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- A senior FTX exec raised concerns about Alameda Research’s use of customer funds as early as 2020.
- That’s according to a report from the New York Times, which cites government documents.
- CEO Sam Bankman-Fried dismissed the concerns saying the funds were backed by FTX’s cryptocurrency, FTT.
A senior FTX executive raised concerns to Sam Bankman-Fried about trading firm Alameda misusing funds from FTX customers as early as 2020, The New York Times reported, citing documents shared between US and Bahamian governments.
According to the Times’ report, the unnamed executive, who is described as being a “high-level software developer” at the firm, met with Bankman-Fried after looking through a company database and finding that Alameda had a negative balance in its FTX account of “approximately hundreds of millions of dollars.”
This information, the Times reports the governments documents as saying, led the executive to believe Alameda was “inappropriately using FTX.com customer funds,” and to take that information to Bankman-Fried.
Bankman-Fried dismissed the concerns, the Times report says, because the money was backed by FTX’s cryptocurrency, FTT. He also dismissed worries that the potential irregularity may be picked up by auditors, the documents reportedly say.
Insider previously reported how the Securities and Exchange Commission’s complaint against SBF revealed that Alameda’s FTX account had special treatment. It was the only one allowed to have a negative balance thanks to special code, and had a $65 billion ‘secret’ line of credit to draw on customer’s funds.
Court documents seen by Insider show how $256.3 million of Bahamian real estate was registered in FTX’s name, and the company spent $6.9 million on “meals and entertainment” in nine months.
FTX collapsed in November 2022.
Filings from the CFTC show that Bankman-Fried considered shutting down the trading firm in September 2022, saying circulating a document titled: “We came, we saw, we researched.”
“I think it might be time for Alameda Research to shut down. Honestly, it was probably time to do that a year ago,” the document read.
Around the same time as the document was circulated, another unnamed executive spoke to Bankman-Fried to express concerns about how much Alameda had borrowed from FTX, the Times reported, citing the documents, adding that he acknowledged that he was also concerned, to the extent that it made him “5-10% less productive.”
SBF was well known for sleeping for just four hours a night on a beanbag chair next to his desk – and for taking work calls at 3:00 a.m.
Bankman-Fried and his attorney did not immediately respond to Insider’s request for comment, sent outside normal working hours.
He faces eight criminal charges for his role in FTX’s collapse, including fraud and conspiracy, and faces a maximum prison term of 115 years if convicted, though such a long sentence is highly unlikely.