In early November, the empire of Sam Bankman-Fried (SBF) collapsed in a matter of days. Since then, this saga has gone from twist to twist. SBF’s net worth, which was nearly $15 billion until recently, is now at zero dollars. A lawyer who worked on the startup’s bankruptcy assured the Financial Times that SBF manages the cryptocurrency exchange as its “personal fief” before it implodes. Of the “are substantial” spent on things that have nothing to do with the company.
Money donated to Alameda Research
The bankruptcy proceedings that started on November 11 allow us to dive into the financial details of the company. SBF has attracted renowned investors such as Sequoia, SoftBank, a subsidiary of Samsung and the Ontario Teachers’ Pension Fund. But no one sat on the company’s board of directors. Still, FTX’s management seems to have been more than questionable. SBF reportedly used more than half of the $16 billion in capital deposited by its clients to fund its own company Alameda Research, a Bahamas-based hedge fund founded in 2017.
James Bromley of Sullivan & Cromwell said the team found that out “significant funds” were transferred from the FTX platform to the Alameda Research fund and that “Significant amounts of money have been spent on matters unrelated to the company.” Alameda appears to have used FTX funds to invest billions of dollars in funds like Sequoia Capital and companies like SpaceX and Elon Musk’s Boring Company. The SEC (Securities and Exchange Commission) has opened an investigation into this subject and the US Department of Justice (DoJ) is also very interested in this bankruptcy.
Acquiring real estate in the Bahamas
Nearly $300 million worth of real estate has been purchased in the Bahamas, documents related to the bankruptcy show. It turned out that those assets were vacation homes and properties used by senior FTX executives. Meanwhile, Reuters reveals that Sam Bankman-Fried’s parents and senior corporate executives have purchased at least 19 properties worth nearly $121 million in the Bahamas over the past two years. Most of these properties are luxury beachfront homes. A spokesperson for SBF’s parents told Reuters that they wanted to return the property to the company ahead of the bankruptcy proceedings and are awaiting further instructions.
Lawyers working on the liquidation of FTX are trying to identify all assets to repay creditors. But the case is marred by allegations of fraud and major mistakes in the company’s management.
Back to the fall of FTX
The collapse of FTX, one of the largest exchanges in the world, left about 1 million creditors with losses totaling billions of dollars. But during the latest $32 billion fundraiser, the platform collapsed in just a few days. An article published in early November by the specialized media CoinDesk revealed that 40% of Alameda’s capital was FTT, the token of the FTX platform. Investors, fearing they would suffer the same fate as Celsius and Voyager Digital, then began withdrawing their capital from the platform and threatening FTX with insolvency. The cryptocurrency exchange eventually froze withdrawals on its platform, unable to respond to multiple requests.
Initially, its competitor, the world’s leading cryptocurrency exchange Binance, announced its intention to buy the platform. Even though the two leaders hardly like each other. Binance finally pulled out less than 48 hours later after a flash audit. FTX filed for bankruptcy protection on November 11 after Binance decided to liquidate its FTT tokens and others followed suit.
FTX has a total of $1.24 billion in cash balances. But that’s a far cry from the $3.1 billion the platform owes its 50 largest creditors. Another question is on everyone’s lips: will the other crypto asset platforms after Voyager Digital, Celsius and FTX suffer the same fate?
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