According to a report released by FTX CEO John J. Ray III, senior leaders of the defunct cryptocurrency exchange had lied to banks as early as 2020 about the misuse of customer deposits. The report alleges that FTX co-founder and ex-CEO Sam Bankman-Fried, along with other senior executives, mixed customer deposits with corporate funds and used them for speculative trading, venture investments, and the purchase of luxury properties, as well as political and other donations. At the time of FTX's collapse, the exchange owed customers nearly $8.7 billion. Bankman-Fried, who had an estimated net worth of $26 billion, faces 13 federal charges related to the collapse of FTX and defrauding of its customers, but has pleaded not guilty.
The report also alleged that an unnamed lawyer and Bankman-Fried lied to banks and auditors, moved the company from jurisdiction to jurisdiction in an effort to avoid detection of wrongdoing, and executed false documents. Three of FTX's top executives have pleaded guilty on federal charges and are cooperating with investigators.
The report states that FTX had difficulty establishing bank relationships, so senior executives allegedly funneled customers' deposits and withdrawals through Bankman-Fried's other firm, Alameda Research, and other affiliates, and made misrepresentations to banks about the purpose for which it was using the accounts. FTX and its related companies established an entity called North Dimension to get access to banks, and the report alleges that FTX and its related companies falsely represented to a bank that North Dimension was a crypto trading firm with substantial operations when it was a shell company with no operations.
Ray, who was tasked with restructuring FTX, said that his team had recovered $7 billion in assets that can be sold to pay back customers. "The image that the FTX Group sought to portray as the customer-focused leader of the digital age was a mirage," Ray said in a statement. "We will continue to report our analysis and findings as our work progresses and remain committed to recovering as much value as possible for creditors."