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interesting, since FTX was headquartered in the bahamas this seems lawful and not unreasonable. though some will argue the government doesn't have the right to

interesting, since FTX was headquartered in the bahamas this seems lawful and not unreasonable. though some will argue the government doesn't have the right to do that, I think you sacrifice your protection when you commit fraud. how quickly should the bahamas have announced about the asset seizure? is it common in other countries to not comment about (seizures in) ongoing investigations?

sanxiyn 4y ago
The news article doesn't state the legal authority, but the statement from Securities Commission of the Bahamas of course does. "Under the Digital Assets and Registered Exchanges Act, 2020 (DARE Act), the Commission has the authority..." The government has the right to do this because FTX agreed to this.
- tartoran 4y ago
  But does FTX have the right to agree to this? It’s like me agreeing with a stranger to sell your house and split the proceeds between us. FTX wasn’t entitled to the customers money and neither had the Bahamian authorities.
  - sanxiyn 4y ago
    Bahamian government is seizing assets "to protect the interests of clients or customers".
    - yanderekko 4y ago
      That's just dodging the key question. Obviously the government has some rationale other than that they're taking it because they can. The problem is that they're still taking money that's owned by someone else, even if it's controlled by SBF. I'm sure there are strong international norms if not laws against a sovereign power directing a foreign financial actor to repay some sort of debt by pilfering client deposits, regardless of whether the debt is legitimate or not.
      - HWR_14 4y ago
        I don't think the idea is that the Bahamas will keep the crypto. It took it because it's a safe holder of it. It can get it back at some rate once the lawsuits go through. Certainly, I would feel more confident getting my money back from a reasonable government than SBF.
        deleted 4y ago
        [deleted]
        initplus 4y ago
        The alternative isn't SBF keeping the funds. It's the funds going through the US bankruptcy proceedings alongside the rest of FTX's assets. SBF chose to operate out of the Bahamas because of their lax legal structure. The fact that he claimed for days this was a hack makes this look like a failed attempt at buying his freedom. I have much more faith in the integrity of the US bankruptcy process than whatever nonsense is going to happen in the Bahamas...
      - philwelch 4y ago
        I suspect that if you deposit 100 ETH at FTX, legally, you no longer own the 100 ETH. Instead, you own an IOU from FTX stating that FTX owes you 100 ETH. FTX owns the ETH. In an ideal world, an IOU from FTX for the amount of 100 ETH would be worth 100 ETH. Unfortunately, FTX is insolvent and bankrupt. The only thing the bankruptcy court can do is divide up FTX’s assets and distribute whatever FTX does have to their creditors. That is naturally going to entail taking possession of those assets. This used to be a risk even with banks, and a lot of people during the Great Depression lost the money they had in the bank due to bank insolvency. The solution to this problem was the FDIC. If you have an American bank account, not only do you have an IOU from the bank for the number of dollars you have in that account, you also have an insurance policy from the FDIC that will pay you the value of the account (up to a specific limit) if the bank is unable to do so. And if the FDIC isn’t good for the money, that would mean the US government has defaulted on their debt, which probably means it’s the end of days, your dollars would have been worthless anyway, and you’re just going to have to get by on whatever canned food, water purification tablets, and ammunition you’ve managed to stockpile in your house until the world re-stabilizes into whatever cyberpunk dystopia comes after the collapse of the United States.
  - davidgay 4y ago
    > But does FTX have the right to agree to this? That makes no sense. They are incorporated under Bahamianan law, so that law takes precedence over any contractual agreement. I.e., FTX cannot enter into a contract that declares implicitly or explicitly that they won't follow said law.
    - legutierr 4y ago
      FTX is incorporated in Antigua and Barbuda and headquartered in The Bahamas. https://en.wikipedia.org/wiki/FTX_(company) https://en.wikipedia.org/wiki/FTX_(company)
      - hef19898 4y ago
        FTX Trading Ltd. has a bunch of legal entities on the Bahamas. As shown in the latest Delaware court fillings. The Bahamas have at least jurisdiction over those legal entities and their assets. That FTX as a whole was unable, and/or unwilling, to keep proper track of accounts, cash and assets across their overly complicated corporate structure is hardly the Bahamas fault.
        legutierr 4y ago
        OK, yes, there are Bahamian entities over which Bahamian authorities likely have jurisdiction. But given what you say with regards to the complexity of FTX's corporate structure, it's likely difficult to determine that the assets that were transferred to Bahamian authorities actually belong to those Bahamian entities. Maybe it's better that these assets are in the hands of Bahamian authorities, but it is highly questionable that the transfer happened after the Delaware filing, and that it was made in such a sloppy way that destroyed so much value. My albeit very basic understanding is that once the bankruptcy filing was made in Delaware, the Bahamas had some obligation to defer to the Delaware courts. It makes one wonder if this was actually an official action to begin with, and was not instead given a post hoc imprimatur only when it became obvious that the transfers could not be hidden.
        4y ago
  - dotnet00 4y ago
    That's why crypto exchanges tend to be careful to not imply that they are banks. When you transfer your crypto to an exchange, the crypto is now theirs and they're just promising to give it back to you when you ask for it. Then they can do whatever they want with it internally until they go bust, at which point the promises all go in the trash.
  - kayamon 4y ago
    Of course they have the right. It's called 'fractional reserve banking' and it's the foundation of our financial system.
zeven7 4y ago
Another interesting angle to this is that the funds were collected in various different currencies, but all of them were converted into ETH. And they weren't converted carefully to make sure they got the full value, no attempt at OTC deals or anything; they were converted in a rush and dumped on the open market. This resulted in pretty clear loss of funds. It seems like a strange way for a government to operate. That's not all: They also seized the funds with SBF's help after FTX had declared bankruptcy and SBF had stepped down as CEO. General counsel for FTX at the time indicated they were surprised by the fund movement and unaware of what was going on[1]. Shouldn't the Bahamas have been communicating with the people actually in charge of FTX at the time? Aren't those the people who would legally be in control of the funds? [1] https://twitter.com/_Ryne_Miller/status/1591281729125613570 https://twitter.com/_Ryne_Miller/status/1591281729125613570 /tinfoil
- ehnto 4y ago
  I agree with your last paragraph, but the prior makes total sense. The government aren't crypto experts nor were they trying to min-max their incoming half a billion. They wanted it quick and easy.
  - zeven7 4y ago
    I would expect a government to hold it as seized until they brought in both crypto experts and legal experts to help them determine what to do with it, probably via the judicial system. When Japan seized BTC from Mt Gox it was years before they converted it to Yen. The same goes for BTC seized by the US government in cases like Silk Road. The Bahamas didn't even convert it to the Bahamian dollar or USD. They converted to ETH. (Likely SBF did it for them.)
  - A4ET8a8uTh0 4y ago
    Yes, however, governments do on occasion hire experts in various fields. During my last conference the discussion was exactly on how you can't just drop millions of BTC/ETH w/e into the market without effectively hurting the price. It is not like they were trying to be nice to the markets. The money just had to be split between several cooperating agencies so there was a reason to maximize return in USD.

sanxiyn 4y ago

The news article doesn't state the legal authority, but the statement from Securities Commission of the Bahamas of course does. "Under the Digital Assets and Registered Exchanges Act, 2020 (DARE Act), the Commission has the authority..." The government has the right to do this because FTX agreed to this.

tartoran 4y ago
But does FTX have the right to agree to this? It’s like me agreeing with a stranger to sell your house and split the proceeds between us. FTX wasn’t entitled to the customers money and neither had the Bahamian authorities.
- sanxiyn 4y ago
  Bahamian government is seizing assets "to protect the interests of clients or customers".
  - yanderekko 4y ago
    That's just dodging the key question. Obviously the government has some rationale other than that they're taking it because they can. The problem is that they're still taking money that's owned by someone else, even if it's controlled by SBF. I'm sure there are strong international norms if not laws against a sovereign power directing a foreign financial actor to repay some sort of debt by pilfering client deposits, regardless of whether the debt is legitimate or not.
    - HWR_14 4y ago
      I don't think the idea is that the Bahamas will keep the crypto. It took it because it's a safe holder of it. It can get it back at some rate once the lawsuits go through. Certainly, I would feel more confident getting my money back from a reasonable government than SBF.
      - deleted 4y ago
        [deleted]
      - initplus 4y ago
        The alternative isn't SBF keeping the funds. It's the funds going through the US bankruptcy proceedings alongside the rest of FTX's assets. SBF chose to operate out of the Bahamas because of their lax legal structure. The fact that he claimed for days this was a hack makes this look like a failed attempt at buying his freedom. I have much more faith in the integrity of the US bankruptcy process than whatever nonsense is going to happen in the Bahamas...
    - philwelch 4y ago
      I suspect that if you deposit 100 ETH at FTX, legally, you no longer own the 100 ETH. Instead, you own an IOU from FTX stating that FTX owes you 100 ETH. FTX owns the ETH. In an ideal world, an IOU from FTX for the amount of 100 ETH would be worth 100 ETH. Unfortunately, FTX is insolvent and bankrupt. The only thing the bankruptcy court can do is divide up FTX’s assets and distribute whatever FTX does have to their creditors. That is naturally going to entail taking possession of those assets. This used to be a risk even with banks, and a lot of people during the Great Depression lost the money they had in the bank due to bank insolvency. The solution to this problem was the FDIC. If you have an American bank account, not only do you have an IOU from the bank for the number of dollars you have in that account, you also have an insurance policy from the FDIC that will pay you the value of the account (up to a specific limit) if the bank is unable to do so. And if the FDIC isn’t good for the money, that would mean the US government has defaulted on their debt, which probably means it’s the end of days, your dollars would have been worthless anyway, and you’re just going to have to get by on whatever canned food, water purification tablets, and ammunition you’ve managed to stockpile in your house until the world re-stabilizes into whatever cyberpunk dystopia comes after the collapse of the United States.
- davidgay 4y ago
  > But does FTX have the right to agree to this? That makes no sense. They are incorporated under Bahamianan law, so that law takes precedence over any contractual agreement. I.e., FTX cannot enter into a contract that declares implicitly or explicitly that they won't follow said law.
  - legutierr 4y ago
    FTX is incorporated in Antigua and Barbuda and headquartered in The Bahamas. https://en.wikipedia.org/wiki/FTX_(company) https://en.wikipedia.org/wiki/FTX_(company)
    - hef19898 4y ago
      FTX Trading Ltd. has a bunch of legal entities on the Bahamas. As shown in the latest Delaware court fillings. The Bahamas have at least jurisdiction over those legal entities and their assets. That FTX as a whole was unable, and/or unwilling, to keep proper track of accounts, cash and assets across their overly complicated corporate structure is hardly the Bahamas fault.
      - legutierr 4y ago
        OK, yes, there are Bahamian entities over which Bahamian authorities likely have jurisdiction. But given what you say with regards to the complexity of FTX's corporate structure, it's likely difficult to determine that the assets that were transferred to Bahamian authorities actually belong to those Bahamian entities. Maybe it's better that these assets are in the hands of Bahamian authorities, but it is highly questionable that the transfer happened after the Delaware filing, and that it was made in such a sloppy way that destroyed so much value. My albeit very basic understanding is that once the bankruptcy filing was made in Delaware, the Bahamas had some obligation to defer to the Delaware courts. It makes one wonder if this was actually an official action to begin with, and was not instead given a post hoc imprimatur only when it became obvious that the transfers could not be hidden.
        4y ago
- dotnet00 4y ago
  That's why crypto exchanges tend to be careful to not imply that they are banks. When you transfer your crypto to an exchange, the crypto is now theirs and they're just promising to give it back to you when you ask for it. Then they can do whatever they want with it internally until they go bust, at which point the promises all go in the trash.
- kayamon 4y ago
  Of course they have the right. It's called 'fractional reserve banking' and it's the foundation of our financial system.

zeven7 4y ago

Another interesting angle to this is that the funds were collected in various different currencies, but all of them were converted into ETH. And they weren't converted carefully to make sure they got the full value, no attempt at OTC deals or anything; they were converted in a rush and dumped on the open market. This resulted in pretty clear loss of funds. It seems like a strange way for a government to operate. That's not all: They also seized the funds with SBF's help after FTX had declared bankruptcy and SBF had stepped down as CEO. General counsel for FTX at the time indicated they were surprised by the fund movement and unaware of what was going on[1]. Shouldn't the Bahamas have been communicating with the people actually in charge of FTX at the time? Aren't those the people who would legally be in control of the funds? [1] https://twitter.com/_Ryne_Miller/status/1591281729125613570 https://twitter.com/_Ryne_Miller/status/1591281729125613570 /tinfoil

ehnto 4y ago
I agree with your last paragraph, but the prior makes total sense. The government aren't crypto experts nor were they trying to min-max their incoming half a billion. They wanted it quick and easy.
- zeven7 4y ago
  I would expect a government to hold it as seized until they brought in both crypto experts and legal experts to help them determine what to do with it, probably via the judicial system. When Japan seized BTC from Mt Gox it was years before they converted it to Yen. The same goes for BTC seized by the US government in cases like Silk Road. The Bahamas didn't even convert it to the Bahamian dollar or USD. They converted to ETH. (Likely SBF did it for them.)
- A4ET8a8uTh0 4y ago
  Yes, however, governments do on occasion hire experts in various fields. During my last conference the discussion was exactly on how you can't just drop millions of BTC/ETH w/e into the market without effectively hurting the price. It is not like they were trying to be nice to the markets. The money just had to be split between several cooperating agencies so there was a reason to maximize return in USD.