On Monday, a second probe report by FTX pointed fingers at its co-founder Sam Bankman-Fried, along with several high-ranking officials, for allegedly mishandling customer deposits and company funds. According to the report, these executives spent an excessive amount, approximately $243 million, on high-end residential and commercial properties for senior employees and their families.
FTX’s second investigative document, presented by its debtors, asserts that customer deposits on FTX.com were mixed and misapplied for an extended period. Such deceitful actions, as per the report, have made it difficult to trace the original source of certain transactions or to distinguish between operational funds and customer assets.
According to the report, at the time of the bankruptcy application, FTX.com owed an enormous $8.7 billion to its customers. The CEO and chief restructuring officer of FTX, John J. Ray III, stated that FTX Group’s customer-centric digital leader image was nothing but an illusion. Ray further elaborated:
The court filing accuses Sam Bankman-Fried (SBF), several top executives, various FTX-associated entities, and Alameda Research of using multiple bank accounts and obscuring complex transactions through an undisclosed entity. Moreover, an unidentified lawyer, referred to as “Attorney-1,” is implicated in aiding and abetting SBF’s alleged fraudulent activities.
Reportedly, the lawyer guided senior FTX officials to create a “deceptive and incorrect register of members and managers” for submission to an unnamed bank. As per the report, Attorney-1 allegedly helped top executives and SBF develop a “fraudulent payment agent agreement.”
The report argues that Attorney-1, in collaboration with SBF, orchestrated the formation of bogus agreements. These agreements aimed to provide a veneer of legitimacy to illegal transfers and arrangements within the FTX Group.
Consequently, investigators argue that these actions facilitated the improper integration and misappropriation of customer assets, along with various other misconducts by the FTX Group. FTX debtors also claim that there was retaliation against an FTX employee who voiced concerns about the misappropriation.
The misconduct spotlighted in the report includes the purchase of approximately $243 million worth of residential and commercial real estate, mainly located in the Bahamas. Much of this sum was used to buy units in the Albany Charles development, an exclusive resort community on New Providence Island in the Bahamas.
The luxury and exclusivity of Albany attract the world’s richest individuals. Allegedly, an 11,500 square-foot penthouse in the ‘Orchid Building’ was occupied by SBF, Nishad Singh, Gary Wang, Caroline Ellison, and other implicated parties.
Lawyers argue that most real estate purchases were made by the FTX Group through a subsidiary named FTX Property Holdings Ltd., allegedly registered in the Bahamas under Attorney-1’s guidance in July 2021.
According to the document, “It appears that FTX Group used FTX DM accounts partly as an intermediary, channeling at least $5.4 billion in customer deposits to FTX Trading Ltd.”
Frequently Asked Questions (FAQs) about fraudulent activities
What are the allegations against FTX co-founder SBF and executives?
How were customer deposits and corporate funds misused?
According to the report, customer deposits were commingled with corporate funds, making it difficult to trace specific transactions or differentiate between operating funds and customer assets. These funds were allegedly used for personal expenses and the acquisition of luxury residential and commercial properties.
How much did FTX owe its customers?
As of the bankruptcy petition, FTX.com owed approximately $8.7 billion to its customers, according to the investigative report.
Who else is implicated in the alleged fraudulent activities?
Apart from SBF, the report implicates senior executives, multiple FTX-controlled entities, Alameda Research, and an unidentified lawyer referred to as “Attorney-1” who is accused of facilitating and assisting in fraudulent activities.
What were the luxury real estate acquisitions made by FTX?
How did the alleged fraudulent activities impact FTX employees?
The report suggests that there was retaliation against an FTX employee who raised concerns about the misappropriation and commingling of funds, further highlighting the misconduct within the company.
Was there any involvement of Bahamian officials?
The report alleges that a “former Bahamian official” facilitated the expedited licensing of FTX Digital Markets within a short period. It also suggests that substantial funds were channeled through a Bahamian entity in connection with FTX’s activities.
What is the response from FTX’s current management?
According to FTX CEO and chief restructuring officer, John J. Ray III, the investigative report reveals that FTX’s portrayal as a customer-focused digital leader was deceptive, and the commingling and misuse of funds occurred under the direction of previous senior executives.
More about fraudulent activities
- FTX Official Website
- FTX Co-Founder Sam Bankman-Fried
- [Allegations of Fraudulent Activities by FTX Executives](insert link here)
- [Investigative Report on FTX Misappropriation](insert link here)
- [Bahamas Real Estate Development Albany Charles](insert link here)