Disgraced former crypto billionaire Sam Bankman-Fried allegedly hid customer funds from his crypto exchange FTX in what he described as “our Korean friend’s account” to prevent them from being detected.
The Commodities Futures Trading Commission (CFTC) alleged in a complaint that “Bankman-Fried and other FTX executives also took hundreds of millions of dollars in poorly-documented ‘loans’ from [FTX sister hedge fund] Alameda that they used to purchase luxury real estate and property, make political donations, and for other unauthorized uses.”
Bankman-Fried referred to Alameda Research’s account on FTX’s system as “our Korean friend’s account” and “the weird Korean account” to conceal Alameda’s $8 billion in liabilities, according to the CFTC complaint. The account was an Alameda sub-account but did not have an identifier used by the hedge fund’s other sub-accounts, the CFTC claimed.
“With today’s charges we continue to move aggressively to hold all individuals who commit fraud accountable and protect customers from additional harm and losses. In the absence of a comprehensive regulatory framework over digital assets, the CFTC will use all of its existing power and authority to protect all market participants, while ensuring the integrity of commodity markets,” said CFTC Chair Rostin Behman in a press release.
The CFTC released an amended complaint on Dec. 21 charging Bankman-Fried and other FTX and Alameda executives with causing over $8 billion in lost customer deposits, NBC reported.
Former Alameda CEO Caroline Ellison admitted at a Dec. 19 hearing that she agreed with Bankman-Fried not to disclose to investors Alameda’s extensive borrowing from FTX, Reuters reported.
She pleaded guilty to seven counts of fraud and conspiracy related to allegations of misusing customer funds, Reuters reported. She was released on a $250,000 bail after pleading guilty, her guilty plea shows.
Ellison and Bankman-Fried reportedly dated while living in a penthouse with other FTX and Alameda executives in the Bahamas. (RELATED: REPORT: Sam Bankman-Fried Had Deep Ties To Current, Former Regulators, Emails Show)
Former FTX Chief Technology Officer Gary Wang pleaded guilty to similar charges at a separate Dec. 19 hearing. Wang said Bankman-Fried directed him to change FTX’s code to give Alameda special capabilities on the platform, according to Reuters.
The outlet previously reported that former FTX Chief of Engineering Nishad Singh changed FTX’s software so Alameda could borrow customer funds from FTX. Singh has not spoken publicly since he was fired by new FTX CEO John J. Ray III when the company filed for chapter 11 bankruptcy on Nov.11.
Federal prosecutors indicted Bankman-Fried on Dec. 13 on eight counts of fraud and conspiracy, including wire fraud, money laundering and campaign finance violations.
He was released from custody on Dec. 22 on a $250 million bond and ordered to stay in his parents’ Palo Alto, California, house until his next court appearance.