Business & Economy
Collapsed Crypto Exchange FTX Can’t Find At Least $1bn Of Customer Funds
FTX cannot find at least N1 billion of customer funds after filing for bankruptcy.
Eko Hot Blog reports that at least $1 billion of customer funds have vanished from collapsed crypto exchange FTX, according to two people who spoke with Reuters.
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The people alleged that the exchange’s founder Sam Bankman-Fried secretly transferred $10 billion of customer funds from FTX to his trading company Alameda Research.
The sources said a large portion of that has since disappeared. One source put the missing amount at about $1.7 billion. The other said the gap was between $1 billion and $2 billion.
The Reuters report came a day after the crypto exchange filed for bankruptcy in the United States, a move that marked a stunning downfall.
The financial hole was revealed in records that Bankman-Fried shared with other senior executives last Sunday, according to the two sources.
The records provided an up-to-date account of the situation at the time, they said. Both sources held senior FTX positions until this week and said they were briefed on the company’s finances by top staff, Reuters reported.
FTX founder, Sam Bankman-Fried
Bahamas-based FTX filed for bankruptcy on Friday after a rush of customer withdrawals earlier this week.
In text messages to Reuters, Bankman-Fried said he “disagreed with the characterization” of the $10 billion transfer.
“We didn’t secretly transfer,” he said. “We had confusing internal labeling and misread it,” he added, without elaborating.
In an examination, FTX legal and finance teams learned that Bankman-Fried implemented what the two people described as a “backdoor” in the company’s book-keeping system, which was built using bespoke software.
They said the “backdoor” allowed Bankman-Fried to execute commands that could alter the company’s financial records without alerting other people, including external auditors. This set-up meant that the movement of the $10 billion in funds to Alameda did not trigger internal compliance or accounting red flags at FTX, they said.
In his text message to Reuters, Bankman-Fried denied implementing a “backdoor”.
The U.S. Securities and Exchange Commission is investigating FTX.com’s handling of customer funds, as well its crypto-lending activities, a source with knowledge of the inquiry told Reuters on Wednesday.
FTX’s bankruptcy marked a stunning reversal for Bankman-Fried, the 30-year-old who had set up FTX in 2019 and led it to become one of the largest crypto exchanges. FTX was valued in January at $32 billion.
The current crisis has sent reverberations through the crypto world, with the price of major coins plummeting.
In a tweet on Friday, Bankman-Fried said he was “piecing together” what had happened at FTX.
FURTHER READING
“I was shocked to see things unravel the way they did earlier this week,” he wrote. “I will, soon, write up a more complete post on the play by play.”
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