One to Two Billion Dollars of FTX Client Cash Have Vanished

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Last Updated on November 13, 2022 by Bitfinsider

As Sam Bankman-FTX Fried’s files for bankruptcy, Reuters believes that between $1 billion and $2 billion in customer funds have vanished.

Reuters discovered that Bankman-Fried, the former CEO of FTX, transferred $10 billion in customer funds from his cryptocurrency exchange to Alameda Research, a digital asset trading firm.

Alameda, which was also formed by Bankman-Fried, was regarded as FTX’s sister firm. According to various sources, these tight links are currently under investigation by multiple regulators, including the Department of Justice and the Securities and Exchange Commission, which is investigating how FTX handled customer assets.

The majority of the $10 billion delivered to Alameda “has now vanished,” according to two Reuters sources.

Reuters stated that both people “had senior FTX roles until last week” and that “top staff briefed them on the company’s finances.”

The shortfall was estimated by one source to be $1.7 billion. The other estimate was anywhere between $1 billion and $2 billion.

It appears that Reuters sent a text message to Bankman-Fried. The former CEO of FTX stated in a letter that he “disagreed with the characterization” of the $10 billion transfer and added, “We did not transfer the funds in secret.”

The text reply stated, “We had confused internal labeling and misinterpreted it,” and when queried explicitly about the allegedly lost monies, Bankman-Fried responded, “???

Last Sunday, Bankman-Fried held a meeting with FTX’s executives in Nassau to examine the company’s records and determine how much cash was required to cover the hole in its balance sheet. (Bankman-Fried acknowledged the meeting’s existence to Reuters.)

After Binance CEO Changpeng Zhao stated that his business was selling the rest of its FTT tokens, the native currency of FTX, trading had been difficult for several days. This followed a CoinDesk report highlighting the fact that Bankman-hedge Fried’s fund, Alameda Research, kept an excessive amount of FTT on its balance sheet.

Not only did Zhao’s public statement cause the price of FTT to drop, but it also prompted FTX customers to leave the exchange. Bankman-Fried tweeted that FTX clients requested around $5 billion in withdrawals on Sunday, which he described as “the largest by a wide margin.” That day, the SBF held an emergency meeting in the capital of the Bahamas.

According to Reuters, the chiefs of FTX’s regulatory and legal teams were present when Bankman-Fried disclosed various spreadsheets indicating how much cash FTX had loaned to Alameda and for what reason.

These documents, which appeared to reflect the most recent financial status of the corporation, revealed that FTX transferred $10 billion in customer deposits to Alameda. A portion of these monies, estimated to be between $1 billion and $2 billion, could not be accounted for among Alameda’s assets.

The financial discovery procedure also uncovered a “back door” established by “bespoke software” in FTX’s books.

The two sources who spoke to Reuters described it as a mechanism for former CEO Bankman-Fried to alter the company’s financial records without raising any internal or external red flags. Theoretically, this system might have prevented the $10 billion transfer to Alameda from being identified by his internal compliance team or external auditors.

According to Reuters, Bankman-Fried flatly denied implementing a so-called back door.

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