Authorities in the Bahamas, where FTX.com is based, said they froze the assets of its local trading subsidiary and “related parties” as more signs emerged that crypto mogul Sam Bankman-Fried’s empire is teetering.

The decision to freeze FTX Digital Markets was “the prudent course of action” to preserve assets and stabilize the company, the Bahamas Securities Commission said in a statement Thursday. An attorney has been appointed provisional liquidator — an initial step in assessing whether a company is sound or should be liquidated.

“Liquidation is what you in the States call bankruptcy,” said John K F Delaney, a commercial lawyer in the Bahamas. The provisional liquidator can be made permanent later if a so-called winding-up petition takes effect.

The move was the first by authorities to lock down parts of FTX amid widening signs of stress in Bankman-Fried’s digital-asset empire. In the US, employees at separate domestic exchange FTX US spent the day trying to raise money and were warned that they might not be paid much longer. The mogul, meanwhile, announced that he’s shutting down Alameda Research, the trading house at the heart of his sprawling collection of businesses.

“FTX US looks prepared to make payroll at least in the next cycle,” FTX US’s general counsel, Ryne Miller, wrote in an internal message to staff, a copy of which was confirmed by Bloomberg News. “Folks should prepare to make their own choices as appropriate for their personal situation on next steps.”

Miller said he’s not had much clear information from the founders and is trying to “preserve whatever is preservable of FTX US.”

Representatives for FTX.com and Bankman-Fried didn’t immediately respond to a request for comment on the development in the Bahamas.

Founder’s Assurances

Bankman-Fried said in a tweet Thursday that FTX US was “100% liquid” and “not financially impacted” by FTX International’s problems. FTX US’s trading may be halted in a few days and users should close down any positions, according to a notice from the website. Withdrawals will remain open, it said.

Miller’s message was sent to staff on a Slack channel and later deleted by a member of the founding team, according to a person familiar with the matter.

It’s been a wild week for FTX as Bankman-Fried — once one of wealthiest and most widely followed voices in the world of digital assets — struggled to patch a multibillion-dollar shortfall that triggered government probes and set off panic across crypto markets. An announcement that FTX.com had reached a deal to be acquired by a competitor proved short-lived, leaving the firm’s future in limbo.

Legions of traders expressed worry about losing their holdings in the debacle, with investors increasingly anxious over the blurred lines among Bankman-Fried’s business interests.

“The commission is aware of public statements suggesting that clients’ assets were mishandled, mismanaged and/or transferred to Alameda Research,” the Bahamas regulator wrote in its statement. “Based on the commission’s information, any such actions would have been contrary to normal governance, without client consent and potentially unlawful.”

The appointment of a liquidator is a way for the agency to take control of FTX, said Delaney, the commercial lawyer. The appointment requires a judge’s approval, and is essentially a means of displacing the business’s board of directors, he said in an interview.

FTX Digital Markets is the Bahamian subsidiary of FTX Trading, operating as FTX.com. The unit helps affiliates offer derivatives, options and other products and services to customers, according to a statement last year. The exchange is based in the Bahamas and is a separate legal entity from FTX US.

At FTX US, employees are in talks about selling parts of the business, including some assets that Bankman-Fried amassed on a sweeping acquisition tear across the industry, according to two people with direct knowledge of the matter, who requested anonymity because the talks were private.

Those employees, in some cases without Bankman-Fried’s participation, are pitching assets including stock-clearing platform Embed and naming rights to an arena in Miami, one of the people said.

FTX US on Thursday said that customers should close out any positions they want to and that trading may be halted in a few days.– BLOOMBERG