FTX advisers have been actively cooperating with federal law enforcement agencies across the United States on customer accounts and transaction records, according to a recent report by Bloomberg. Advisers from consultancy firm Alvarez & Marsal dedicated their expertise to responding to subpoenas from no less than five FBI field offices.
The advisers’ meticulous work, chronicled in billing records for the bankruptcy court’s scrutiny, spanned various tasks. They delved not only into customer trades and scrutinized accounts but also probed the depths of cloud-computing data. One notable task involved extracting transaction details linked to particular device IDs for the FBI’s Philadelphia office in September.
The cost of scrutiny
Amid these revelations, a glaring reality comes to light—FTX customers will bear the financial burden for the work. Advisers have invoiced over $21,000 for FBI-related endeavors in July, August, and September alone. Such professional fees inevitably chip away at the potential recoveries for those with stakes in FTX’s downfall.
Meanwhile, the billing records remain silent on the specifics of the FBI probes, with only oblique references to grand jury subpoenas and scant details of discussions regarding FBI outreach to “FTX victims.”
The agency’s inquiries into FTX spanned offices in Oakland, Portland, Philadelphia, Cleveland, and Minneapolis from July to September. These efforts align with standard U.S. crypto firm practices of complying with government subpoenas when probable cause justifies data acquisition. Nevertheless, concerns linger, especially if these authorized probes morph into extensive data mining endeavors.
The company’s cooperation has raised questions about the delicate balance between the pursuit of justice and the preservation of customer privacy. Neeraj Agrawal, a spokesman for the Coin Center, expresses trepidation at the potential for an overreach, cautioning against any “fishing expedition” that might intrude unduly into private data.
Further compounding FTX’s challenges, new CEO John J. Ray III has openly criticized the platform’s previous administration under Sam Bankman-Fried. Ray highlighted the lackluster record-keeping of private keys and business transactions, a disconcerting discovery given the platform’s extensive user base before its November 2022 implosion. While customer identities have remained shielded in the bankruptcy process, recent developments highlight the vulnerability of customer data.
After a month-long trial, jurors in Manhattan found Sam Bankman-Fried, the founder of FTX, guilty of a significant fraud that led to the collapse of the exchange. Former executives of FTX have also admitted to fraud charges and cooperated with federal prosecutors.