ICYMI: What happened with FTX this week

A former lawyer for FTX was accused of being Sam Bankman-Fried’s ‘fixer’

article-image

Artwork by Crystal Le

share

As FTX’s bankruptcy progresses, fresh information has continued to trickle out around the crypto exchange’s balance sheet and the behavior of executives leading up to its collapse.  

The exchange collapsed late last year, a period marked by a slew of bankruptcies from Celsius to Three Arrows Capital. 

The failure of one of the world’s largest exchanges went from bad to worse as then-CEO Sam Bankman-Fried attempted to come up with liquidity as the SEC and CFTC investigated.

John J. Ray III, known for overseeing Enron’s bankruptcy,  was tapped as CEO following FTX filing for bankruptcy. 

This week, Ray released a second report on the state of FTX, and a claims portal could open as soon as July 3. A judge denied Bankman-Fried’s motion to dismiss charges. 

Read more: What an FTX Reboot Could Look Like — And Is It Even Viable?

There are also reports that FTX has explored a relaunch. Here’s what we know. 

Investigation has been ‘extraordinarily challenging’

The newest report uncovered $7 billion of previously unaccounted assets in an arduous process. 

“From the inception of the FTX.com exchange, the FTX Group commingled customer deposits and corporate funds, and misused them with abandon,” Ray and his team wrote in the June 26 filing. 

Despite uncovering $7 billion, debtors are still $1.7 billion short of nearly $9 billion needed to repay customers. The misuse and commingling of the funds has “complicated” efforts.

FTX created North Dimension to oversee customer deposits. A filing claimed they totaled at least $2 billion by late December 2921 — including approximately $1 billion in customer deposits. 

Executives at FTX made over $100 million in political donations funded through “loans” from FTX. At least $12.7 million donated from an executive, Ray found, came from North Dimension accounts commingled with customer deposits.

Related: Yes, Prosecutors Will Claw Back FTX Money From US Lawmakers

Debtors target ex-attorney for FTX

A June 28 complaint alleged Daniel Friedberg, former chief regulatory officer, committed fraud at FTX and accused him of being a “fixer” for Bankman-Fried. 

The complaint was filed after an unnamed senior attorney was accused of firing another attorney after they noticed “a lack of internal documentation and recordkeeping.” The unnamed attorney in Ray’s report was also accused of false documentation.

There is no direct indication in Ray’s report that the unnamed attorney is Friedberg.

The complaint against Friedberg alleges he “knowingly” failed to ensure proper risk mitigation or compliance. 

“He not only settled the complaints for inflated amounts, in some instances he arranged for the FTX Group to retain the whistleblowers’ attorneys post-settlement, thereby buying or otherwise ensuring their silence,” the filing says.

While at FTX, Friedberg’s resume grew, working his way up into increasingly senior compliance positions that encompassed both FTX and Alameda roles.  

Bankman-Fried was unable to set up a proper bank account for FTX in 2020, but the complaint alleges Friedberg “solved this problem.”

Friedberg also allegedly provided an auditor with a “false, backdated Payment Agent Agreement,” which led to the auditor creating a financial statement for an FTX unit that was provided to potential investors. 

Judge denied Bankman-Fried’s motion to dismiss 

Bankman-Fried’s bid to get certain charges dropped from the US government’s case against him was denied by a judge on Tuesday. He had asked Judge Lewis Kaplan to drop 11 of 13 counts.

Bankman-Fried aimed to dismiss the post-extradition charges and a charge of campaign finance violations because “they allegedly were charged in a manner” that violated the Extradition Treaty between the US and the Bahamas. 

Read more: Drowning in Sam Bankman-Fried: A Survival Guide 

Kaplan said Bankman-Fried’s claims presented “arguments [that were] either moot or without merit.”

Bankman-Fried’s trial is expected to take place in early October. He’s pleaded not guilty.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research Report Templates (6).png

Research

In recent months, a number of highly accretive developments were implemented across the protocol to improve fee capture, expand product functionality, and ultimately drive value accrual to the RUNE token, with more upgrades on the immediate horizon. These developments include hiking the minimum swap fee parameter to increase revenue, adding a Burn System Income Lever to reduce the RUNE supply, the addition of COSM-WASM smart contracting and IBC to enable an application layer, new chain integrations, and more.

article-image

Former IRS agent and Binance executive Tigran Gambaryan will remain imprisoned in Nigeria’s Kuje prison

article-image

When Permissionless III wraps on Friday, there will be 26 days left until the 2024 presidential election

article-image

Plus, an update from the ground in Salt Lake City at Permissionless III

article-image

The US regulator accused the crypto market-making firm of acting as an unregistered dealer

article-image

Customers can pay merchants in USDC or USDP on Ethereum, Solana, and Polygon, while US-based merchants are paid in dollars