The FTX.com crypto exchange, which was once valued at $32 billion and specialized in derivatives and leveraged products, filed for Chapter 11 bankruptcy protection in the U.S. in November 2022. According to its bankruptcy filing, the exchange had $8 billion of liabilities it could not pay to as many as 1 million creditors.
A new report from the FTX team that is investigating the collapse of the exchange revealed that the company misappropriated and commingled its customers’ deposits, amounting to $8.7 billion. Out of this amount, $6.4 billion was in fiat currency and stablecoin that had been taken by the company. The report, which was filed on Monday, also stated that about $7 billion in liquid assets have been recovered so far and that more recoveries are expected.
Poor Executive Decisions were BEhind FTX Demise
According to the new report based on months of analysis and forensic auditing, the FTX Group was not the customer-focused leader of the digital age as it claimed to be, but a fraud. John J. Ray III, the CEO who is trying to recover money for creditors, said in a statement:
“The FTX Group mixed customer deposits and corporate funds from the start of the FTX.com exchange, and used them recklessly under the guidance and by the plan of previous senior executives.”
The report reveals that company management and at least one senior lawyer were aware of and involved in misusing customer money. They “deceived banks and auditors, created false documents, and moved the FTX Group from one country to another, fleeing from the United States to Hong Kong to the Bahamas, in a constant effort to facilitate and evade detection of their wrongdoing.”
Ray filed a 33-page report detailing evidence of embezzlement, loss concealment, price gouging, and violation of election laws under Bankman-Fried. This report is the second Ray has produced after conducting an initial review in April that revealed a series of wrongdoing under the direction of the founder and former CEO of FTX.
The company is currently in the middle of bankruptcy proceedings in Delaware. Ray has been trying to sort out the exchange’s issues since its collapse in November, and there have been some indications that his operations could be restarted as FTX 2.0.
