Troubled FTX’s Bahamas unit seeks bankruptcy protection

The Bahamas unit of troubled crypto exchange FTX has sought protection from creditors in the United States.

FTX Digital Markets is seeking protection under Chapter 15 of the US Bankruptcy Code, a court filing showed on Tuesday.

Under Chapter 15, foreign debtors may file for bankruptcy in the United States court system, allowing them to shield their assets in the country.

Non-US companies use the provision to protect themselves from creditors seeking to file lawsuits or tie up assets in the US.

FTX, the third-largest crypto exchange, filed for bankruptcy on Friday after investors rushed to withdraw $6bn from the platform and a proposed rescue deal by rival Binance collapsed. CEO and founder Sam Bankman-Fried also stepped down following the implosion.

Bankman-Fried, a 30-year-old MIT graduate who had been described as the next Warren Buffet, has promised to explain “what happened”  insisted the exchange has sufficient assets “to repay all customers”.

FTX’s implosion has sent shockwaves through the world of cryptocurrencies, leaving investors complaining of feeling duped and drawing comparisons to the collapse of Lehman Brothers.

Bankman-Fried and his company are under investigation by the Department of Justice and the Securities and Exchange Commission. The investigations are likely to centre on the possibility that the firm used customers’ deposits to fund bets at Bankman-Fried’s hedge fund, Alameda Research, in violation of US securities law.