During the trial of Sam Bankman-Fried, an astute forensic accountant made efforts to trace the whereabouts of the missing $9 billion in FTX client funds on Wednesday. When queried about potential misuse of client funds by FTX, the accountant emphatically responded, “Absolutely.”Thank you for reading this post, don't forget to subscribe!
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Per CoinDesk’s coverage on Thursday, Peter Easton, an esteemed accounting professor at the University of Notre Dame and enlisted by the prosecution, revealed that user deposits had been funneled into various businesses, real estate deals, political contributions, and charitable donations. Gone.
Significantly, Easton highlights certain transactions involving SBF that necessitated the use of client funds. In a pivotal interview with ABC’s George Stephanopoulos in November 2022, the founder of FTX vehemently denied being aware of “any impropriety with regards to the use of client funds.”
Client funds reached their peak on FTX in June 2022, with Alameda Research supposedly holding $11.3 billion, yet their actual bank balance only tallied up to $2.3 billion. Easton found evidence of client funds dwindling as early as March 2021.
Easton affirms that the client funds were invested in Anthony Scaramucci’s SkyBridge Capital and Lily Zhang’s Modulo Capital. However, in March 2023, Modulo Capital returned $404 million to FTX, citing an erroneous transfer of funds. Furthermore, FTX clients unknowingly poured $550 million into Genesis Digital Assets, a crypto mining company that should not be confused with the other Genesis making headlines on the same day.
Aditya Baradwaj, a former employee of Alameda Research, assembled a comprehensive list chronicling SBF’s political donations. The disclosed total sum amounted to $133 million. The list encompasses a $10 million contribution to SBF’s father, Joseph Bankman, millions of dollars allocated to Republican and Democratic super PACs, as well as donations to various charitable organizations.
Earlier in the trial, Nishad Singh, FTX’s engineering head, expressed feeling “betrayed” by SBF. Singh maintains that he is largely culpable for the wrongdoing, but his testimony bolsters the prosecution’s argument that SBF orchestrated FTX’s fraudulent activities. Singh discovered the fraud two months before it came to light, yet he chose to remain in a bid to salvage the sinking ship.
“How could I live with myself if my departure led to a preventable fallout?” Singh remarked in court.
During his final months at the company, the engineering head raised concerns about FTX’s financial situation. When Singh inquired about the extent of the shortfall, SBF dismissed it as “the wrong question” and redirected the focus to the question of “How can we deliver?”