When crypto exchange FTX was struggling to raise cash early last month, it seized billions of dollars worth of collateral from its trading arm, Alameda Research, and used it to try to convince investors of its financial health, former FTX Chief Executive Sam Bankman-Fried said, the Wall Street Journal reported. But much of it didn’t add up. A big chunk of the assets consisted of four thinly traded crypto tokens closely connected to Mr. Bankman-Fried and FTX employees and mostly held by Alameda. The tokens were likely worth far less than the $6.4 billion marked on the balance sheet FTX was shopping to investors in the hope of a bailout, according to market data and crypto researchers. “It wasn’t meant to be casting a judgment or making a decision for people on what they thought was their worth from a liquidity perspective,” Mr. Bankman-Fried said. The four tokens taken from Alameda were listed as assets in documents dated Nov. 10, Mr. Bankman-Fried said in an interview Friday and according to documents reviewed by the Wall Street Journal. By then, the value of the tokens had roughly halved in less than a week, market data and FTX’s balance sheet show. Some investors had already been skeptical of the value of these tokens. At its peak price, one had a market value of $127 billion—though only a tiny fraction of that was available for purchase. The value FTX placed on the tokens held on its balance sheet vastly exceeded the total amount in circulation. No investor stepped forward to save FTX, which filed for bankruptcy the next day.
