FTX Consumers Appear to Be Cashing Out of the Bankrupt Cryptocurrency Exchange Through a Loophole in the Bahamas

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Last Updated on November 13, 2022 by Bitfinsider

Some FTX users appear to have discovered a backdoor in the Bahamas to remove funds from the exchange.

Five days ago, while FTX was restricting customer withdrawals, the data firm Argus discovered strange trading patterns. Most infractions included digital collectibles, often known as NFTs. According to Argus, the patterns show “desperate” clients sought assistance from FTX users in the Bahamas.

After banning FTX liquidations everywhere else in the globe, the now-bankrupt worldwide cryptocurrency exchange permits withdrawals only in the Bahamas. The formerly $32 billion company, headquartered partially in Nassau, stated in a tweet that it was required to allow Bahamian withdrawals to comply with local legislation.

High-net-worth customers are paying exorbitant amounts for NFTs on FTX at a time when the market for cryptocurrencies and digital collectibles as a whole has plummeted. In one instance, a collectible that traded for approximately $9 three weeks ago sold on Friday for $10 million. This week, an additional NFT that was similarly priced a month earlier sold for $888,888.88.

Owen Rapaport, cofounder and CEO of Argus, a blockchain analytics company that specializes in insider trading, stated, “This NFT activity is highly irregular on a macro level when the NFT market as a whole is declining in both value and volume, and in this specific case when there is limited trading on other FTX markets.”

According to Argus, this form of trade is likely an effort by FTX users to gain access to funds in any manner possible. According to Rapaport, one option is that traders have a deal with Bahamian customers to pay a certain proportion of the assets in exchange for receiving them once they have been properly removed from FTX.

According to data from Dune Analytics, trading volumes for nonfungible tokens have decreased 97% from their all-time high. A year ago, the price of bitcoin was 75% lower than its all-time high.

These transactions are recorded on the blockchain, which serves as a public ledger for monitoring the flow of money. Although anybody can observe the flow of money, names remain anonymous. Argus was unable to confirm who these clients were, and FTX appeared to have terminated the abnormal trade on Friday. There are still “bids” or offers to purchase these expensive collectibles, but no purchase orders have been executed since.

This week, other Twitter users have reported similar anomalies. Cobie, the host of a famous crypto podcast, was among the first to claim that people were acquiring NFTs offered for sale by Bahamian users. He pointed to a wallet that had withdrawn $21 million worth of Tether from FTX and sent it to an address that appeared to be in the Bahamas.


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