Key points to remember
- Top FTX executives feared that Alameda would use money from FTX customers in 2020, The New York Times has revealed.
- Sam Bankman-Fried reportedly dismissed the concerns, saying Alameda’s debts were guaranteed by FTT.
- Pressed again on the matter in September 2022, Bankman-Fried said that rising crypto prices would help correct the situation.
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Members of Sam Bankman-Fried’s “inner circle” – most likely FTX co-founder Gary Wang and FTX engineering chief Nishad Singh – issued several warnings to Sam Bankman-Fried about the balance. negative from Alameda.
If only prices would go up
FTX executives were well aware of the dangerous state of the stock market before its collapse.
New documents obtained by the New York Times report that two senior FTX executives came to then-CEO Sam Bankman-Fried with concerns about the company’s responsibilities to Alameda Research on several occasions before the collapse of the exchange.
While the two executives remained anonymous in the documents, they were described as “high-level software developers who worked on FTX’s code.” So it seems likely that they were FTX co-founder Gary Wang and FTX engineering manager Nishad Singh.
According to the Times, one of the executives approached Bankman-Fried as early as 2020 with concerns about Alameda’s negative balance on FTX – the trading company was already “hundreds of millions” in the red. The executive realized that the situation could only be possible if Alameda was “inappropriately using FTX.com client funds.” But Bankman-Fried dismissed their concerns, saying “everything was fine” as Alameda’s debts were secured by FTX’s FTT token.
Later, in September 2022, after Alameda reportedly lost around $5 billion, Bankman-Fried discussed the possibility of shutting down the trading company. But Alameda was now about $13 billion in debt to FTX, top executives found. Bankman-Fried, who also admitted to being concerned, said “the situation could correct itself if they raise more equity and cryptocurrency prices increase.”
Wang and former Alameda CEO Caroline Ellison have already pleaded guilty to multiple fraud charges. Singh has not yet been charged.
Disclaimer: At the time of writing this article, the author of this article owned BTC, ETH, and several other crypto assets.
