Sam Bankman-Fried’s (SBF) empire collapsed within days in early November. Since then, this saga has gone from one twist to another. SBF’s fortune, which until recently totaled nearly $15 billion, now stands at zero dollars. A lawyer working on the startup’s bankruptcy assured the Financial Times that SBF runs the cryptocurrency exchange as its own “personal fiefdom” before it implodes. Of the “are substantial” they were spent on items unrelated to the business.
Money donated to Alameda Research
The bankruptcy procedure launched on November 11 allows us to deepen the financial details of the company. SBF has been able to attract well-known investors such as Sequoia, SoftBank, a subsidiary of Samsung, and the Ontario Teachers’ Pension Fund. But no one was on the company’s board of directors. Yet FTX’s management appears to have been more than questionable. SBF has reportedly used more than half of the $16 billion in capital deposited by its clients to fund its own firm Alameda Research, a Bahamian-based hedge fund founded in 2017.
James Bromley of Sullivan & Cromwell said the team found out “huge funds” they were transferred from the FTX platform to the Alameda Research fund and so on “Large sums of money have been spent on things unrelated to the business.” Alameda appears to have used FTX funds to make billions of dollars in investments in funds like Sequoia Capital and companies like SpaceX and Elon Musk’s Boring Company. The SEC (Securities and Exchange Commission) has opened an investigation into this matter and the US Department of Justice (DoJ) is also taking a close interest in this failure.
Acquisition of property in the Bahamas
Nearly $300 million worth of real estate was purchased in the Bahamas and shows bankruptcy filings. It turns out those assets were vacation homes and properties used by FTX’s senior executives. Meanwhile, Reuters reveals that Sam Bankman-Fried’s parents and company executives bought at least 19 properties worth nearly $121 million in the Bahamas over the past two years. Most of these properties are luxury beach houses. A spokesperson for SBF’s parents told Reuters they sought to return the property to the company ahead of bankruptcy proceedings and were awaiting further instructions.
Lawyers working on the liquidation of FTX are trying to identify all assets to repay creditors. But the case is marked by allegations of fraud and serious failures in the management of the company.
Let’s go back to the fall of FTX
The collapse of FTX, one of the largest exchanges in the world, left about 1 million creditors with losses totaling billions of dollars. Still, valued at $32 billion during its latest fundraising, the platform collapsed within days. An article published in early November by the specialized media CoinDesk revealed that 40% of Alameda’s capital was made up of FTT, the token of the FTX platform. Investors, fearing the same fate as Celsius and Voyager Digital, then started withdrawing their capital from the platform threatening FTX with insolvency. The cryptocurrency exchange has finally blocked withdrawals on its platform, unable to respond to more requests.
Initially, its competitor, the world’s leading cryptocurrency exchange Binance, announced plans to buy the platform. Even if the two leaders hardly like each other. Binance finally pulled less than 48 hours later following a flash audit. FTX filed for bankruptcy protection on Nov. 11 after Binance decided to liquidate its FTT tokens and others followed suit.
FTX has a total cash balance of $1.24 billion. But that’s a far cry from the $3.1 billion the platform owes its 50 biggest creditors. Another question is on everyone’s lips: after Voyager Digital, Celsius and FTX, will other crypto-asset platforms suffer the same fate?
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