The current FTX management team statedwhich has made “significant progress” in securing client funds and has so far recovered about $7 billion in liquid assets.
The trading platform owed users about $8.7 billion at the time of filing for bankruptcy. The vast majority of the company’s deficit – more than $6.4 billion – comes from fiat and stablecoins that were misappropriated, the report says.
The current CEO of the company, John Ray, also revealed details of corporate fraud. According to him, employees of the FTX Group lied to banks about using the accounts of a subsidiary of Alameda Research to transfer funds from the exchange’s clients. In 2020, some financial institutions questioned the actions of the organization and began to reject transactions.
“The image of the customer-focused leader of the digital age that FTX sought to portray was a mirage. Since the inception of the exchange, the company has mixed and misused customer deposits and corporate funds at the behest and intent of previous senior executives,” Ray added.
One of the top managers instructed an Alameda employee to lie to a bank representative. Then he said that clients “sometimes confuse FTX and Alameda”, but all incoming and outgoing transfers are used to settle the transactions of the latter.
Former managers were also aware of the company’s financial problems. Back in March 2022, ex-CEO of Alameda Research Caroline Ellison calculated a $10 billion cash shortfall in a personal note.
According to the report, FTX created a new entity, North Dimension Inc., which was falsely positioned as a cryptocurrency trading firm with 2,000 counterparties and an average monthly trading volume of $10 million. It was actually a front company to accept client deposits and withdrawals from the Bahamas-based exchange. .
Between April and June 2022, FTX received about $360 million from the fraudulent firm and another $330 million from other accounts in user assets. At the same time, at least $12.7 million of them went to donations to political organizations.
BREAKING: FTX transferred multiple funds of customer money, one account receiving $360 million, to fund at least $12.7 million in political contributions: pic.twitter.com/ESZpAifoqW
— unusual_whales (@unusual_whales) June 26, 2023
When an FTX junior lawyer discovered and raised concerns that North Dimension accounts were being used to siphon off client assets, he was fired almost immediately.
In February 2023, the company sent out closed letters to politicians demanding the return of donations previously received from the former head of the exchange, Sam Bankman-Freed. FTX also sued the former CEO’s partners and related firms for a $700 million return on investment.
In June, there were reports that the collapsed company had spent $121.8 million on consulting and financial services in six months. Of these, $761,000 went to a workflow called “restarting the exchange.”
Recall that in January, John Ray first announced that a special working group is studying the possibility of resuming the company’s activities.
In April, lawyers from Sullivan & Cromwell allowed the exchange to be reorganized instead of liquidated or sold. The schedule they presented assumed that the detailed plan would be submitted in the third quarter.
At the same time, the idea of reviving FTX was expressed by the former head of institutional sales Zane Tackett. In his opinion, the platform should resume offering all pre-crash products by adding a tokenized claims market.
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