Former FTX CEO Sam Bankman-Fried has received a $1 billion personal loan from one of the four silo companies heavily implicated in the collapse of the FTX cryptocurrency exchange.

An official announcement in the ongoing Chapter 11 bankruptcy filings of FTX’s new CEO, John Ray III, revealed further misappropriation of funds by Bankman Fried.

According to the filing, Alameda Research loaned $1 billion directly to Bankman-Fried, while FTX director of engineering Nishad Singh also received a $543 million loan from the company.

Ray III, who was responsible for picking up the pieces after the infamous collapse of Enron, was scathing in his initial filing with the United States Bankruptcy Court for the District of Delaware.

He went so far as to describe the situation as the worst he had seen in his career, highlighting the “complete failure of company controls” and the absence of trustworthy financial information:

“From the compromised integrity of systems and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, inexperienced and vulnerable individuals, this situation is unprecedented.”
The Chapter 11 filing will examine the implementation of accounting and auditing controls, cybersecurity, human resources, data protection, and other systems for four groups of companies associated with the FTX corporation organization.

The FTX group consists of four silos
Ray III identifies four “silos”, which include the collection of different companies that make up the FTX Group. The WRS silo includes subsidiaries of West Realm Shires Inc. , which includes FTX US, LedgerX, FTX US Derivatives, FTX US Capital Markets and Embed Clearing.

Alameda Research is a standalone silo on record with its affiliates, while Clifton Bay Investments LLC and Ltd and Island Bay Ventures Inc. and Debtor FTX Ventures Ltd within the “Ventures” silo. The final “Dotcom” silo includes FTX Trading Ltd and the exchanges that do business under the umbrella.

According to the Ray III filing, all of the silos were controlled by Bankman-Fried, while the small equity stakes were owned by former CTO of FTX Zixiao “Gary” Wang and Singh. The silos of WRS and Dotcom had third-party investors that include a range of mutual funds, endowments, sovereign wealth funds, and families affected by the FTX crash.

The file contains other indictments regarding the inner workings of the Bankman Fried empire. The broader FTX group did not maintain “central control” of its cash liquidity, failed to maintain accurate bank account statements and paid insufficient attention to the creditworthiness of banking partners.

Ray III also notes that the WRS silo was the only arm that performed a reliable audit with a noteworthy accounting firm. He expresses concern about the audited financial statements of Dotcom Silos, while failing to find any audited financial statements for Alameda Silos and Ventures.

Money disbursement has also been largely disrupted, according to the filing:

“For example, FTX Group employees sent payment requests through an online ‘chat’ platform where a disparate group of moderators approved payments by responding with custom emojis.”
Ray III also indicates that corporate funds were used to purchase homes and personal items for employees and advisors, with no documentation of transactions including loans.

Cryptocurrency custody is in shambles
Custody of crypto assets has also been in disarray, according to a Chapter 11 filing, with insufficient records or security controls in place for FTX Group’s digital assets.

Bankman-Fried and Wang control access to the cryptocurrency holdings of key companies within the group. Ray III identifies “unacceptable practices” that included the use of an unsecured mass email account to access the private secret keys and highly sensitive data of a global corporate network.

The group also failed to perform daily settlement of cryptocurrency holdings and used software to hide the misuse of customer funds. This also allowed Alameda to be discreetly exempted from certain aspects of’s auto-liquidation protocol.

Perhaps most telling is the fact that the debtors who executed the bankruptcy proceedings secured only a “small portion of the digital assets” they hoped to recover. Cold wallets containing $740 million in cryptocurrency have been obtained, but it is not clear which silo the funds belong to.

Source: CoinTelegraph