SBF acquired $1 billion in personal loans from Alameda as a result of FTX’s insolvency.
Sam Bankman-Fried received $1 billion in loans from FTX-related silo companies, according to a recent bankruptcy filing by FTX Chief Restructuring Officer John Ray III.
Sam Bankman-Fried, the former CEO of FTX, acquired a $1 billion personal loan from one of the four silo firms that played a significant role in the demise of the FTX bitcoin exchange.
John Ray III, the new CEO of FTX, made a formal declaration in the continuing Chapter 11 bankruptcy papers that showed additional financial theft by Bankman Fried.
In accordance with the filing, Alameda Research provided Bankman-Fried with a direct loan of $1 billion while simultaneously lending $543 million to FTX director of engineering Nishad Singh.
In his inaugural submission to the United States Bankruptcy Court for the District of Delaware, Ray III, who was in charge of putting things back together following the catastrophic fall of Enron, is harsh.
He even goes so far as to call the scenario the worst he has ever encountered in his professional career, praising the “total breakdown of corporate controls” and the dearth of reliable financial data:
This position is unprecedented, with weakened system integrity, inadequate regulatory supervision abroad, and the concentration of power in a small number of untrained, naive, and possibly compromised people.
In the Chapter 11 case, four groupings of firms connected to FTX’s corporate structure will seek to create controls on accounting, auditing, cybersecurity, human resources, data protection, and other systems.
The four silos were Toxic Group
Four “silos,” including a variety of various enterprises that make up the FTX Group, are identified by Ray III. The West Realm Shires Inc. subsidiary FTX US, LedgerX, FTX US Derivatives, FTX US Capital Markets, and Embed Clearing are all included in the “WRS” silo.
Alameda Research is listed in the petition as a separate silo with its own companies, whereas the “Ventures” silo includes Clifton Bay Investments LLC and Ltd, Island Bay Ventures Inc., and Debtor FTX Ventures Ltd. The exchanges operating under the FTX.com brand and FTX Trading Ltd are included in the final “Dotcom” silo.
All of the silos, according to Ray III’s filing, were under Bankman-management, Fried’s with modest ownership stakes owned by Singh and former FTX chief technology officer Zixiao “Gary” Wang. Third-party equity investors in the WRS and Dotcom silos comprised a wide range of investment firms, endowments, sovereign wealth funds, and families that were negatively impacted by the collapse of FTX.
Other scathing accusations about the inner workings of Bankman-enterprise Fried’s can be found in the complaint. The larger FTX Group failed to retain accurate bank account records, did not “maintain centralized control” over its cash, and did not “pay appropriate attention to the creditworthiness of banking partners.””
Ray III adds that the WRS silo was the only branch that had engaged in a trustworthy audit with a reputable accounting firm. While unable to locate any audited financial accounts for the Alameda and Ventures silos, he raises worry with the Dotcom silo’s financial statements.
The petition states that the fund disbursement was likewise quite dysfunctional:
Employees of the FTX Group, for instance, made payment requests using an online “chat” platform, and a variety of supervisors approved the disbursements by providing customized emoji responses.
Ray III further mentions that there was a lack of paperwork for transactions, including loans, and that business monies were used to buy residences and other personal assets for workers and advisers.
Cryptocurrency custody in a mess
According to the Chapter 11 filing, there were no proper records or security controls in place for the digital assets owned by FTX Group, and custody of these assets was also in disarray.
Access to the major companies in the group’s cryptocurrency holdings was under the supervision of Bankman-Fried and Wang. In his list of “unacceptable behaviors,” Ray III “that involved accessing sensitive information and private keys for the global network of companies through an insecure group email account.
Additionally, the organization employed software to cover up the misappropriation of customer monies and neglected to do a daily reconciliation of cryptocurrency holdings. This made it possible for Alameda to be secretly exempted from several requirements of the auto-liquidation protocol used by FTX.com.
The fact that the debtors filing for bankruptcy have only been able to collect “a fraction of the digital assets” they had intended to reclaim is perhaps the most striking. Although $740 million worth of cryptocurrencies has been found in cold wallets, it’s unclear to which silo the money actually belongs.