After mishandling and pooling user deposits, the collapsed FTX exchange owes $8.7 billion to its consumers, according to a recent study from the FTX team investigating the exchange's finances. The report claims that top officials began covering up the problem as early as August 2022.
Bankruptcy's Latest Report
In the report submitted on Monday, June 26, it was stated that "in the form of fiat currency and stablecoin that had been misappropriated," FTX.com owed its clients around $6.4 billion. The investigators have found around $7 billion in liquid assets so far, and they anticipate additional recoveries.
According to CEO John J. Ray III, who is attempting to recoup funds for creditors, the FTX Group's claim to be the customer-focused digital age leader was an illusion. "From the inception of the FTX.com exchange, the FTX Group commingled customer deposits and corporate funds and misused them with abandon at the direction and by the design of previous senior executives."
CoinDesk reported that months of analysis and forensic auditing have culminated in a new report that paints a picture of company management and at least one senior lawyer knowingly misusing customer money. That lawyer, among other things, lied to banks and auditors, executed false documents, and relocated the FTX Group from one jurisdiction to another, first to the US and then to Hong Kong and the Bahamas.
The 33-page evaluation is Ray's second filing after an earlier investigation in April revealed many instances of wrongdoing on the part of founder and ex-CEO Sam Bankman-Fried.
Reportedly, there will be a trial for several criminal allegations against Bankman-Fried in New York this coming October.
Lies Fed to Clients, Banking Partners, Etc.
The corporation filed for bankruptcy in the District Court for the State of Delaware last year. Since its collapse in November, Ray has been seeking to settle the exchange's affairs, and there have been indications that its activities may be revived as FTX 2.0.
According to Ray's research, corporate high-ups, including former FTX trading affiliate Alameda Research CEO Caroline Ellison, knew in August 2022 that the company owed more than $8 billion to clients but did not have the cash on hand to pay them.
In order to lessen the likelihood of detection, the FTX senior executives and Ellison allegedly referred to a fake account as 'our Korean friend's account.' The said account had a huge debt to the FTX.com exchange, as shown by its $8.9 billion balance.
Moreover, the firm often lied to its banking partners about its account activity.
Reportedly, a former employee of Alameda Research told the bankruptcy team that there was no substantial distinction between customer funds and Alameda funds.
The study also claims that on February 9, 2022, Bankman-Fried lied to senators at a hearing regarding the company's procedures for safeguarding clients' funds.
