FTX Misused Customer Funds Since The Beginning, New CEO Claims
John J. Ray III – CEO and Chief Restructuring Officer of FTX and its affiliated debtors – maintained that the once-prominent cryptocurrency exchange commingled customer deposits from its get-go.
He said the entity owed clients approximately $8.7 billion when it filed for bankruptcy protection in November last year. The new management, though, has made “substantial progress,” recovering around $7 billion in liquid assets so far.
Shady Since Day One
The current management team of FTX, led by John Ray, suggested in a recent report that the cryptocurrency exchange conducted a series of misdeeds against its clients over the years.
For one, it commingled users’ funds, whereas employees lied to banking institutions about employing Alameda Research as a trading firm for customers’ transactions. According to the report, some banks doubted the latter’s activity and began rejecting proceedings in 2020. CEO Ray claimed that misusing clients was a practice FTX adopted since its inception:
“The image that the FTX Group sought to portray as the customer-focused leader of the digital age was a mirage. From the inception of the FTX.com exchange, the FTX Group commingled customer deposits and corporate funds and misused them with abandon at the direction and by the design of previous senior executives.”
He also revealed that the former crypto behemoth owed customers $8.7 billion in November last year. Nonetheless, the ongoing management team has managed to significantly shrink that debt, recovering $7 billion in liquid assets so far.
“We will continue to report our analysis and findings as our work progresses and remain committed to recovering as much value as possible for creditors,” Ray asserted.
Subsequently, the team alleged that FTX established a new organization called North Dimension Inc., described as a cryptocurrency trading company with 2,000 counterparties and an average monthly trading volume of $10 million. In reality, though, it was a shell firm that funded withdrawals for the parent company.
Is FTX 2.0 on its Way?
The collapse of FTX last year, considered one of the darkest events in crypto’s history, shook the industry to its core and undermined its legitimacy. Multiple investors parted with substantial sums, whereas others lost faith in centralized exchanges.
Despite the bad experience from the past, CEO Ray revealed that reviving FTX is an existing option. He first hinted about such plans at the beginning of the year. The idea received support from some prominent finance leaders, such as Tribe Capital.
A court filing from last month doubled down on the rumors. Ray explained that the reorganization strategy would include a bidding process.
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