The current Twitter chaos has dominated the news cycle for the past week or more. But a new meltdown has caught people’s attention, and that’s the collapse of the FTX crypto exchange. Cryptocurrency has existed for many years but still has not caught on with a mainstream user base. Even so, entities like the FTX crypto exchange have become very big.
Sam Bankman-Fried founded the FTX crypto exchange and quickly rose to prominence, with mainstream financial commentators such as Jim Kramer praising the company and its founder. The young Bankman-Fried became a billionaire very quickly and lived in the Bahamas with ten other people who helped run FTX crypto exchange.
Fast forward to the present day, and everything Bankman-Fried built has collapsed around him and the customers whose funds were in his care. According to Reuters, at least $1 billion in customer funds have vanished. Bankman-Fried is also accused of secretly transferring $10 billion of customer funds from the FTX crypto exchange to his trading company Alameda Research.
Since the story broke, users who have lost everything because of the collapse have taken to social media in anger. The latest updates show that the collapse is still rippling outwards, causing havoc in various ways. FTX has been hit with rouge transactions, which they say are under investigation. The hedge fund Galois Capital claims that half of its capital is stuck on the FTX exchange. And FTX has filed for bankruptcy protection.
Bankman-Fried showed several spreadsheets to the heads of the company’s regulatory and legal teams that revealed FTX had moved around $10 billion in client funds from FTX to Alameda, the two people said. The spreadsheets displayed how much money FTX loaned to Alameda and what it was used for, they said.
The documents showed that between $1 billion and $2 billion of these funds were not accounted for among Alameda’s assets, the sources said. The spreadsheets did not indicate where this money was moved, and the sources said they don’t know what became of it.
In a subsequent examination, FTX legal and finance teams also learned that Bankman-Fried implemented what the two people described as a “backdoor” in FTX’s book-keeping system, which was built using bespoke software.
They said the “backdoor” allowed Bankman-Fried to execute commands that could alter the company’s financial records without alerting other people, including external auditors. This set-up meant that the movement of the $10 billion in funds to Alameda did not trigger internal compliance or accounting red flags at FTX, they said.
Full story at Reuters
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