Recent sources show that authorities were notified of the demise of the FTX prior to its actual occurrence. Days prior to FTX’s bankruptcy filing last month, co-CEO Ryan Salame informed Bahamian authorities that founder Sam Bankman-Fried may have committed fraud by transferring customer funds to his other company, Alameda Research.
CZ did not take down SBF and FTX
Salame highlighted the “possible mishandling of clients’ assets” by Bankman-Fried in a filing relating to FTX’s bankruptcy proceedings on Wednesday. The letter included in the file was dated November 9 and was addressed to the commissioner of police by the Securities Commission of the Bahamas (SCB). FTX filed for bankruptcy on November 11.
Contrary to the vast majority of market speculations, it was not Changpeng Zhao (CZ) of Binance who brought down SBF and FTX, but rather one of the company’s top executives. Wednesday’s statement is the first public acknowledgment of an insider turning against Bankman-Fried.
Salame stated that the funds were to offset Alameda’s financial losses and that the transfer was neither authorized nor approved by their clients. Moreover, he informed the SCB that only three individuals possessed the required access to move client assets to Alameda: former FTX CEO Sam Bankman-Fried, FTX co-founder Zixiao “Gary” Wang, and the engineer Nishad Singh.
Salame stated that he told Bankman-Fried and Alameda executives that the likely mismanagement of client funds, which were commingled with Alameda’s, violated “normal corporate governance.”
After that, Christina Rolle, executive director of the SCB, contacted the commissioner of the Royal Bahamas Police Force to request an inquiry since the information “may constitute misappropriation, theft, fraud, or some other crime.”
The following day, on November 11, the SCB froze FDM’s assets, stopped the company’s registration in the country, and the Bahamian Supreme Court appointed a provisional liquidator in an effort to protect the company’s assets. Similar to Bankman-Fried, Salame was a prominent political donor, giving $20 million to Republican causes.
According to the documents, Salame is presumed to be in Washington, D.C., and he has not spoken publicly since the collapse of the exchange. On November 7, he responded with “lol” to Binance co-founder Yi He’s explanation of why the exchange sold its FTX Token in his final public tweet.
FTX’s collapse taints the industry with absurdity
The mixing of SBF’s companies’ funds is a significant issue in the FTX scandal. SBF, the deposed and detained CEO of the company, has stated that he did not knowingly commingle funds. The U.S. Securities and Exchange Commission (SEC) has charged SBF with fraud, stating that he gave Alameda Research access to FTX customer assets by creating a special line of credit.
Another former executive from a company associated with FTX is said to have assisted authorities in recent weeks. Pictures purportedly showing Alameda CEO Caroline Ellison in a New York coffee shop a short distance from the U.S. Attorney’s Office fueled rumors on December 4.
In the wake of the FTX crash, the cryptocurrency community suspects she may have struck a deal with authorities. SBF is the only individual from FTX and Alameda to have been charged thus far, lending validity to the theory that officials from both companies are supporting law enforcement.
In addition to wire and securities fraud, he is accused of money laundering and campaign financing offenses. The documents indicate that during this crucial pre-bankruptcy period, SBF exchanged emails with a number of Bahamian authorities, including Ms. Rolle and Attorney General Ryan Pinder.
In an email sent to Mr. Pinder on the evening of November 9, Bankman-Fried apologized for “delayed responses” to prior messages. In the email, SBF stated, “It’s been a hectic week, but that’s on me. Myself and Joe (cc’ed) will be responsive going forward.” Joseph Bankman, his father, was copied on the email.
Bankman-Fried added in the same message that FTX has “segregated funds for all Bahamian customers” and that “we would be more than happy to open up withdrawals for all Bahamian customers on FTX so that they can fully withdraw all of their assets tomorrow, making them fully whole.”
Several billion dollars worth of client assets have vanished, John Ray III, the new chief executive officer of FTX, testified before the US Congress. He stated that a portion of the funds likely went to Alameda.
In addition, Mike Belshe, the CEO of digital asset custodian BitGo, has revealed that Alameda Research sought to redeem 3,000 Wrapped Bitcoin (wBTC) before FTX’s bankruptcy declaration on November 11.
During a Dec. 14 Twitter Spaces event hosted by decentralized finance (DeFi) researcher Chris Blec, Belshe confirmed the company denied the redemption request because the unidentified Alameda representative involved failed Bitgo’s security verification and appeared unfamiliar with how the wrapped Bitcoin burning process worked.
