FTX bankruptcy aftershocks: governments worldwide vie for control over asset disposition
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FTX bankruptcy aftershocks: governments worldwide vie for control over asset disposition
After FTX collapsed, it directly stirred up a hornet's nest between foreign governments and John J. Ray III, the newly appointed CEO in the United States.
Navigating Web3 tides with focused insightsBy WSJ
Translation: TechFlow
The collapse of FTX has sparked a global clash between foreign governments and John J. Ray III, the newly appointed CEO overseeing its bankruptcy in the U.S.
Cyprus’s securities regulator complained that Ray’s declaration of FTX’s bankruptcy hindered due diligence and prevented European customers from promptly recovering their funds. After FTX relocated its headquarters to the Bahamas last year, officials there accused Ray of making false statements, suggesting his team’s actions were aimed at generating high legal fees. Turkish authorities seized assets of FTX’s local subsidiary—an act seen as undermining Ray’s efforts under Delaware’s bankruptcy proceedings to consolidate and manage FTX’s global assets.
These disputes highlight the gap between crypto’s global ambitions and the rigid reality of national regulations, as legal authority remains confined within borders. Crypto advocates often claim that the borderless nature of digital assets makes cross-border transfers as easy as sending an email, and many crypto firms have begun serving international clients while establishing headquarters in offshore jurisdictions. Yet when crises occur, the laws meant to protect customers—especially bankruptcy frameworks—are still bound by national boundaries.
No crypto bankruptcy so far has been more global than FTX’s, which initially listed over 130 subsidiaries worldwide—from Canada to Ghana to Japan. According to financial data from The Wall Street Journal and FTX staff, 95% of FTX’s revenue came from outside the United States.
The outcome of this international legal battle will directly determine how FTX customers recover billions of dollars in losses. Regulators across countries are pushing to ensure their citizens can fully reclaim what is owed. If unresolved, it could result in some customers recovering all their funds while others retrieve only a fraction.
A spokesperson for the bankruptcy team said that since taking control, the debtors have established cooperative relationships with several regulators in jurisdictions where FTX operated, and are working with the few that have taken action to chart a path forward.
On November 28, the head of Cyprus’s stock exchange commission expressed concerns about the bankruptcy process in a letter to Ray, a copy of which was reviewed by this newsletter. FTX EU Ltd., FTX’s European arm based in Cyprus, was authorized to offer services across other parts of the EU market.
One year before FTX collapsed, it moved its headquarters to the Bahamas—a jurisdiction actively courting crypto companies. What made the country attractive for crypto trading? And how will FTX’s downfall reshape this appeal?
George Theocaridis, head of the regulatory authority, wrote that his agency was investigating whether FTX violated securities laws. However, because FTX’s European staff could not access data from the exchange platform—now controlled by Ray—the agency lacked critical information needed for its investigation and to respond to requests from other European regulators. He therefore labeled the request: Special inquiries.
Theocaridis said that as of November 15, FTX EU held €47 million ($49 million) in customer funds. The Cyprus Securities and Exchange Commission (CySEC) had ordered the company to return these funds to customers, but the firm couldn’t comply because its bank accounts had been frozen under the U.S. bankruptcy protection process.
Theocaridis also warned Ray: "The illegal use of customer funds may constitute criminal offenses."
"CySEC's priority is to protect investors while these investigations continue and to ensure an orderly return of appropriate customer funds," said a spokesperson for the agency.
Ray has also found himself embroiled in a diplomatic dispute with Bahamian regulators, who are attempting to handle FTX’s insolvency independently.
On November 10, the Bahamas Securities Commission began steps to liquidate FTX Digital Markets, the entity controlling the company’s international exchange. The appointed liquidators later ordered the transfer of the unit’s crypto assets into a digital wallet controlled by the Bahamian government.
Ray objected. His lawyers accused Bahamian officials of theft, asserting that the crypto assets taken from the Bahamas should belong to the FTX entities currently under his control. In court filings, they cited "credible evidence indicating that the Bahamian government is responsible for directing unauthorized access... for the purpose of seizing digital assets."
The Bahamian government responded that Ray’s allegations were baseless and reiterated its intention to wind down FTX. Bahamian officials questioned Ray’s motives and his ability to manage the situation effectively.
Bahamas Attorney General Ryan Pinder said in a recent television address: "The prospect of millions of dollars in fees likely motivates them to pursue aggressive legal strategies and make exaggerated claims."
Former FTX CEO Sam Bankman-Fried (SBF), facing multiple investigations over the loss of billions in customer funds, may side with Bahamian officials. SBF has said he never intended to commit fraud and did not deliberately commingle FTX customer funds with those of Alameda Research, the crypto hedge fund he founded in 2017.
Ray may face further complications in Turkey, where regulators have decided to liquidate FTX’s local subsidiary. On November 19, Ray stated that FTX had identified several solvent franchise subsidiaries that could be sold to raise cash for creditors. One such entity is FTX Turkey Teknoloji Ve Ticaret AS, a wholly owned Turkish subsidiary, which court documents show had nearly $3.1 million in assets at the time of bankruptcy filing.
Four days later, Turkey’s Financial Crimes Investigation Board announced it had seized the assets of FTX Turkey, citing suspicions that customer deposits were fraudulently transferred abroad and that non-existent crypto assets were being sold on the exchange. They added that Istanbul prosecutors had launched a criminal investigation into Bankman-Fried and others linked to FTX.
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