (CPA). He also made $23 million in United States campaign donations.

Disputes between Bahamas and US insolvency firms

Various allegations are circulating among the US Chapter 11 group, local Bahamian liquidators and others. The Bahamas Securities and Exchange Commission (the Commission) first liquidated the company.

A brief summary of the problems are:

• After stopping withdrawals, FTX paid out $100 million to 1,500 Bahamian creditors.
• The US bankruptcy team alleges that the Bahamas Securities and Exchange Commission minted new FTT tokens.
• The Bahamas Securities Commission transferred the remaining assets to a cold wallet.
• The Bahamas bankruptcy team requests access to FTX Digital’s systems because they are the local trustee and need access to do their job. The American side is in decline.

It is widely known that FTX continued to pay Bahamian debtors after closing other withdrawals. An email from Sam Bankman-Fried (SBF) states that this was his idea.

“We would be more than happy to open withdrawals to all Bahamian clients on FTX, so that they can, tomorrow, fully withdraw all their assets, making them fully bankable,” SBF wrote. He goes on to say that he “could open it right away if he responds by saying he wants us to. If we don’t hear back from you, we’ll go ahead and do it tomorrow.”

In an affidavit the next day from The Commission’s Christina Rolle, she expresses concern, questioning whether this is a voidable preference and will “subsequently result in attempts to recover funds from Bahamian clients. In any event, the Commission cannot condone preferential treatment to any investor or customer of FTX Digital or otherwise.” The affidavit was on November 10, and the same sentiment was echoed in a press release two days later, after the distributions occurred.

What we didn’t see in the filings was an email from the Commission to SBF that said, “don’t pay Bahamian customers.”

Minting of tokens after insolvency

During a congressional hearing earlier this week, new FTX CEO John Ray stated that new FTT tokens were minted at the behest of the Commission.

This repeated an accusation he made in a letter to the Prime Minister of the Bahamas and his Attorney General. He wrote:

“FTX Global Debtors possess information indicating that the Commission was involved in directing others to access FTX Global Debtors’ computer systems on or about November 12, 2022, that digital assets were transferred, tokens were minted, and that such actions were taken or facilitated by Messrs. Bankman-Fried and Wang, perhaps among others, at the express direction of the Commission and Ms. Christina Rolle, Executive Director of the Commission”.

We are not aware of an answer to this other than a simple denial. However, the Commission indicated in a press release that on November 12, the same day, it took physical control of the remaining assets.

It is conceivable that the Commission decided that it needed the help of either SBF or Wang to secure the assets, and while it was doing so, someone – the question is who – minted additional tokens.

Meanwhile, Bahamian liquidators do not have access to the records of the company they are liquidating. And they are requesting expedited access.

The US bankruptcy team opposes it because it is concerned that “the Government of the Bahamas and Messers will have full and complete access to the Debtors’ cloud-based systems…immediately. Samuel Bankman-Fried and Gary Wang.

The legal team in the Bahamas have said that it is okay not to have access to the live system if they can access a clone. Given the level of mistrust, the challenge is that the clone could include private keys and/or passwords.

And then the saga continues.