Second FTX Asset Recovery Report contains surprising information.

The second report of John J. Ray III and his FTX restructuring team, also known as the “debtors,” was released on June 26. The report reveals specific financial flows, including the use of customer funds for political donations and venture capital investments at the defunct crypto exchange FTX and related hedge fund Alameda Research. Many of these flows went to entities controlled by friends and family of Sam Bankman-Fried, reinforcing the image of a coordinated and extensive criminal effort.

The report claims that FTX executives were aware as early as August 2022 that the exchange was missing over $8 billion in customer funds. This contradicts statements made by executives, including Caroline Ellison, and especially by FTX CEO and co-founder Sam Bankman-Fried himself, in the following weeks and months.

The report also describes Bankman-Fried’s involvement in the overall fraud, which is even more damning. However, it is important to note that all of these allegations are made by the FTX liquidators, and the claims may or may not surface or be confirmed in the separate criminal trial against Sam Bankman-Fried, currently scheduled to begin in October.

The report highlights the flows of FTX customer funds, which are represented as a big bowl of spaghetti with many flows ending at “to be determined.” The recovery team’s work is not yet done. The report claims that $20 million of FTX customer funds went to Guarding Against Pandemics (GAP), a “nonprofit” run by Gabe Bankman-Fried, Sam’s brother. The report also suggests that funding to GAP came from specific bank accounts full of commingled (that is, customer) funds, deepening existing questions about the Bankman-Fried family’s knowledge of and participation in the fraud.

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Throughout the report, we see Sam Bankman-Fried’s closest friends and associates eagerly taking what were stolen funds. The FTX Foundation, another “nonprofit” entity that was itself funded with customer money, donated $400,000 to an unnamed Effective Altruism organization that made YouTube videos promoting that troubling ideology.

The report also describes the “venture investments,” which were not real investments but rather financial cutouts mainly created to recycle and obscure stolen FTX user funds. The report specifically describes the “investment” of $450 million worth of FTX customer funds into an entity called Modulo Capital. Modulo Capital had been founded by two known Bankman-Fried associates, Duncan Rheingans-Yoo and Xiaoyun “Lilly” Zhang.

Finally, the report provides new insight into the massive personal loans that went to FTX executives, many of which were meant to fund political donations. The report claims that “the evidence identified by the Debtors indicates the transfers were ‘loans’ in name only.” The report is packed with tidbits that suggest goings-on at FTX were overtly and intentionally criminal, such as the claim that “by August 2022, the FTX Senior Executives and [Caroline] Ellison privately estimated that the FTX.com exchange owed customers over $8 billion in fiat currency that it did not have. They did not disclose the shortfall.” This $8 billion shortfall was hidden in a fake account with a negative $8 billion balance, referred to internally as belonging to “our Korean friend.”

The account was known, but I don’t know of any other trustworthy source that made specific claims that executives knew about the shortfall as early as August. This would be extremely damaging for Sam Bankman-Fried, who made numerous statements about FTX’s rock-solid finances after that, further clarifying his fraudulent actions.

However, the report also makes a claim that would somehow be even worse for SBF if it were demonstrated in his criminal case. It describes a “Payment Agent Agreement” intended to make the flow of FTX customer deposits through Alameda Research bank accounts look intentional, rather than some combination of negligence and fraud.

While the debtors discovered that the payment agreement document was created in April 2021, it was backdated to an “effective date” of June 1, 2019. This was apparently designed to create the impression that FTX customer funds had always flowed through Alameda. In reality, however, that flow was a desperate strategy to circumvent banking controls, and it appears to have underpinned the larger fraud.

In short, the payment agent agreement document is evidence of a criminal conspiracy.

And according to the debtor’s report, Sam Bankman-Fried signed the fraudulently backdated document with his own, actual hand: “Notably, while Bankman-Fried regularly executed agreements electronically using DocuSign, which electronically records the date and time of execution, Bankman-Fried signed the Payment Agent Agreement with a wet signature.”

This is extremely damaging to Bankman-Fried’s criminal defense for two reasons. First, the one-time use of a physical signature indicates a clear strategy to avoid generating DocuSign metadata that might reveal the document was not signed in 2019. This clearly indicates that Bankman-Fried was involved in a conspiracy to commit and conceal fraud.

See also: FTX’s Bankruptcy Fees Already Topped $200M, Court Examiner Says

Second, a physical signature means it is possible that someone actually saw Bankman-Fried sign the document, and/or that it can be clearly established that the signature is his. This would eliminate even the far-fetched hypothetical defense that Bankman-Fried’s electronic signature was somehow faked and he was actually unaware of the document.

To reiterate, it is not certain that these and other facts claimed in the debtor’s report will become part of Bankman-Fried’s criminal trial, but it seems very likely that most of them will.

So while we were already fairly certain that Sam Bankman-Fried was in trouble, it is starting to look like he is in even deeper trouble.