Reuters Reports $1B of Client Funds Missing at FTX (reuters.com) 61
Friday the Wall Street Journal reported:
Crypto exchange FTX lent billions of dollars worth of customer assets to fund risky bets by its affiliated trading firm, Alameda Research, setting the stage for the exchange's implosion, a person familiar with the matter said.
FTX Chief Executive Sam Bankman-Fried said in investor meetings this week that Alameda owes FTX about $10 billion, people familiar with the matter said. FTX extended loans to Alameda using money that customers had deposited on the exchange for trading purposes, a decision that Mr. Bankman-Fried described as a poor judgment call, one of the people said.
All in all, FTX had $16 billion in customer assets, the people said, so FTX lent more than half of its customer funds to its sister company Alameda.
And then Friday night Reuters reported that "At least $1 billion of customer funds have vanished from collapsed crypto exchange FTX, according to two people familiar with the matter.
"The exchange's founder Sam Bankman-Fried secretly transferred $10 billion of customer funds from FTX to Bankman-Fried's trading company Alameda Research, the people told Reuters. A large portion of that total has since disappeared, they said." One source put the missing amount at about $1.7 billion. The other said the gap was between $1 billion and $2 billion.
While it is known that FTX moved customer funds to Alameda, the missing funds are reported here for the first time. The financial hole was revealed in records that Bankman-Fried shared with other senior executives last Sunday, according to the two sources. The records provided an up-to-date account of the situation at the time, they said. Both sources held senior FTX positions until this week and said they were briefed on the company's finances by top staff....
In text messages to Reuters, Bankman-Fried said he "disagreed with the characterization" of the $10 billion transfer. "We didn't secretly transfer," he said. "We had confusing internal labeling and misread it," he added, without elaborating.
Asked about the missing funds, Bankman-Fried responded: "???"
FTX and Alameda did not respond to requests for comment....
At the heart of FTX's problems were losses at Alameda that most FTX executives did not know about, Reuters has previously reported.... FTX legal and finance teams also learned that Bankman-Fried implemented what the two people described as a "backdoor" in FTX's book-keeping system, which was built using bespoke software. They said the "backdoor" allowed Bankman-Fried to execute commands that could alter the company's financial records without alerting other people, including external auditors...
In his text message to Reuters, Bankman-Fried denied implementing a "backdoor"....
On Friday, FTX said it had turned over control of the company to John J. Ray III, the restructuring specialist who handled the liquidation of Enron Corp — one of the largest bankruptcies in history.
FTX Chief Executive Sam Bankman-Fried said in investor meetings this week that Alameda owes FTX about $10 billion, people familiar with the matter said. FTX extended loans to Alameda using money that customers had deposited on the exchange for trading purposes, a decision that Mr. Bankman-Fried described as a poor judgment call, one of the people said.
All in all, FTX had $16 billion in customer assets, the people said, so FTX lent more than half of its customer funds to its sister company Alameda.
And then Friday night Reuters reported that "At least $1 billion of customer funds have vanished from collapsed crypto exchange FTX, according to two people familiar with the matter.
"The exchange's founder Sam Bankman-Fried secretly transferred $10 billion of customer funds from FTX to Bankman-Fried's trading company Alameda Research, the people told Reuters. A large portion of that total has since disappeared, they said." One source put the missing amount at about $1.7 billion. The other said the gap was between $1 billion and $2 billion.
While it is known that FTX moved customer funds to Alameda, the missing funds are reported here for the first time. The financial hole was revealed in records that Bankman-Fried shared with other senior executives last Sunday, according to the two sources. The records provided an up-to-date account of the situation at the time, they said. Both sources held senior FTX positions until this week and said they were briefed on the company's finances by top staff....
In text messages to Reuters, Bankman-Fried said he "disagreed with the characterization" of the $10 billion transfer. "We didn't secretly transfer," he said. "We had confusing internal labeling and misread it," he added, without elaborating.
Asked about the missing funds, Bankman-Fried responded: "???"
FTX and Alameda did not respond to requests for comment....
At the heart of FTX's problems were losses at Alameda that most FTX executives did not know about, Reuters has previously reported.... FTX legal and finance teams also learned that Bankman-Fried implemented what the two people described as a "backdoor" in FTX's book-keeping system, which was built using bespoke software. They said the "backdoor" allowed Bankman-Fried to execute commands that could alter the company's financial records without alerting other people, including external auditors...
In his text message to Reuters, Bankman-Fried denied implementing a "backdoor"....
On Friday, FTX said it had turned over control of the company to John J. Ray III, the restructuring specialist who handled the liquidation of Enron Corp — one of the largest bankruptcies in history.
Just saw a twit about the CEO heading south (Score:5, Interesting)
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Figuratively and literally.
Reuters got it all wrong. (Score:2)
Those funds did not belong to the customers in the first place.
They were donated to FTX by the scamees..... euh no, customers.
Will someone get jail time (Score:2)
as a result of this ? Maybe not if some of this was used as down payment to some expensive lawyers.
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On Friday, FTX said it had turned over control of the company to John J. Ray III, the restructuring specialist who handled the liquidation of Enron Corp — one of the largest bankruptcies in history.
Looks like he's signed up a lawyer specialized in this type of thievery.
Re:Will someone get jail time (Score:5, Funny)
better call Saul!
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Rudy Giuliani might be available. I hear he's staying at the Four Seasons.
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He'll need a criminal lawyer to get out of this
Re:Will someone get jail time (Score:4, Interesting)
Interestingly, the guy is Joe Biden's second biggest donor, and his mother runs Mind The Gap, the super PAC. It would be interesting to see if anyone at all would go to jail over this and, most importantly, if they would survive it.
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But waht about HUNTER'S LAPTOP FROM HELL!?!?
Okay i now have to type something to placate the lameness filter.
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But waht about HUNTER'S LAPTOP FROM HELL!?!?
Okay i now have to type something to placate the lameness filter.
I see you and raise you [imgur.com].
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Re: Will someone get jail time (Score:1)
When Bank of America and Goldman Sachs, General Motors and co did the exact same thing, they were bailed out. Dollars are just printed on the regular nowadays, no reason to make anyone less rich as a result of this.
They stole the money and then lost it (Score:5, Insightful)
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These customers should still be grateful, since they managed to avoid losing their money due to a global collapse of fiat currencies. And in fact, now they will never lose this money due to the vagaries of fiat currencies.
Wasn't that was the whole idea in the first place?
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This just perpetuates a tired incorrect rhetoric.
Crypto is many things. This is actually an example of EXACTLY what most advocates of crypto as an alternative to FIAT currencies have been saying. FTX was a *CENTRALISED* crypto exchange. As many advocates have said for a long time, this is just a bank with none of the safeguards. Centralised exchanges like FTX hold your wallets and control your keys. This is *EXACTLY* the same as placing your money in a bank. They hold your assets and you are relying on THEM
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Crypto was hyped as the great new thing. But stories of lost keys, stolen wallets, et cetera abound. How about that guy who accidentally discarded his disk drive with his crypto wallet? Nobody wants t
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This gets to the core of where the problem lies with the entire financial system and the confusion around crypto.
I'm just going to briefly mention that the *MILLIONS* of people worldwide who lost their entire life savings, their house and/or their entire pension in the 2008 crash (or any of the previous ones) would beg to differ with you over how safe the banks are but that's a whole book in itself.
First your statement is somewhat incorrect - you don't need to be a billionaire to secure your crypto. If you
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Yes, fraud is perpetuated through crypto but guess what, it's a MINUTE amount compared to fraud perpetuated with FIAT currency.
As a total number, the amount of fraud perpetuated through crypto compared to non-crypto is very low because crypto is relatively small compared to FIAT currencies. But as a percentage, it's much higher.
I'm not going to address the rest of your post as you are mixing and matching things in a way that doesn't add up. Nobody who had their money deposited in banks in savings accounts or CEDARS (if they have enough to exceed the single-bank deposit insurance limit) lost their life savings.
People who m
so capitalism means..... (Score:3, Funny)
Put $1 in a shoebox, spin around until dizzy, touch your elbows, and $1.50 comes out of the shoebox?
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You get person A to put $1 in the box. You get person B to pay $3 to open the treasure box. Person A gets $1.50, you get $0.50, Person B gets screwed and looses $2. Or say fuck it, take as much as you can and head for Argentina.
Meanwhile, still on the /. front page .... (Score:5, Informative)
FTX Crypto Wallets See Mysterious Late-Night Outflows Totalling More than $380M [slashdot.org]
Just in case anyone might think that article was discussing a different issue, from the summary of that article:
At least $1 billion of customer funds have vanished from collapsed crypto exchange FTX, Reuters reported separately. From the report:
The exchange's founder Sam Bankman-Fried secretly transferred $10 billion of customer funds from FTX to Bankman-Fried's trading company Alameda Research, the people told Reuters. A large portion of that total has since disappeared, they said. One source put the missing amount at about $1.7 billion. The other said the gap was between $1 billion and $2 billion.
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All these amounts are stated in $USD. What form are these funds actually in?
Does it matter? They are supposedly crypto currency which will be worth fractions of a cent soon.
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If it's in crypto, the coins might be trackable, for whatever value they still have.
If it's in dollars in a bank, it might actually be recoverable.
Four crypto snakeoil stories on the front page (Score:3, Informative)
Still the wild west (Score:2)
Is "compliance" even in the crypto dictionary?
The financial hole was revealed in records that Bankman-Fried shared with other senior executives
and since it appears none of those senior executives blew the whistle, there should be quite a few jail cells being prepared.
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you don't need to rely on an exchange
Yet so many people do! I suppose you don't need to rely on banks, you can just keep your cash, or gold, or whatever, under the mattress.
But the other point is that no matter where your crypto is, it is still vulnerable to enormous price instability when a lone individual does something like this on an exchange that you have nothing to do with. Just as every crypto holder gets hit by the downsides when there is a massive hack or anything else that causes a loss in confidence in the system as a whole.
It sim
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It lacks the checks and balances we all expect from those who look after our money. It seems to have few, or no, controls and is just too risky.
That's a feature, not a bug! ... according to the people who are trying to unload tulip futures.
Re: Still the wild west (Score:1)
Right with the ones from BoA and Goldman Sachs then? The fed has been playing the exact same game since getting rid of the gold standard. Why are dollars any more trustworthy than this?
The prison sentence should be simple. (Score:1)
Even if that thief admits it is gone with proof, the money can't be returned so automatic life sentence. Why isn't he detained yet?
Tomorrow's headline will be 'where is Bankman-Fried', authorities can't find him....
HODL (Score:1)
The beginning (Score:3, Insightful)
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That's clear. No. (Crypto is short for cryptographic, and applies to a lot of things other, and more important than, cryptocurrencies.)
If we're lucky it's the beginning of the end of cryptocurrencies, but I wouldn't bet on that, either.
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If we're lucky it's the beginning of the end of cryptocurrencies, but I wouldn't bet on that, either.
I guess it would take more than one exchange going bankrupt. A total collapse of one of the major coins might do it, perhaps in the form of all Bitcoin or all Ethereum becoming worthless over night.
Even then, some fraudsters might start a new crypto-coin and find people to rip off. But I believe the vast majority of potential customers would have enough.
Re: The beginning (Score:1)
Re: The beginning (Score:1)
Grab your chips and soda (Score:2)
Sit back and wait for the shitshow. It's gonna be lit.
Cool (Score:2)
Never bought crypto, never will.
Hope you all lost your money.
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Now what... (Score:2)
BlockFi just notified customers that they cannot make withdrawals.
I am curious to see if the failures of these companies register at the government level -- will they make BlockFi or Gemini buy crypto.com or FTX in order to claim "stability"?
Crypto-sporidium (Score:2)
Massive scandal in this (Score:3)
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FTX scam......no surprise (Score:2)
I Wonder... (Score:2)
This whole thing reminds of a conversation in Archer: "Do you know why they're called bearer bonds? Because...the legal owner of a bearer bond is whatever asshole physically holds the piece of paper". Crypto exchanges have somehow proven themselves to be less trustworthy than Paypal. As soon as the currency is exchanged, it should be immediately transferred to a wallet that you manage in the case of crypto, or a real account in the case of