A senior FTX executive reported that user funds were diverted to Sam Bankman-Fried’s trading arm, Alameda Research, just days before the companies went bankrupt. Nine for illegal transfers to Alameda, court documents filed on Wednesday showed, the same day Binance withdrew from its proposed bailout. The transfers were made to cover Alameda’s “financial losses,” Salame said. He added that the moves for FTX were evil. The normal course of action may constitute embezzlement, theft, fraud, or any other crime.
Only three people had the passwords needed to transfer user funds to Alameda, Salame said: former CEO Bankman-Fried, technical director Nishad Singh and technology director Gary Wang, the latter in the same capacity at Alameda.
FTX Digital Markets filed for bankruptcy in the Bahamas about a week after more than 100 related companies filed the same in the U.S. on Nov. 9, primarily based at the 600-acre luxury resort of Albany, according to the court document. Bankman-Fried and Alameda CEO Caroline Ellison also resided in Albany and reportedly lived in a five-bedroom penthouse suite with eight other people.
Salame joined FTX Digital Markets, the company that operates the Bahamas-based FTX flagship trading platform, in September 2021. He reportedly ran Alameda’s over-the-counter office for two years before taking on the position of co-executive chairman at FTX and is said to have plans to stay around and help pick up the pieces. Salame’s information prompted Christina Rolle, executive director of the Bahamas Securities Commission, to request an investigation by local police. It has yet to respond to Blockworks’ request for comment.
Bankman-Fried is the only FTX insider arrested so far. U.S. authorities indicted the former crypto billionaire on eight counts of fraud on Tuesday, along with separate charges from the SEQ. Ellison has hired his legal defense, which includes a former top SEC attorney who has filed lawsuits against Ripple Labs, Elon Musk, and Theranos scammer Elizabeth Holmes.
FTX may have siphoned $10 billion in user funds to Alameda
Recent court filings show that Bahamian regulators exchanged emails with Bankman-Fried before FTX’s bankruptcy. He was asked to meet with the local securities commission to discuss the platform’s solvency and potential Binance bailout. In an email to Bahamian attorney Ryan Pinder, Bankman-Fried apologized for the delay in her responses and said she was only focused on “putting clients back to health.”We are investigating a complete answer to that question; we had no intention of doing this, but we are concerned that poor risk management will lead to a liquidity problem,” said Bankman-Fried.
FTX has reportedly transferred approximately $10 billion in client funds to Alameda over the years, and between $1 billion and $2 billion of those funds remain unaccounted for.
According to outlet sources, Reuters reported that FTX co-founder Wang had built a “backdoor” into the exchange’s accounting software that allowed Alameda to withdraw funds from FTX users without activating the systems. Bankman-Fried, arrested Monday in the Bahamas and faced possible U.S. extradition, has repeatedly denied any wrongdoing, saying he never intended to mix up user funds and instead blamed bank accounts.