Bahamas freezes certain FTX assets, further crippling Sam Bankman-Fried's troubled crypto trading firm

• The Bahamas securities regulator has frozen the assets of FTX Digital Markets, an FTX subsidiary.
• It said it's aware of statements suggesting the firm mishandled, mismanaged, or transferred client assets to Alameda Research.

Sam Bankman-Fried's bad week has just gotten worse.

Certain assets of FTX Digital Markets — a subsidiary of Bankman-Fried's FTX crypto exchange — have been frozen by the Bahamas securities regulator, the authorities said in a media release on Thursday

Attorney Brian Simms, K.C. was appointed as a provisional liquidator, after the authorities petitioned the Supreme Court of The Bahamas, the the release states.

FTX, which relocated its headquarters from Hong Kong to the Bahamas in September 2021, has been embroiled in a liquidity crisis for days.

The Securities Commission of the Bahamas said in the announcement it's aware of statements suggesting FTX mishandled, mismanaged, or transferred the assets of clients to Alameda Research, Bankman-Fried's crypto trading firm.

"Based on the Commission's information, any such actions would have been contrary to normal governance, without client consent and potentially unlawful," the Bahamian securities regulator added.

Sources told Reuters Bankman-Fried had transferred $4 billion from FTX to Alameda earlier in 2022 without telling anyone, the news agency reported on Thursday.

The Bahamian securities commission added it has determined the "prudent course of action" was to put FTX Digital Markets into provisional liquidation so as to "preserve assets and stabilize the company."

Bankman-Fried's running pillar to post to raise funds for FTX

Bankman-Fried had told investors that the firm faces bankruptcy if it did not receive emergency funding, Bloomberg reported earlier on Thursday, citing a person with direct knowledge of the matter. FTX faces a shortfall of up to $8 billion and was trying to raise $4 billion to stay solvent, per Bloomberg.

Later in the same day, FTX announced on Twitter it reached an agreement with Tron, a crypto network, for the transfer of Tron-based assets from FTX to external wallets.

The turmoil at FTX kicked off over the weekend with a very public Twitter feud between Bankman-Fried and Binance CEO Changpeng "CZ" Zhao. The latter tweeted on Sunday that Binance would be liquidating all its FTT tokens — a crypto token native to FTX — due to "recent revelations."

He didn't specify his concerns at the time, but a November 2 CoinDesk report had been stoking market fears about FTX's liquidity position. Bankman-Fried then hit back at Zhao on Monday, tweeting: "a competitor is trying to go after us with false rumors," per media reports including Bloomberg and Reuters.

Bankman-Fried and Zhao then appeared to have made up with as both announced a Binance deal to acquire FTX. But Binance called off its acquisition plan on Wednesday, citing issues "beyond our control or ability to help."

The drama weighed on market sentiment, sparking a rush for withdrawals. Around $6 billion was withdrawn from FTX in the 72 hours preceding Tuesday morning, Reuters reported, citing a message Bankman-Fried sent to staff.

FTX did not immediately respond to Insider's request for comment.