FTX Founder Sam Bankman-Fried Funneled Millions From Now Bankrupt Firm To Fund Purchase Of Luxury Real Estate In Bahamas: Court Filing

FTX founder Sam Bankman-Fried treated FTX like a “personal fiefdom,” as he and a handful of close associates funneled millions from the now-defunct crypto exchange to fund purchase of Bahamas luxury real estate, lawyer for the company have said in a court filing.

James Bromley, the lawyer representing FTX during its bankruptcy hearings, blamed Bankman-Fried for running the company to ground. Bromley accused Bankman-Fried in court of running FTX like a “personal fiefdom” and ultimately demonstrating that “the emperor had no clothes.”

“This company was run by inexperienced, unsophisticated and potentially personally compromised individuals…It is one of the most abrupt and difficult company collapses in the history of corporate America,” Bromley told the judge.

“Unfortunately, the FTX debtors were not particularly well run, and that is an understatement…We have probably witnessed one of the most abrupt and difficult corporate collapses in the history of corporate America,” Bromley added.

Under Bankman-Fried’s watch, “substantial amounts of money were spent on things not related to the business,” Bromley stated.

Attorneys representing the company said that $300 million was splurged to buy mansions and beachfront vacation properties for Bankman-Fried and other senior FTX executives.

Reuters reported that Bankman-Fried’s parents, Stanford law professors Joseph Bankman and Barbara Fried, were among those in FTX’s close circle who acquired luxury property in the Bahamas.

FTX Collapse

FTX was the second-largest centralised crypto exchange in the world, until a few days ago. With marquee investors like Sequoia, Softbank, and Temasek, FTX had quickly become the second-largest exchange in the world with daily volumes touching $ 2 billion during its peak.

On Nov 11, the company filed for bankruptcy as it is unable to meet its financial obligations.

Bankman-Fried began his entrepreneurial journey by founding Alameda Research, a proprietary trading firm that traded in crypto-currency. Later, Bankman-Fried founded FTX to move from being just a trader to becoming the market itself. FTX went ahead and created its own token, FTT. Anyone who owned FTT would receive benefits such as lower trading fees.

After Alameda Research faced losses in its business, funds were transferred from FTX to Alameda – and these funds included customer fiat money deposits and FTT tokens.

As a result, nearly a third of Alameda’s assets worth $ 14.6 billion, were held in the form of FTT tokens. Alameda’s balance sheet was leaked on Coinbase, which caused concern amongst users and investors, given the group’s precarious financial situation.

Alameda had used its assets to borrow for its business operations and had around $7.4 billion in debt according to its balance sheet. It is speculated that its FTT tokens were collateral for the loans it took. And therefore, a collapse in the value of the collateral (FTT tokens) would have sent the entire group into a tailspin. Hence, the value of FTT tokens gained immense importance for the FTX group.