FTX has recovered $7B of misappropriated assets, but still needs to recover nearly $2B more.
The CEO of FTX, John Ray, announced in the FTX Debtors’ second interim report, released on June 26, that the company has recovered around $7 billion in liquid assets so far. The search for additional assets is still ongoing, but the extensive commingling of funds has complicated their efforts.
The FTX Debtors, which includes FTX and its affiliates, currently estimate that the amount of customer assets misappropriated is $8.7 billion. Most of the money, approximately $6.4 billion, was in fiat and stablecoins. FTX did not differentiate between the two in its accounting.
FTX debtor have filed the second interim report pic.twitter.com/aEafxFTnLu
— Sunil (FTX 2.0 Champion) (@sunil_trades) June 26, 2023
The report alleged that the former FTX leadership did not commingle and misuse customer deposits by accident and that they hid their actions with the assistance of a senior FTX Group attorney and others. As a result:
“Notwithstanding extensive work by experts in forensic accounting, asset tracing and recovery, and blockchain analytics, among other areas, it is extremely challenging to trace substantial assets of the Debtors to any particular source of funding, or to differentiate between the FTX Group’s operating funds and deposits made by its customers.”
The report included a diagram that showed the flows of FTX customer money out of primary deposit accounts “as identified to date.” Misrepresenting their purpose to banks and making many other false representations made these flows possible, according to the report.
The misrepresentation allegedly extended to statements made by former CEO Sam Bankman-Fried (SBF) to the United States Congress. The involvement of the unidentified FTX senior attorney was repeatedly mentioned, and it was noted that the attorney fired a less senior attorney who raised objections to the company’s deceptive practices. Misappropriated funds were allegedly used for political and charitable donations, as well as the company’s investments and acquisitions, such as luxury real estate.
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The report also claimed that the FTX Senior Executives, including SBF, Gary Wang, Nishad Singh, and Alameda Research CEO Caroline Ellison, informally tracked the size of FTX.com’s undisclosed, fiat currency liability to customers that resulted from the extensive commingling and misuse of FTX.com customer deposits. Their estimates ranged from $8.9 billion to $10 billion, which is somewhat higher than the FTX Debtors’ estimate.
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