Now-bankrupt trading house Alameda Research allegedly loaned $1 billion to co-founder and former CEO Sam Bankman-Fried after he reportedly loaned the company billions from his other company, according to the company’s new CEO John J. Ray III in a Thursday court filing.
The allegation comes one week after a report that Bankman-Fried had loaned $10 billion of client funds from crypto exchange FTX to Alameda Research when he was FTX’s CEO. A group of companies Ray dubs the “Alameda Silo,” comprised of Alameda and its subsidiaries, loaned $4.1 billion to “Related Parties,” including $2.3 billion to Paper Bird Inc — one of the roughly 130 companies in the so-called FTX Group collectively filing for bankruptcy — $1 billion to Bankman-Fried and $543 million to FTX Group co-founder Nishad Singh, according to Ray in a declaration to the Delaware court overseeing the case Thursday.
The firm’s new CEO also called out a variety of practices at the companies he considered inappropriate, including the alleged use of the FTX Group’s corporate funds to “purchase houses and other personal items for employees and advisors,” according to the court filing. Additionally, the FTX group allegedly used an “unsecured email account … to access confidential private keys and critically sensitive data,” hid misuse of customers’ funds and secretly exempted Alameda from some of FTX’s protocols, Ray claimed.
FTX also lacks records of its decision-making process, and failed to keep accurate records of its financial books, Ray alleged. He noted that Bankman-Fried and co-founder Zixiao “Gary” Wang controlled access to the FTX Group’s assets, and that several companies in the FTX Group had no audited financial statements.
“Although the investigation has only begun and must run its course, it is my view based on the information obtained to date, that many of the employees of the FTX Group, including some of its senior executives, were not aware of the shortfalls or potential commingling of digital assets,” Ray wrote. “Indeed, I believe some of the people most hurt by these events are current and former employees and executives, whose personal investments and reputations have suffered.”
Bankman-Fried defended a now-deleted tweet claiming that FTX never invested client assets by saying that it was “factually accurate” since FTX loaned the money to Alameda before it was invested, in an interview with Vox Wednesday. After the interview was published, Bankman-Fried claimed he thought he was speaking to a friend and did not intend for his statements to be made public, according to several tweets posted on Nov. 16.
Between $1 billion to $2 billion in clients’ assets have been lost, Reuters reported Nov. 10, citing two anonymous sources.
The erstwhile billionaire, who has seen his fortune vanish at a historically rapid pace, claimed that if he had not agreed to enter bankruptcy, “everything would be [about] 70% fixed right now,” Vox reported. He is currently being sued in a class action lawsuit and under investigation by several federal agencies.
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