On Monday, FTX released a second investigative report accusing co-founder Sam Bankman-Fried and senior executives of commingling customer deposits and corporate funds and misusing them. The report alleges that they spent $243 million on luxury residential real estate for senior staff and family members, as well as on commercial properties.
FTX Execs Accused of $243 Million Real Estate Spending Spree, Retaliation, and Fraud
A second investigative report by FTX debtors alleges that “commingling and misuse of FTX.com customer deposits occurred for several years.” The report criticizes this fraudulent practice for making it “extraordinarily challenging” to trace the origins of specific transactions or distinguish between operating funds and customer assets.
As part of the report, it states that FTX.com owed customers $8.7 billion as of the date of the bankruptcy petition. “The image that the FTX Group sought to portray as the customer-focused leader of the digital age was a mirage,” the current FTX CEO and chief restructuring officer, John J. Ray III stated. Ray added:
From the inception of the FTX.com exchange, the FTX Group commingled customer deposits and corporate funds, and misused them with abandon at the direction and by the design of previous senior executives.
The court filing alleges that Sam Bankman-Fried (SBF), senior executives, multiple FTX-controlled entities, and Alameda Research utilized numerous bank accounts and concealed intricate transactions through an undisclosed entity. Additionally, an unidentified lawyer referred to as “Attorney-1” is implicated and accused of assisting and facilitating SBF’s alleged fraudulent activities.
The attorney purportedly instructed senior FTX officials to establish a “false and misleading corporate register of members and managers” to be submitted to an unnamed bank. According to the report, Attorney-1 purportedly assisted senior executives and SBF in devising a “sham payment agent agreement.”
so SBF and an attorney:
• falsified a "payment agreement" between FTX & Alameda
• backdated it by ~2y
• wet signed it to avoid DocuSign timestamp
• submitted it to an external auditor
• used it to obtain a $400M funding round pic.twitter.com/x1qODBrKbU— Molly White (@molly0xFFF) June 27, 2023
The report asserts that, in collaboration with SBF, Attorney-1 conceived and coordinated the creation of counterfeit agreements. These agreements were designed to lend an air of credibility to unlawful transfers and arrangements within the FTX Group.
As a result, investigators claim that they enabled the mingling and wrongful appropriation of customer assets, along with various other forms of misconduct by the FTX Group. FTX debtors also contend there was retaliation against an FTX employee who raised concerns about commingling.
The highlighted misconduct encompasses the acquisition of approximately $243 million worth of residential and commercial properties, predominantly situated in the Bahamas. A significant portion of these funds was allocated towards the purchase of units within the Albany Charles development, a highly prestigious resort community located on New Providence Island in the Bahamas.
Albany enjoys popularity among the world’s wealthiest individuals due to its exclusivity and luxurious amenities. Allegedly, an 11,500 square-foot penthouse within the ‘Orchid Building’ was shared by SBF, Nishad Singh, Gary Wang, Caroline Ellison, and other implicated individuals.
Attorneys contend that the majority of the real estate acquisitions were conducted by the FTX Group via a subsidiary called FTX Property Holdings Ltd., which they say was registered in the Bahamas in July 2021 under the direction of Attorney-1.
The report makes an allegation that a “former Bahamian official” facilitated the process to expedite FTX Digital Markets’ licensing within a mere six weeks, with substantial funds being channeled through the Bahamian entity.
According to the document, “The FTX Group appears to have utilized the FTX DM accounts in part as an intermediary mechanism, directing at least $5.4 billion in customer deposits to FTX Trading Ltd.”
What are your thoughts on the allegations of lavish spending and fraud against FTX co-founder SBF and executives? Share your thoughts and opinions about this subject in the comments section below.
