As John J Ray III and his team strive to recover as much value as possible for FTX’s creditors, new evidence of wrongdoing is surfacing as the disorganized hoards of information about FTX’s inner transactions are combed through.
At least $8 billion could not be repaid
New trial filed against FTX’s former C-suite — which accuses SBF, Ellison, Wang and Singh of breaches of fiduciary duty and other crimes — alleges that Bankman-Fried was well aware of an “8 billion dollar liability in a hidden and mislabeled fiat account internally,” which he disclosed to potential investors.
FTX’s new management accuses SBF – which in a show of hubris previously boasted that FTX is not auditable – of labeling client funds as a liability, implying that they were commingled with FTX funds.
“Alameda is unverifiable. I don’t mean that in the sense that “a large accounting firm will have reservations about its audit”; I mean that in the sense of “we can only estimate its balances, not to mention something like a full transaction history.(“) We sometimes find $50 million worth of assets lying around that we have lost track of; that’s life.”
Coincidentally, Bloomberg reports that Caroline Ellison calculated FTX Group’s transaction numbers as early as March 2022 and came to the conclusion that the crypto empire owed $8 billion to clients that it could not repay. However, this figure was part of a larger deficit of about $10 billion in total.
FTX’s new management can only speculate where these funds will go – however, they certainly have ideas, which were mentioned in the court document linked above.
Private bunkers and self-awarded bonuses
Besides the well-documented speculative investments in which FTX has engaged, ranging from margin trading to various startupsthe former FTX executive also diverted money to generous bonuses for presumably leading the company with stellar conduct.
According to Bloomberg, soon after Ellison “discovered” the gaping hole in FTX’s budget, she handed herself a $22.5 million bonus, which she used, among other things, to invest in an AI startup in her own name.
Similarly, Nishad Singh allegedly received around $477 million worth of FTX shares absolutely for free.
However, these two executives were obviously not thinking at the same level as their CEO, who invested in several spurious projects when he was not busy investing $546 million of Alameda’s client money in Robinhood.
The court record shows that the FTX Foundation engaged in highly speculative and outright science fiction projects. An internal memo shows that SBF intended to purchase the island of Nauru in order to build a doomsday bunker for members of the Effective Altruism movement, of which he was a strong supporter.
Assuming a collapse occurs, EAs “could survive and develop sensitive regulation around human genetic enhancement and build a lab there”, among other activities.
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