A senior FTX executive blew the whistle on user funds being siphoned to Sam Bankman-Fried’s trading shop Alameda Research, just days before the firms filed for bankruptcy.
Ryan Salame, co-CEO of FTX Digital Markets, informed regulators on Nov. 9 about illicit transfers to Alameda, court documents filed Wednesday showed, the same day that Binance pulled out of its proposed rescue deal.
The transfers were made to cover Alameda’s “financial losses,” Salame said. He added the movements were perverse to FTX’s ordinary course of action and may constitute misappropriation, theft, fraud or some other crime.
Only three people had the required passwords to transfer user funds to Alameda, Salame said: Former CEO Bankman-Fried, director of engineering Nishad Singh and chief technology officer Gary Wang, the latter serving the same role at Alameda.
FTX Digital Markets filed for bankruptcy in the Bahamas about one week after more than 100 affiliated companies did the same in the US. Singh and Wang’s roles were quickly terminated.
Both former executives were on the Bahamas luxury island of New Providence as of Nov. 9 and mostly resided in 600-acre luxury resort Albany, according to the court document.
Bankman-Fried and Alameda CEO Caroline Ellison also resided in Albany, reportedly living together in a five-bedroom penthouse suite with eight others.
Salame himself joined FTX Digital Markets, the firm operating FTX’s flagship Bahamas-based trading platform, in September 2021. He reportedly ran Alameda’s over-the-counter desk for two years before taking on the co-CEO role at FTX, and is said to have plans to stay and help pick up the pieces.
Salame’s information prompted Christina Rolle, executive director of the Bahamas securities commission, to request local police investigate. He didn’t return Blockworks’ request for comment by press time.
Bankman-Fried is so far the only FTX insider arrested, with US authorities charging the former crypto billionaire a fraud-heavy eight count indictment on Tuesday, alongside separate SEC charges.
Ellison has hired her own legal defense, which includes a former top SEC lawyer who brought cases against Ripple Labs, Elon Musk and Theranos fraudster Elizabeth Holmes.
FTX may have siphoned $10 billion in user funds to Alameda
Recent court filings separately showed Bahamas regulators exchanging emails with Bankman-Fried prior to FTX’s bankruptcy. He was asked to meet with the local securities commission to discuss the platform’s solvency and Binance’s potential rescue deal.
In one email addressed to Bahamian lawyer Ryan Pinder, Bankman-Fried apologized for delays in his responses, claiming he was focused only on “making customers whole.”
“We are investigating a more thorough answer to this question; we did not intend to, but are concerned that poor risk management will lead to a liquidity issue,” Bankman-Fried said.
FTX reportedly moved some $10 billion in client funds to Alameda over the years, and between $1 billion and $2 billion of those funds are unaccounted for.
Reuters reported FTX co-founder Wang had built a “backdoor” into the exchange’s book-keeping software, per the outlet’s sources, which let Alameda withdraw FTX user funds without setting off internal systems.
Bankman-Fried, who was arrested in the Bahamas on Monday and faces potential US extradition, has repeatedly denied any wrongdoing and claimed he never intended to commingle user funds, instead blaming mislabelled bank-related accounts.
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Source: https://blockworks.co/news/ftx-execs-user-funds-alameda