key takeaways
- FTX’s top executives were concerned that Alameda would use FTX client money in 2020, the New York Times revealed.
- Sam Bankman-Fried reportedly dismissed the concerns, saying Alameda’s liabilities were backed by FTT.
- Pressed again on the issue in September 2022, Bankman-Fried said that rising cryptocurrency prices would help rectify the situation.
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Members of Sam Bankman-Fried’s “inner circle,” quite possibly FTX co-founder Gary Wang and FTX head of engineering Nishad Singh, issued multiple warnings to Sam Bankman-Fried about Alameda’s negative balance.
If only the prices went up
FTX executives were well aware of the perilous state of the stock market before it collapsed.
new documents obtained According to the New York Times, two senior FTX executives approached then-CEO Sam Bankman-Fried with concerns about the company’s obligations to Alameda Research on multiple occasions before the stock market crashed.
While the two executives remained unnamed in the documents, they were described as “senior software developers who worked on the FTX code.” So it seems likely that it was FTX co-founder Gary Wang and FTX head of engineering Nishad Singh.
According to the Times, one of the executives approached Bankman-Fried as early as 2020 with concerns about Alameda’s negative balance at FTX: The trading company was already “hundreds of millions of dollars” in the red. The executive realized that the situation could only be possible if Alameda was “inappropriately using the funds of FTX.com clients.” But Bankman-Fried dismissed his concerns, saying it was “okay” because Alameda’s liabilities were backed by FTX’s FTT token.
Later, in September 2022, after Alameda reportedly lost approximately $5 billion, Bankman-Fried discussed the possibility of shutting down the business venture. But Alameda was now roughly $13 billion in debt to FTX, the top executives found. Bankman-Fried, who also acknowledged being concerned, said that “the situation could correct itself if they raise more capital and cryptocurrency prices go up.”
Wang and former Alameda CEO Caroline Ellison have already pleaded guilty to multiple fraud charges. Singh has yet to be charged.
Disclaimer: At the time of writing, the author of this article owned BTC, ETH, and various other crypto assets.
