Crypto mystery: What has happened to FTX’s missing billions?

Out of control

The comments shed little light on the question of where client funds ended up as Bankman-Fried stuck to a hard-to-parse account of how Alameda ran up a massive margin position on the exchange.

The restructuring expert who took over the firm in bankruptcy, John J. Ray III, has painted a picture of FTX as a mismanaged, largely out-of-control company bathed in conflicts and lacking basic accounting practices, calling it the worst failure of corporate controls he’d ever seen.

Bankman-Fried faces a complex web of lawsuits and regulatory probes into alleged wrongdoing. Some observers speculate his public comments could be used against him in litigation.

The spotlight has also fallen on an apparent company culture of working and playing hard. Bankman-Fried said there were no wild parties and that he saw no illegal drug use. He added that he’s been prescribed drugs over time to help with focus and concentration.

Crypto contagion

The digital-asset sector is braced for widening contagion from FTX, which once boasted a $US32 billion valuation before sliding into bankruptcy. It owes its 50 biggest unsecured creditors a total of $US3.1 billion and there may be more than a million creditors globally.

A crypto lender, BlockFi, filed for bankruptcy after being buffeted by the wipeout. Embattled brokerage Genesis is striving to avoid the same fate.

BlackRock chief executive Larry Fink said earlier at the DealBook summit that most crypto companies will probably fold in the wake of FTX’s collapse. The world’s biggest asset manager was among firms stung by the chaotic unravelling of Bankman-Fried’s tangled web of 100-plus FTX-related entities.

Bankman-Fried has provided convoluted accounts on social media and in interviews with other news outlets about what led to FTX’s woes. Advisers overseeing the ruins of his business have slammed non-existent oversight.

Potential hack

As if such travails weren’t enough, the exact breakup of a $US662 million outflow from FTX as it tumbled into bankruptcy remains another enigma. Bankman-Fried said in the summit interview that there was improper access to FTX after its spiral.

Treasury Secretary Janet Yellen, another speaker at the summit in New York, called the FTX debacle “the Lehman moment within crypto,” referring to the collapse of investment-banking giant Lehman Brothers in 2008.

Crypto markets have stabilised somewhat after lurching lower in November as the turmoil around FTX thickened. Even so, a gauge of the top 100 tokens is down more than 60 per cent this year, hit by tightening monetary policy and a series of crypto blowups of which FTX is the most spectacular.

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Bankman-Fried’s fortune at one point reached $US26 billion, and just weeks ago he was described as the John Pierpont Morgan of digital assets, willing to throw around his wealth to bail out the industry. He said during the interview that he’s down to one credit card and $US100,000 in the bank.

Pressed on whether he had been straight about FTX, Bankman-Fried said: “I was as truthful as I’m knowledgeable to be.”

Bloomberg

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