CFTC prosecutors accused FTX of hiding 8 billion dollars in liabilities in a customer account. Sam Bankman Fried, the co-founder of FTX, referred to it as his Korean friend account. It is now becoming clear where the customer assets have gone.
More about CFTC allegation
On Nov 11, SBF filed for Chapter 11 bankruptcy protection for the FTX exchange and about 130 affiliated companies. The decision was made after billions of dollars were withdrawn from the exchange, which left it illiquid.
Last Wednesday, SBF reached the US after he was extradited from The Bahamas. The Associated Press reported that a US judge had kept secret that two of the SBF’s former associates, Caroline Ellison and Gary Wang, have been found guilty of the FTX fraud and are now cooperating with the US Feds. The press also said that the prosecutors feared that SBF would have fought against the extradition if he knew that his partners had turned on him.
Alameda Research, a crypto hedge fund started by Bankman Friend and run by Caroline Ellison, had borrowed billions of dollars from FTX, losing it to multiple bad deals and trades. Unfortunately, it was later revealed that all the money borrowed from the research from FTX was the customer deposits.
On December 13, a lawsuit was filed by CFTC stating that SBF directed the FTX executives to move Alameda’s approx 8 billion dollars in liabilities to an unknown customer account of FTX’s account. This lawsuit also claimed that the FTX co-founder later referred to it as one of his Korean friend’s accounts. It added that although it was a sub-account of Alameda, it did not have any typical investment firm email identifier, “@alameda-research.com”, making it difficult to recognise.
Funds were used to cover Alameda Research’s losses
The lawsuit filed by CFTC also claimed that the funds that FTX transferred to a sub-account of Alameda were used to cover the losses made by the firm. However, the account had the same privileges as the Alameda accounts, including exemption from liquidation characteristics.
A day later, one of the biggest Television networks in the world, Bloomberg, revealed that a GitHub account under the name of the FTX’s former engineering director, Nishad Singh, created a code which allowed Alameda’s ballooning liabilities to conceal on the exchange. The FTX’s implosion sent shockwaves throughout the crypto community, which was very bad for the industry.
What are your thoughts as CFTC prosecutors accused FTX of hiding 8 billion dollars in liabilities? How much do you think CFTC’s lawsuit will disrupt the FTX exchange? Let us know in the comments below. And, if you found our content informative, share it with your family and friends.
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