Home ยป Bankman-Fried secretly moved $4 billion including FTX customer deposits to Alameda

Bankman-Fried secretly moved $4 billion including FTX customer deposits to Alameda

by LLT FINANCE REPORTER
10th Nov 22 3:48 pm

New details are coming to light regarding the behind the scene events that saw cryptocurrency exchange FTX encounter a significant liquidity crunch resulting in the near-collapse of the platform.

The liquidity crunch is tied to CEO Sam Bankman-Friedโ€™s intent to establish his other trading firm, Alameda.

In particular, Bankman-Fried reportedly transferred about $4 billion of FTX funds secured by tokens such as FTT and shares in trading platform Robinhood to Alameda, Reuters reported on November 10.

According to the report, a portion of the transferred funds entailed customer deposits, a transaction where Bankman-Fried allegedly failed to inform other FTX executives. However, the value of the customer deposit could be determined.

Sources close to the matter indicated that Bankman-Friedโ€™s failed to communicate with executives over fears the information could leak to the public.

Genesis of FTX troubles

Notably, insiders alleged that FTXโ€™s troubles are mainly the doing of Bankman-Fried as he moved to attempt and save other collapsing cryptocurrency firms. Interestingly, the CEOโ€™s push to rescue collapsing firms was accelerated despite the prevailing macroeconomic conditions characterized by high inflation and rising interest rates.

According to the executive, the crisis emerged after FTX experienced a โ€œgiant withdrawal surgeโ€ as users rushed to move about $6 billion worth of cryptocurrencies from the exchange within 72 hours. In most cases, FTXโ€™s daily withdrawals totaled tens of millions of dollars.

Following the crisis, giant cryptocurrency exchange Binance announced a possible bail-out of FTX. However, Binance withdrew the deal stating that the issue was beyond its control.

โ€œIn the beginning, our hope was to be able to support FTXโ€™s customers to provide liquidity. But the issues are beyond our control or ability to help,โ€ Binance said.

Regulators step in

The withdrawal comes after United States regulators officially began looking into the FTX saga. As reported by Finbold, the Commodity Futures Trading Commissionโ€™s (CFTC) Commissioner, Kristin Johnson, reiterated the need to establish a regulatory framework to protect consumers.

Like previous high-profile cryptocurrency crises, the FTX incident has resulted in market-wide turmoil, with most assets undergoing significant selling pressure. For instance, the cryptocurrency market cap has plunged by over $150 billion, with assets like Bitcoin (BTC) staring at a possible retest of the $10,000 level.

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