FTX pursues $99 million from jailed former executive

The collapsed digital asset exchange FTX has filed a lawsuit against former executive Ryan Salame, accusing him of misappropriating $99 million in digital currencies and fiat.

FTX filed the lawsuit at the United States Bankruptcy Court for the District of Delaware this week. It alleges that Salame withdrew $52.9 million in wire transfers and $29.8 million in digital assets between November 2020 and November 2022, when the exchange collapsed and filed for Chapter 11 bankruptcy protection. He received the rest through fraudulent transfers, which he designed to defraud creditors, or through payments made without receiving sufficient returns.

Salame was one of the highest-ranking executives at FTX. After joining disgraced founder Sam Bankman-Fried in Hong Kong when the digital asset exchange was in its infancy, he rose to become one of SBF’s most trusted allies. He spearheaded the migration to the Bahamas in 2021 and led the island nation’s division for some time.

Now, the bankruptcy estate is seeking to recover the money it says he received during the preference period. In bankruptcy proceedings, this is the amount of time before the bankruptcy filings, during which a court can demand the disgorgement of proceeds as they are deemed to have contributed to the firm’s collapse.

Aside from the misappropriated funds, the estate is seeking to recover at least $7.7 million, which Salame received as salary during his time as a top-ranking executive at FTX. Additionally, the exchange reportedly awarded him nine million FTT tokens as bonuses, which he cashed in despite knowing that the token “was severely inflated by the perpetration and concealment of a fraud on FTX customers.”

Salame sold the tokens for $24 million, which he used to buy businesses, luxury cars and properties. He also invested $2.3 million in a fund raised by RedBird Capital Partners, a New York-based venture capital firm.

FTX also wants the court to order Salame to transfer properties he purchased with the misappropriated funds in Miami, Connecticut, Portugal, Bali and Hong Kong.

Salame was the first SBF crony to get convicted and sentenced for his role in the collapse of FTX, getting 7.5 years behind bars. However, he wasn’t sentenced for defrauding billions of dollars from customers or for several other financial crimes the FTX team committed. Instead, it was his role in operating an unlicensed money-transmitting business that took him down.

Salame was also convicted of circumventing campaign donation laws to fund Republican candidates across the U.S. In his prime, he emerged as one of the youngest megadonors to the Republican Party (GOP), parting ways with SBF and all the other top FTX executives who exclusively supported Democratic Party candidates.

Additionally, he had tweaked a work agreement at FTX, awarding his ‘crypto’ lobbyist wife a $400,000 signing bonus as a consultant. It later emerged that the funds were a campaign donation to fund her run for a vacant House seat in Long Island, which violates American election laws.

Unlike all his other colleagues, Salame refused to cooperate with U.S. prosecutors. Caroline Ellison, a former executive at sister firm Alameda and SBF’s girlfriend, for instance, was a star witness against SBF; the prosecutors noted that they had not witnessed higher cooperation from a witness. This cooperation earned her leniency from the court, which sentenced her to two years behind bars.

While he was sentenced in May, Salame only reported to a federal correction center a month ago. He even joked about it on LinkedIn, stating, “I’m happy to share that I’m starting a new position as Inmate at FCI Cumberland!”

Cyprus extends FTX suspension to May 2025

Cyprus’ securities watchdog has extended the suspension of FTX’s European division until May 2025, two years after the exchange collapsed.

The Cyprus Securities and Exchange Commission (CySEC) first suspended FTX EU’s activities on November 11, 2022, shortly after it had declared bankruptcy. The suspension bars the exchange from accepting new clients, serving existing clients, or advertising its services. However, it can still return funds to clients. 

It’s the fourth time that CySEC has pushed the suspension forward. In April this year, it announced that it would remain in place until September.

FTX EU was originally founded as Digital Assets AG by two entrepreneurs who then sold it to SBF’s global exchange for $323 million in 2021. It then rebranded to FTX EU to serve European investors, but eight months later, the global exchange collapsed, and FTX EU was listed as one of the several firms in bankruptcy proceedings.

After a court dispute between the FTX estate and the original founders—in which FTX wanted the founders to return the funds it spent on acquisition, arguing that it had grossly overpaid—FTX EU was sold back to the two founders for $32.7 million. Since then, it has only been accepting existing clients to log in and claim their withdrawals. It says unclaimed funds will be moved into a “client segregated account” for six years.

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