apple.news/AB8pc2czASNSaS2FK8hCzvQ
Excerpt:
The tab was $7.7 billion, a Wall Street Journal analysis of company disclosures and legal filings shows. FTX founder Sam Bankman-Fried and senior staff spent customer funds on technology investments, luxury real estate and political contributions, among other things.
The missing funds are at the heart of Bankman-Fried’s criminal trial, which kicked off in Manhattan federal court this week. Top lieutenants of FTX and its sister company, Alameda Research, have pleaded guilty to fraud and looting customer funds.
The firm spent over $2 billion on payments to top brass including Bankman-Fried. Usually, execs would pay themselves through personal loans that they never repaid.
MARKETS MAIN
Here’s How FTX Executives Secretly Spent $8 Billion in Customer Money
Billions went to personal loans, luxury real estate and donations
The crypto exchange FTX went bust last year after executives spent billions in customer funds they had promised to safeguard.
The tab was $7.7 billion, a Wall Street Journal analysis of company disclosures and legal filings shows. FTX founder Sam Bankman-Fried and senior staff spent customer funds on technology investments, luxury real estate and political contributions, among other things.
The missing funds are at the heart of Bankman-Fried’s criminal trial, which kicked off in Manhattan federal court this week. Top lieutenants of FTX and its sister company, Alameda Research, have pleaded guilty to fraud and looting customer funds.
Customers say they had $16 billion in funds on the exchange before its collapse. So far, FTX’s new management has found $7.3 billion that could go toward paying them back.
FTX’s customers likely won’t be fully repaid. The Wall Street Journal’s analysis shows insiders spent $7.7 billion using commingled customer funds.
So where did all the money go?
FTX spent big on investments in technology startups. For example, FTX paid $1.15 billion to acquire around 20% of Genesis Digital Assets, a crypto miner that ran a number of mining facilities in Kazakhstan.
The firm spent $243 million on real estate in the Bahamas…
…and around $86 million in political donations and charitable contributions that could be clawed back.
The firm spent over $2 billion on payments to top brass including Bankman-Fried. Usually, execs would pay themselves through personal loans that they never repaid.
There’s still around $1 billion of missing customer money that isn’t accounted for, and which could have been used by FTX to fund bad trades at its affiliate hedge fund, Alameda.
Venture capital investments: over $5 billion
Much of the $5 billion-plus that FTX invested in tech companies was financed through misappropriated customer funds, according to lawsuits filed against senior executives.
M any deals haven’t paid off. FTX bought the trading platform Embed for $236.8 million in September 2022, planning to use it to roll out stock trading for FTX customers, legal filings show. No buyers are willing to pay more than $1 million for the company now.
FTX has sued Embed’s former shareholders, including Y Combinator and Bain Capital, to get the money back.
Bankman-Fried invested $700 million of FTX money in the venture-capital firm K5 Global in 2022. K5’s co-founders, Bryan Baum and the former Hollywood agent Michael Kives, each received $125 million payments as part of the deal, according to court filings.
FTX’s new managers have been trying to claw back those funds and have said the investments were “vastly overvalued.”
Direct payments to company insiders: $2.2 billion
FTX insiders paid themselves over $2 billion with suspected customer funds. Executives also made personal investments with customers’ money.
B ankman-Fried and FTX’s chief technology officer, Gary Wang, both took out personal loans through the hedge fund Alameda to acquire almost 8% of the trading platform Robinhood Markets in May 2022. They bought $546 million in Robinhood shares, according to lawsuits filed against Bankman-Fried.
The FTX executive Nishad Singh used a personal loan from Alameda to buy himself 44 million shares of FTX in November 2021, worth $477 million at the time.
In addition, Bankman-Fried took around $10 million from an Alameda account and directed it to an account owned by his father, Joseph Bankman. FTX lawyers said in court papers that Bankman has “been using this gift to finance Bankman-Fried’s criminal defense.”
Bankman-Fried, Wang and Singh haven’t repaid a penny of those loans and never intended to do so, FTX’s new management said.
Bahamas real estate: $243 million
FTX’s founders moved their headquarters from Hong Kong to the Bahamas for the Caribbean jurisdiction’s laws favorable to crypto. The company used customer funds to buy units at a luxe Bahamas resort called Albany, according to court documents.
One $30 million purchase was a five-bedroom property known as the Orchid Penthouse, where Bankman-Fried lived with some other employees before FTX’s collapse. It was also where he was taken into custody before his extradition to the U.S.
Donations: $80 million to politicians and charities
FTX customer money helped Bankman-Fried rise from relative obscurity to one of the biggest donors in U.S. politics.
B ankman-Fried donated over $28 million of his money to a political-action committee called Protect Our Future. The PAC gave the crypto entrepreneur Carrick Flynn $10 million. He lost his U.S. House Democratic primary race in Oregon in May 2022.
As a company, Alameda contributed to Democratic politicians including Sen. Kirsten Gillibrand of New York and Rep. Jim Costa of California. Both have said they would return or donate any funds contributed by Bankman-Fried. The FTX founder also made a number of his donations on a personal basis, some of which were made with customer funds, according to federal prosecutors.
Several charities benefited from FTX’s donations.
Alameda gave a $500,000 grant to the Good Food Institute, a nonprofit think tank for meat alternatives. The company said it had spent the FTX funds it received.
Bankman-Fried’s brother, Gabe, received $35 million from FTX accounts for his charity Guarding Against Pandemics.
FTX estimates that there is still around $80 million of charitable and political donations that the company could recover to repay customers.
“These contributions were disguised to look like they were coming from the wealthy co-conspirators, when in fact the contributions were funded by Alameda with stolen customer money,” said Damian Williams, the U.S. attorney for the Southern District of New York, last year.
Write to Alexander Saeedy at alexander.saeedy@wsj.com and Danny Dougherty at danny.dougherty@wsj.com
The Sam Bankman-Fried Trial
Coverage of the crypto exchange’s collapse and the trial of the FTX founder
What’s Happening at the Bankman-Fried Trial
Can Someone Lose Track of Billions of Dollars?
The SBF Trial: How We Got Here
Meet the Star Witness at the SBF Trial
Crypto Could Be a Mystery to Jurors in SBF Case
It’s Their Job to Put Sam Bankman-Fried in Prison
Law, Power, and Justice 
Leave a comment