According to The New York Times (NYT), weeks before FTX’s demise, its chief executive officer accused founder and then-CEO Sam Bankman-Fried (SBF) of Alameda’s massive debt to FTX. expressed concern.
The report cites documents seen by the NYT and details private correspondence between the governments of the United States and the Bahamas.
An FTX executive labeled CC-2 in the document was “alarmed” after learning from another executive (labeled CC-1) that hedge fund Alameda Research owed FTX $13 billion. Did.
Alameda lost $5 billion. This included funds a user deposited with his FTX for safekeeping.
When faced with CC-2, SBF admitted that the loss of Alameda was a problem. % decreased. At that point, however, SBF was still hopeful that the matter would be resolved, but he was discussing closing the hedge fund.
According to the documentation:
“Bankman-Fried has shown that the situation could naturally correct itself if they raise more equity and cryptocurrency prices rise.”
According to the NYT, FTX executives, including those who discussed Alameda’s debt to FTX with SBF, are high-level software engineers with access to the exchange’s code described in the documents.
According to court documents, only two people had access to FTX’s code: co-founder Gary Wang and then-head of engineering Nishad Singh.
Wang has pleaded guilty to criminal charges and is cooperating with the prosecution in the case against SBF. Singh is also reportedly seeking a plea bargain but has not been charged.The SBF is pleading “not guilty” to multiple fraud and money laundering charges against her. His trial is scheduled to begin in October.
When the problems started to occur in early November 2022, CC-1’s initial calculations indicated that “FTX can handle all customer withdrawals,” according to the documentation. But according to the docs:
“Bankman-Fried subsequently accused CC-1, in substance and in part, that CC-1 had overlooked another hidden account containing approximately $8 billion in debt to FTX.com by Alameda. showed.”
Recent court filings in the FTX bankruptcy case show that Alameda had a “$65 billion backdoor” in FTX.
FTX executives knew Alameda was misusing FTX user funds in 2020
According to the NYT, in 2020 CC-1 learned that Alameda had a negative balance of “around hundreds of millions of dollars” on the FTX exchange, documents revealed.
Data obtained by CC-1 querying the company’s database led executives to conclude that Alameda was “improperly using FTX.com’s customer funds.”
According to the documents, CC-1 highlighted the issue, replying to SBF with “it’s fine” because Alameda’s loan from FTX was backed by the exchange’s native token, FTT.
After Binance CEO Changpeng Zhao (CZ) announced plans to sell Binance’s FTT holdings on November 6, 2022, the price of FTT began to plunge rapidly.
When CC-1 approached SBF in 2020, documents reportedly revealed that FTX was under audit. CC-1 asked SBF if auditors had any concerns about Alameda’s use of his FTX user funds. According to the NYT, SBF assured his CC-1 that “auditors typically did not focus on such matters,” the document reports.