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Sam Bankman-Fried's FTX Saga Is Full Of Obscure Financial Details

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  • Since Sam Bankman-Fried stepped down as CEO and FTX filed for bankruptcy, several unusual details have come to light.
  • Recently, it was discovered that FTX allegedly told customers to transfer money to a fake, little-known electronics retailer website.
  • FTX executives also allegedly stashed $8 billion in liabilities in what Bankman-Fried called “our Korean friend’s account.”

Cryptocurrency critics and advocates alike consider the nascent industry a Wild West, but Sam Bankman-Fried’s FTX meltdown has given the term new weight.

Ties between parts of his crypto empire — which included exchange FTX, hedge fund Alameda Research and dozens of smaller subsidiaries — remain complex. Since FTX’s bankruptcy filing on Nov. 11, bizarre new details about the murky finances continue to surface.

An SEC complaint said FTX told customers to transfer money to a subsidiary that was a little-known fake online electronics retailer. The North Dimension, as it was called, was instrumental in putting FTX client funds to use in Alameda’s business activities.

The website was down, but it was full of misspelled words and what appeared to be mispriced items. For example, an electronics item showed a “sell” price of $899 even though it listed a regular price of $410.

The revelations only get weirder from there. FTX executives stashed $8 billion in liabilities in a customer account that Bankman-Fried called “our Korean friend’s account,” a Commodity Futures Trading Commission lawsuit alleges.

And court filings show that Bankman-Fried and FTX co-founder Gary Wang borrowed $546 million in Alameda promissory notes earlier this year to buy stock in Robinhood.

So Alameda took out a loan and pledged those same shares as collateral.

Bankman-Fried is now locked in a four-way legal battle with new FTX leadership, as well as bankrupt cryptocurrency lender BlockFi and lender Antigua, over control of that stake in Robinhood.

Meanwhile, the SEC also alleges that FTX used $200 million in user deposits for venture capital investments. Half of that went to fintech company Dave, while the other half went to Web3 company Mysten Labs.

“FTX was an opaque company, so centralized that it depended entirely on one person,” Andrew Yeoh, director of marketing at Web3 Nillion, told Insider. “The point of decentralization is to avoid outcomes like FTX where one person can take advantage of trust. I think the public and certainly the industry are waking up to this.”

A centralized player in a decentralized environment

The SEC alleged that Bankman-Fried orchestrated a fraud scheme that lasted for years. He has denied criminal responsibility and is due to appear in federal court in New York on Jan. 3 on wire fraud and conspiracy charges.

Using client funds for proprietary trading is a disruptive practice, according to Jeffrey Blockinger, general counsel of Quadrata. The resulting fallout, he explained to Insider, could end up driving investors away from similar rival exchanges.

For Darren Sandler, chief advisor at Republic Crypto, the entire saga is tongue-in-cheek and highlights the shortcomings of a centralized player in an ostensibly decentralized environment.

“The whole point of crypto is that it’s completely decentralized and trustless,” he told Insider. “Acts of fraud and misappropriation of funds should be really impossible or extremely difficult to commit. Ordinary participants should not trust crypto companies blindly or on the basis of reputation.”

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