FTX told customers to deposit money by wiring funds to Alameda's bank accounts, report says
- FTX told some customers to wire money to bank accounts held by Alameda Research in order to make deposits, Bloomberg said.
- The practice came about because most banks were hesitant to do business with crypto firms like FTX.
Sam Bankman-Fried's FTX told some customers to deposit money by wiring funds to bank accounts held by Alameda Research, the trading firm also founded by Bankman-Fried, according to Bloomberg.
The practice came about because most banks were hesitant to do business with crypto firms like FTX, and some wire transfers were as recent at this year. But Alameda held some accounts at Silvergate Capital, a fintech and crypto bank, sources told Bloomberg.
Silvergate provides "on-ramp" services, meaning it helps customers transfer dollars and euros into crypto exchanges. Silvergate has said that as of September 30, it had $11.9 billion in deposits from digital-asset customers, and those from FTX represented less than 10% of that.
Silvergate didn't immediately respond to requests for comment. In a statement to Bloomberg, a spokesperson said it's a federally regulated, state-chartered bank "whose solutions are built on a deep-rooted commitment and proprietary approach to regulatory compliance." The bank added that it is policy for it to avoid commenting on customers or customer activities.
Bankman-Fried, who stepped down as CEO November 11 as FTX Group filed for Chapter 11 bankruptcy, previously acknowledged to Vox that customers could get money to FTX by wiring it to Alameda's bank account, saying it "looks like people wired $8 billion to Alameda" over the years.
The arrangement with Alameda further highlights the commingling of assets that took place in Bankman-Fried's companies, and raises additional concerns about how the companies used customer funds.
Over the last several weeks, details about Bankman-Fried's haphazard management and lack of diligence in record-keeping have emerged. John Ray III, FTX Group's new chief executive who previously cleaned up troubled energy firm Enron, said in a court filing that he'd never seen "such a complete failure" of corporate controls, adding that Bankman-Fried's empire lacked trustworthy data and financial safeguards.
Meanwhile, The Wall Street Journal reported FTX lent more than half of its $16 billion in customer funds to Alameda, while a Reuters report said Bankman-Fried transferred at least $4 billion from FTX to Alameda earlier this year without notifying anyone.