Sam Bankman-Fried’s crypto conglomerate made “false statements” to banks about accounts commingling customer funds and fired an employee who raised concerns about the practice, the new management of bankrupt FTX alleged in a report Monday, Bloomberg News reported. FTX Group employees lied to banks about using trading firm Alameda Research’s accounts for FTX.com customer transactions after some banks questioned Alameda’s wire activity in 2020 and began rejecting transfers, according to the report. In one instance, a bank representative — noticing references to FTX — asked whether an Alameda account that received customer deposits would be used to settle trades for FTX. An Alameda employee was then directed by a senior FTX executive to lie and say customers “occasionally confuse FTX and Alameda,” but all incoming and outgoing wires are used to settle Alameda trades, the report said. The tangled relationship between FTX and Alameda was at the heart of the empire’s unraveling. Caroline Ellison, the former CEO of Alameda Research, estimated in March 2022 in private notes that FTX.com had a cash deficit alone of over $10 billion, the report said.
Read more.
In related news, one creditor of bankrupted cryptocurrency exchange FTX decided not to sit and wait to get their money back. Instead, the unidentified creditor of a FTX bankruptcy claim worth $31,307 converted the claim to a token on the Ethereum blockchain and sold it to a buyer who on June 23 used the token to borrow $7,500 worth of stablecoin USD, according to nonfungible token lending platform Arcade, Bloomberg News reported. A number of high-profile bankruptcies in the digital-asset space, not just the FTX insolvency, has left millions of investors frustrated over how much money they’ll be able to recover. Solutions to temporarily reduce the pressures have been popular in the crypto industry. By putting the claim on the blockchain, the ownership of the claim is represented by an NFT. Activity history on NFT marketplace OpenSea shows that the NFT was originally sold at a value worth about $12,163.33 in a version of Ether token, at the time. The “tokenization” process was facilitated by Found, a platform that allows users to trade tokenized bankruptcy claims. The lender of the loan ultimately decides the value of the NFT as a collateral, Gabe Frank, founder of Arcade told Bloomberg News. The loan is now set to be repaid in five days, according to Arcade, and in the event of a payment default, the lender can take the NFT, therefore, the ownership of the bankruptcy claim.
Read more.
