by One of FTX founder’s closest lieutenants, Sam Bankman-Fried, warned Bahamian regulators of improper operations at the cryptocurrency exchange in the days leading up to its collapse, according to court documents.
The revelation came in documents released as part of the bail hearing of Bankman-Fried, the former FTX chief executive, who was arrested in the Bahamas on Monday and charged Tuesday in the United States on alleged fraud, money laundering and conspiracy.
The filing refers to a warning from Ryan Salame, co-CEO and chairman of FTX Digital Markets, the Bahamas-based portion of Bankman-Fried’s sprawling cryptocurrency empire, about transfers to FTX’s cryptocurrency hedge fund, Alameda Research .
On Nov. 9, Salame told the Bahamian Securities Commission that “client assets that may have been held at FTX Digital have been transferred to Alameda Research to cover financial losses to Alameda,” according to court documents released for the first time from the Financial Times.
In the filing, released as part of Bankman-Fried’s bail hearing, commission director Christina Rolle added that Salame was clear that only three people could make the transfer: Bankman-Fried or his two co-founders, Nishad Singh and Gary Wang. “Such actions can be considered criminal,” concluded Rolle.
The conversation between Rolle and Salame occurred two days before FTX filed for Chapter 11 bankruptcy in the United States, and the same day that Binance, the largest cryptocurrency exchange, walked away from a non-binding offer to save the company after performing a brief due diligence. .
Salame has long been one of Bankman-Fried’s closest associates, just outside the inner circle of FTX’s co-founders. While Bankman-Fried built a reputation as a mega-donor to the Democratic Party, using his newfound influence in Washington DC to push for friendly regulation, Salame was doing the same to Republicans, eventually donating more than $20 million to various causes within the party.
Those donations are now in the spotlight, after criminal charges filed against Bankman-Fried in New York include campaign finance violations and money laundering offenses.
According to Justice Department allegations, client funds deposited with FTX were funneled to Alameda, where they were then used to make political donations both in Bankman-Fried’s name and in the names of other anonymous “conspirators.”
Since the collapse of FTX, Bankman-Fried has publicly said he was largely absent from day-to-day decisions in Alameda and blamed the transfer of funds between the two companies on an oversight of a “hidden and mislabeled internal account” containing $8 billion dollars that FTX’s internal records had failed to mark as actually held in the name of the cryptocurrency hedge fund.
But while Bankman-Fried stepped down as Alameda chief executive in 2021, with his former hedge fund colleague and sometime girlfriend, Caroline Ellison, eventually taking over as sole chief executive the following year, the allegations Civilians filed by the Commodity Futures Trading Commission argue that he “retained direct decision-making authority over all of Alameda’s major business, investment and financial decisions.”
The charges add, “This authority was exercised at least in part through Bankman-Fried’s regular, often daily participation in various in-person and mobile chat communications with senior Alameda personnel.”
