- The latest report discloses that FTX owes its customers $8.7 billion, and senior executives were aware of and concealed the information.
- According to the report, $7 billion in liquid assets has been recovered so far and the team tries to recover the rest.
Last year, Sam Bankman Friend’s FTX empire collapsed sending the entire crypto market plummeting. Since then, a series of discoveries have been reported with the recent update disclosing the amount owed to customers.
According to the report, FTX owes customers $8.7 billion after misappropriating and misusing customers’ deposits. This was concealed by senior executives as early as August 2022. A report filed on Monday reveals that about $6.4 billion owed customers is in fiats and stablecoins, all misappropriated. Interestingly, it is reported that these were not done by accident.
John J. Ray III is the CEO trying to recover the money for creditors. He explained that:
The image that the FTX Group sought to portray as the customer-focused leader of the digital age was a mirage. From the inception of the FTX.com exchange, the FTX Group commingled customer deposits and corporate funds, and misused them with abandon at the direction and by the design of previous senior executives.
According to Ray III, FTX has so far recovered $7 billion in liquid assets as they continue to search for the rest. The FTX debtors have in a second interim report stated that the company concealed its actions with the help of the FTX Group attorney.
Notwithstanding extensive work by experts in forensic accounting, asset tracing and recovery, and blockchain analytics, among other areas, it is extremely challenging to trace substantial assets of the Debtors to any particular source of funding, or to differentiate between the FTX Group’s operating funds and deposits made by its customers.
More Details on the FTX Story
Bankman-Fried is facing several criminal charges and is set to appear in New York for trial in October. Also, there are ongoing bankruptcy proceedings in Delaware. On Feb. 9, 2022, SBF reportedly gave false testimony to senators in a hearing concerning FTX’s practices to protect consumers and their money.
According to Ray’s report, Caroline Ellison, the former CEO of FTX’s trading affiliate Alameda Research, had prior knowledge about the company’s financial situation. In addition, it continuously provided false information to its banking partners concerning how it was using accounts. The report further discloses that a former employee of Alameda informed the bankruptcy team that no meaningful distinction was made between the customers’ funds and Alameda’s funds.
They did not disclose the shortfall, but at that time, for the first time, they created a sham customer account on FTX.com to reflect the hidden fiat currency liability. To minimize the risk of scrutiny, the FTX Senior Executives and Ellison referred to this sham account only as ‘our Korean friend’s account.’ The account reflected that their ‘Korean friend’ owed the FTX.com exchange $8.9 billion.
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The debtors initially released a first report that identifies and discusses control failures by the FTX Group’s previous management team. This includes “management and governance, finance and accounting, digital asset management, information security, and cybersecurity.” The third report is expected to be published by August 2023.
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