FTX Says Banks Earlier Raised Questions About FTX-Affiliated Hedge Fund’s Wire Activity

Certain banks working with FTX founder Sam Bankman-Fried’s trading firm Alameda Research raised questions about the firm’s wire activity as early as 2020, according to a report released by FTX on Monday.

Some banks began rejecting wires to or from Alameda the same year that the cryptocurrency exchange scrambled to access the US banking system, the report said.

Federal prosecutors have alleged that Bankman-Fried stole billions of dollars in customer funds to plug losses at Alameda. FTX, which filed for bankruptcy in November after Bankman-Fried resigned as CEO, has estimated that approximately $8.7 billion (nearly Rs. 71,300 crore) in customer assets were misappropriated from the exchange.

Bankman-Fried has pleaded not guilty to 13 counts of fraud and conspiracy. He has previously said that when FTX did not have a bank account, some customers wired money to Alameda and were credited on FTX. Bankman-Fried did not immediately respond to a request for comment on the report.

In 2020, certain banks working with Alameda pressed the firm on its wire transfers, according to the report.

One bank representative wrote to Alameda about references to FTX in the company’s wire activity and asked whether the account was being used to settle trades on FTX. An Alameda employee responded that while customers “occasionally confuse FTX and Alameda,” all wires through the account were to settle trades with Alameda, according to the report.

The Alameda employee’s response was false, FTX said on Monday. In 2020 alone, one of Alameda’s accounts received more than $250 billion (nearly Rs. 20,49,900 crore) in deposits from FTX customers and more than $4 billion (nearly Rs. 32,800 crore) from other Alameda accounts that were funded in part by customer deposits, the report said.

Bankman-Fried, a 31-year-old former billionaire, rode a boom in digital assets to accumulate an estimated net worth of $26 billion (nearly Rs. 2,13,200 crore), and became an influential political and philanthropic donor before FTX declared bankruptcy.

© Thomson Reuters 2023