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Bahamas Unleash DARE Act On Crypto Regulation

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Bahamas’ Securities Commission has legalized the Digital Assets and Registered Exchanges Act [DARE], marking a new standard in crypto asset regulation. Building upon the foundation established by the DARE Act, 2020, the regulator’s main focus was to ensure the new law aligns with global standards set forth by the International Organization of Securities Commissions standards for regulators and the Financial Action Task Force Recommendations.

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Bahamas Unleash DARE Act On Crypto Regulation 2

Some key takeaways of Bahamas’ DARE 2024 include encompassing a wider range of digital asset activities, including derivatives and staking services, and custody provisions of digital assets. DARE 2024 also introduces a first-of-its-kind disclosure regime for staking digital assets belonging to clients or the operation or management of a staking pool as a business.

The Act defines stablecoins and allows for the registration of existing stablecoins. It also specifies acceptable forms of reserve assets and establishes new requirements for the custody and management, segregation, reporting, and redemption of reserve assets. However, algorithmic stablecoins are prohibited from being issued.

The Caribbean island was at the center of the FTX saga whose eventual collapse left significant implications for the country’s economy and reputation. Despite that, the Bahamas have been steadily picking up pace, and the latest move signals renewed focus on addressing the evolving landscape of digital assets.

Bahamas’ Crypto Revival As Russia Catches Up

Meanwhile, Russia is moving swiftly in its efforts to legalize cryptocurrency for cross-border transactions amidst increasing Western sanctions. The move led by the Ministry of Finance and the Bank of Russia indicates a significant shift in the country’s stance on digital assets. Deputy Finance Minister Alexei Moiseev has advocated for establishing a legal framework for cross-border crypto transactions.

He vouched for home-grown crypto platforms that comply with Anti-Money Laundering [AML] and Know Your Customer [KYC] regulations. The proposed legislation aims to allow legal cross-border payments without integrating cryptocurrency into Russia’s domestic financial system.

This move has gained support from key Russian officials, including the State Duma, which has been advocating for allowing miners to sell cryptocurrency as an export product. The proposed legislation is expected to be launched by the latter half of 2024, marking a significant milestone for Russia’s crypto industry.

SBF Case Update: New Twist In Bahamas Court Ruling

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SBF’s bid to context the additional charges imposed by the DOJ has been bolstered by the latest ruling of the Bahamas Supreme Court.

“Leave is granted to the claimant to commence proceedings for judicial review. All of the grounds advanced by the claimants disclose arguable claims with a real prospect of success,” Judge Loren Klein wrote in the court order.

In other words, the court has temporarily restrained the government from approving the addition of further charges to Bankman-Fried’s US indictment.

It needs to be told that SBF lawyers sought leave from the court to apply for judicial review of the orders.

The disgraced founder is currently locked up in the US and awaiting trial set in Oct after pleading not guilty. 

The high-profile case has taken a new turn as a result of Bahmas’ court ruling, which also creates prospective trial delays and increases uncertainty in the legal process.

The aforementioned issues were recently brought up by SBF’s lead attorney Mark Cohen, who said that the Bahamas legal proceedings could take “months or years” longer than expected, delaying the October U.S. trial date or leaving him with little time to build a defense against the additional allegations.

Bankman-Fried’s attorneys are contesting the additional charges levied against him in the U.S. which they argue breached the extradition agreement with the Caribbean nation.

SBF Lawyers Accused US Gov Of Not Following Extradition Norms

The government is believed to have moved swiftly to indict Mr. Bankman-Fried on December 9, 2022, less than a month after FTX’s bankruptcy and before it had even been granted, by skipping over the regular civil regulatory procedures, according to the 12th June filing.

Eight counts were imposed in the grand jury indictment, including violations of campaign finance laws, securities fraud, money laundering, and conspiracy to commit wire fraud against lenders and customers.

After the Bahamas agreed to extradite on seven of the original eight charges, the Government ignored and decided to prosecute on all eight charges, the filing alleged.

The Manhattan US attorney’s office, which is in charge of prosecuting Bankman-Fried, has not yet made any remarks regarding the Bahamian court’s ruling.

In response to SBF’s claims in the US court, prosecutors had previously suggested that they would dismiss the extra charges if the Bahamas’ permission was not secured.

SBF’s Desperate Bid; Files Another Bail Application

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SBF, the former CEO of the now-defunct exchange FTX, has submitted a new bail application after having a previous one denied two days prior, local media on Dec. 15 reported.

In a clear sign of desperation, the disgraced founder submitted a second bail request, which is set for a court hearing on January 17, 2023.

Following his arrest on Dec 12, SBF was being held at Bahamas’ sole penitentiary, Fox Hill Prison. The next day a bail was set at $250,000. Bankman-Fried’s lawyers argued that he should be released as he had no prior convictions and was depressed and sleep-deprived.

The presiding judge rejected the appeal on the grounds of a flight risk. Since then, he has been in the prison’s sick bay where his health and risk of self-harm are being monitored.

However, conditions at Fox Hill prison infamous for its “harsh” conditions and there have been incidences of physical abuse against inmates by correctional officers that have been documented, according to 2021 human rights report.

Investigations shed light on the overcrowded inmates living in the facility along with poor sanitation and lack of adequate medical care.

That said, SBF’s own legal strategy is probably going to make his stay at Fox Hill longer. Here’s why.

SBF Set For A Long-Drawn Legal Battle

Bankman-Fried declined to give up his right to challenge his extradition to the US, where he faces eight criminal accusations, including money laundering, conspiracy, and wire fraud.

The jailed entrepreneur might have to prepare himself for a drawn-out judicial battle that could last months or perhaps over a year by refusing to surrender that right. And for that entire period, he’ll probably be detained at Fox Hill.

On the other hand, Bankman-Fried could not fare much better in the American prison system if he gives in to extradition.

The crypto executive would be lodged at either the Metropolitan Correctional Center in Manhattan or the Metropolitan Detention Center in Brooklyn while awaiting trial in New York City, where federal charges had been brought against him.

Further, it has been also claimed that those facilities have unsanitary conditions, rodent and bug infestations, poor medical care, and guard aggression and abuse. To add more misery, the conditions have been criticized as being “worse than Guantanamo” and “soul-negating.”

Till then, SBF will likely remain incarcerated in the Bahamas till February 2023 as extradition proceedings with the US continue. 

FTX: SBF’s Arrest Sets The Stage For Extradition To US

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FTX’s former CEO Sam Bankman-Fried or SBF would likely be extradited to the US to face criminal charges after the arrest by the Royal Bahamas Police Force.

Confirming the news, attorney Andre Damian Williams Jr stated, the Bahamian authorities took Samuel Bankman-Fried into its custody at the request of the U.S. Government, based on a sealed indictment filed by the Southern District of New York [SDNY].

“We expect to move to unseal the indictment in the morning and will have more to say at that time,” he added.

Prior to his arrest, Bankman-Fried turned down a request to testify virtually before the House Financial Services Committee on Dec 13.

His reluctance to appear at the scheduled date irked many in the community as they felt he was simply evading to dodge the authorities.

As reported by TronWeekly, Rep. Maxine Waters, D-Calif., has earlier extended an invitation to the embattled founder for a hearing on Capitol Hill.

Waters expressed disappointment that Congress will not be able to hear from him and expressed her “surprise” at his arrest.

The 30-year-old crypto billionaire and son of Stanford law professors continued to maintain innocence and deny fraud charges. He recently reached out to the BBC inviting them to his current residence in the Bahamas and said he hoped to find a way to make FTX users whole.

I’m going to be thinking about how we can help the world and if users haven’t gotten much back, I’m going to be thinking about what I can do for them. And I think at the very least I have a duty to FTX users to do right by them as best as I can.

When asked if he intended to launch a new business to generate the funds needed to repay investors, SBF replied: “To be able to do that, I would do anything. And I’ll make an effort if I can.”

With his arrest, SBF’s aim of recovering his customers’ assets is now a distant dream.

SBF Might Face Life In Prison Per Lawyer

FTX’s collapse was sparked by a CoinDesk report which uncovered a highly concentrated holding in self-issued FTT coins, which SBF’s fund Alameda Research utilized as collateral for billions in cryptocurrency loans.

The trading firm froze assets and declared bankruptcy days later. According to legal experts, Bankman-Fried might face life in prison without the chance of supervised release if the federal government pursues accusations of wire or bank fraud. It would be rare but not extraordinary to impose such a harsh penalty.

FTX Former CEO To Testify Before U.S. House Committee – Ready For Dec 13th?

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Sam Bankman-Fried, the former CEO of FTX, has agreed to give a testimony on December 13th at a hearing held by the House Financial Services Committee regarding the collapse of his crypto exchange.

SBF commented in a Twitter thread from December 4th, where the committee said they might see that the material SBF has provided so far is sufficient for testifying based on his position as CEO and your recent media interviews.

According to the committee’s statement:

As you know, the collapse of FTX has harmed over one million people. Your testimony would not only be meaningful to Members of Congress but is also critical to the American people. 

They asked SBF to attend their hearing on the 13th and also indicated that they would be open to setting up further hearing dates if additional information arose.

The former CEO of FTX said that he still does not have access to much information about his cryptocurrency company and the factors that caused it to fail. However, he agreed to attend the hearing on December 13th because the committee thought it would be helpful.

He claimed that “so there is a limit to what I will be able to say, and I won’t be as helpful as I’d like.” He claims that he will make an effort to be useful during the hearing and to clarify as much as possible about “FTX US’s solvency and American customers.” 

However, he had viewed himself as a role-model CEO who would avoid being unmotivated or unfocused. “Which made it that much more destructive when I did.” He also expressed regret and wished that others could draw lessons from the contrast between his actions and his potential.

Bahamas’ Attorneys Seek Access To FTX Database

An emergency petition was filed by the attorneys representing the Securities Commission of the Bahamas, asking a Delaware bankruptcy court judge for permission to access FTX Inc.’s customer database in order to continue their investigations into the company’s mystery collapse.

As reported by CNBC, the motion claims that Bahamian regulators have been unable to access vital financial data stored in databases hosted by Amazon Web Services and Google Cloud Portal due to resistance by FTX employees and counsel despite several attempts to do so.

Per the motion statement:

While the Joint Provisional Liquidators are happy to engage in dialogue with the U.S. Debtors, their refusal to promptly restore access has frustrated the ability of the Joint Provisional Liquidators to carry out their duties under Bahamian law and placed FTX Digital’s assets at risk of dissipation.

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FTX To Bear Costs For Bahamas Regulators Holding Digital Assets

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All expenses related to the digital wallet that houses the assets of FTX Digital Markets (FDM) shall be borne by FTX, the recently defunct cryptocurrency exchange. The Securities Commission of The Bahamas is in charge of keeping the pocketbook under control, according to a Bahama’s Supreme Court decision from Monday.

The statement said,

“The Order secured today confirms the Commission is entitled to be indemnified under the law and FDM shall ultimately bear the costs the Commission incurs in safeguarding those assets for the benefit of FDM’s customers and creditors, in a manner similar to other normal costs of administering FDM’s assets for the benefit of its customers and creditors………… No payment(s), however, may be made to the Commission without prior approval of the Supreme Court.”

The Supreme Court ruled that FTX must cover the expenses incurred by the Securities Commission in retaining the assets “for the benefit of FDM’s customers and creditors.” But no payment to the commission may be made without the Supreme Court’s prior consent.

FTX Owes Over $3B To Biggest Creditors

According to a document submitted to a US bankruptcy court, the defunct cryptocurrency exchange FTX owes its 50 largest creditors close to US$3.1 billion. FTX, which declared bankruptcy after being unable to handle consumer withdrawals, alone owes its top 10 debtors over US$1.45 billion.

The cryptocurrency exchange filed for bankruptcy over ten days ago, abandoning about one million creditors, albeit the degree of the harm is uncertain due to allegedly bad record-keeping procedures.

FTX was the second-largest cryptocurrency exchange after Binance before it went under.
Its inability to fulfil a surge in withdrawals caused by worries about its solvency revealed that it did not actually have assets worth the billions of dollars it had stated.

In addition, FTX has requested assistance from other exchanges in getting back cryptocurrency that was taken during the latter phases of its collapse so that it can pay its creditors. Analysts estimate that around US$270 million worth of cryptocurrency was stolen.

FTX Ordered To Move its Assets to the Control of Bahamian Securities Regulator

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FTX collapse has shaken the whole industry. On November 12, according to the Securities Commission of The Bahamas (SCB), the commission mandated that all digital assets belonging to FTX Digital Markets (FDM) be transferred to a digital wallet it owns.

The SCB claimed in a statement dated Nov. 17 that it had moved the assets to a “digital wallet controlled by the Commission, for safekeeping,” in accordance with the authority of a Supreme Court order.

Regulators claimed the decision will protect FTX’s users

According to SCB, last week’s action was justified by the need for “urgent interim regulatory action to protect the interests of clients and creditors of FDM.”

The most recent information might provide some insight into some financial movements that were noticed last week.

Analysts estimate that $663 million was lost as a result of a number of suspicious transactions that were flagged by the cryptocurrency community on November 11 in wallets connected to FTX and FTX.US. While the remaining funds were thought to have been transferred by FTX to secure storage, $477 million were suspected to have been stolen.

The amount of FDM’s digital assets that were moved as a result of the SCB order was not mentioned in the SCB statement, though.

FDM applied for Chapter 15 bankruptcy protection in a court in New York on November 15 in an effort to have the Bahamian liquidation proceedings recognized in the United States.

In his filing, Brian Simms, the court-appointed provisional liquidator in charge of FTX Digital Markets’ bankruptcy proceedings in the Bahamas, argued that FDM was not authorized to file for Chapter 11 in the United States and rejected the filing’s legality.

In an emergency motion filed on November 17, FTX Trading Limited argued that in order to “end the chaos and to ensure that assets can be secured and marshaled in an orderly process,” both the Chapter 11 case and all proceedings pertaining to Chapter 15 filings should take place in the Delaware-based U.S. Bankruptcy Court.

Additionally, according to the same filing, there is “credible evidence that the Bahamian government is responsible for directing unauthorized access to the Debtors’ systems for the purpose of obtaining digital assets of the Debtors—that took place after the commencement of these cases.”

FTX Liquidators From Bahamas Identify Fraud and Mismanagement as per the Court Filings

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FTX seems to be inviting trouble day after day. According to court documents submitted late Wednesday by the company’s Bahamian liquidators, there are indications that “serious fraud and mismanagement” occurred at the crypto exchange FTX.

The crypto exchange, which has its headquarters in the Bahamas, filed for bankruptcy in the United States after investor panic and sizable outflows were sparked by CoinDesk’s revelations about a blurring of lines with family trading establishment Alameda Research’s financials.

FTX court filings indicate mismanagement of funds

According to the document submitted to the U.S. Bankruptcy Court for the Southern District of New York, “The Joint Provisional Liquidators’ findings to date indicate that serious fraud and mismanagement may have been committed” with regard to the group. The people in charge of closing down the company’s affairs in the Bahamas, Brian Simms, Kevin Cambridge, and Peter Greaves, filed the paperwork on their behalf.

On November 11, FTX filed for bankruptcy in Delaware, but Simms has disputed that, claiming in a legal filing on Tuesday that the entire group was actually run from the Bahamas.

The Wednesday filing seeks a provisional halt on the sale of any FTX assets until a formal ruling under Chapter 15 of the U.S. bankruptcy code, which addresses cross-border insolvency, is made.

The filing also cited the failed $500 million loan to Voyager in May as evidence of how last week’s media reports that Alameda owed FTX $10 billion were “basically confirming that FTX Brand’s management misused customer deposits on Fried’s digital asset exchange to extend undisclosed loans to Alameda.”
The business, which has 134 worldwide subsidiaries and affiliates, is embroiled in complex legal proceedings to liquidate its assets and pay up to one million creditors.

Sam Bankman-Fried, the founder of Alameda, resigned on Friday, and the company may be subject to legal action, according to a statement released by the Bahamas Securities Commission on Sunday.

The fall of Fried’s exchange was something that no one saw coming. FTX, which was saving troubled firms during the fall of Terra, has ended up with the same fate with no one to come to rescue.

FTX Saga: Bahamas Calls For Liquidator And Freezes Assets

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The honeymoon between FTX CEO, SBF, and the Bahamas appears to be ended. On Thursday, the West Indian country’s Securities Commission issued a directive to freeze the assets of the troubled cryptocurrency exchange FTX.

The Securities Commission of The Bahamas stated in a statement, “Today the Securities Commission of The Bahamas took action to freeze assets of FTX Digital Markets and related parties.” The commission also suspended FTX’s operation registration and requested that a provisional liquidator be appointed by the Supreme Court of The Bahamas, according to the statement.

The letter, which was shared by the Nassau Guardian on Twitter, comes after a week of difficulties for Sam Bankman-Fried, a former cryptocurrency darling, and SBF’s exchange, previously among the biggest cryptocurrency exchanges in the world.

The organization claimed to be aware of claims that FTX’s assets were handled, managed, or given to Alameda Research improperly. The commission stated that FTX Digital Markets should be placed into provisional liquidation to “preserve assets and stabilize the company” and that these activities may have been illegal.

The agency further stated,

“The Commission is committed to working with the provisional liquidator to endeavor to obtain the best possible outcome for the customers and other stakeholders of FTX.” 

On November 6, 2022, Binance CEO Changpeng “CZ” Zhao announced that the largest cryptocurrency exchange in the world was selling its holdings of FTT, the native token of competitor exchange FTX. This is when the global exchange’s problems started.

Approximately 23 million FTT tokens, valued at $529 million, were held by Binance, according to Investopedia. FTT’s value dropped by 85.6% and is currently trading at $3.43, down from $24.01 the previous week, when Binance said it was liquidating its entire investment, triggering a run on the exchange.

FTX And Bahamas: A Short Lived Love Story

After relocating from Hong Kong, SBF’s exchange inaugurated its new offices there in September 2021, citing the Bahamas as one of the few nations that have established a thorough framework for cryptocurrencies.

The Bahamas has embraced digital currency, even introducing the Sand Dollar as its official digital currency. Companies like OKX and SBF’s global exchange built headquarters in the island nation thanks to welcoming crypto rules.

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FTX CEO Sam Bankman-Fried

Sam Bankman-Fried conducted a four-day seminar in the Bahamas in May of this year while the exchange was still settling into its new home there. Along with Wall Street, other notable attendees included Tom Brady, Gisele Bundchen, Bill Clinton, Tony Blair, Andrew Yang, Orlando Bloom, Apolo Ohno, Rick Fox, Udonis Haslem, and Liam Payne from One Direction.

CBDC of Bahamas must increase its cybersecurity: IMF

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The International Monetary Fund (IMF) warned in a review published Monday that the Bahamas’ central bank digital currency (CBDC), known as the sand dollar, requires broader reach and security to meet its goals. The IMF stated in an assessment of the Caribbean nation’s economic and financial policy that the sand dollar accounts for only 0.1 percent of the total money in circulation.

The IMF advised the country’s central bank to maintain building internal capacity – including on cybersecurity and the reliability of systems related to the sand dollar, noting that the sand dollar has limited avenues to usage.

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In reaction to the findings, Bahamas authorities aim to enhance public awareness campaigns about the CBDC, according to Philip Jennings, the IMF executive director responsible for that country.

The Bahamas, along with Nigeria and China, has been a leader in lobbying for a CBDC, seeing it as a viable means of reaching people on the archipelago’s hundreds of remote islands. Citizens can now use it to pay their taxes, according to the country.

The IMF has been cautious of the use of private crypto in countries like El Salvador and Argentina, maybe because it sees bitcoin (BTC) as a danger to its own power. It’s warming up to government-controlled cryptocurrencies like CBDCs.

9 out of 10 banks to establish their own CBDCs

According to a recent poll conducted by the Bank for International Settlements, nine out of ten central banks are considering establishing their own CBDCs.

The results of a survey of 81 central banks performed in autumn 2021 were presented in a report issued on Friday by BIS, an umbrella body for central banks. The poll looked into banks’ involvement in their digital currency activities, as well as their motivations and goals for CBDC issuance. BIS is owned by 63 central banks representing approximately 95% of global GDP.

Furthermore, around 70% of central banks are exploring the effects of stablecoins on monetary and financial stability, while a quarter are investigating the use of cryptocurrencies.