FTX’s Bankman-Fried Siphoned $300M in Investor Money; Used $16.4M to Buy Parents Bahamas Vacation Home

FTX’s Bankman-Fried Siphoned $300M in Investor Money; Used $16.4M to Buy Parents Bahamas Vacation Home 

Edited by: TJVNews.com

As with each passing day, FTX’s Sam Bankman-Fried seems to be getting even more bad ink than he ever imagined.

According to a recent New York Post report, it appears that the disgraced head honcho at the failed cryptocurrency exchange  extracted at least $300 million from  FTX, and questions are emerging as to whether there’s still more alleged looting to be uncovered, and, if so, will any of it ever be paid back.

Bankman-Fried, 30, has cultivated a scruffy, do-gooder image, but bankruptcy documents reveal  that FTX raised some $421 million from investors, only to have him siphon off $300 million and using  some of that money to fund the purchase of a $16.4 million vacation home for his parents in the Bahamas, the Post reported,

The Wall Street Journal reported that at the time, Bankman-Fried told investors the cash-out was a partial reimbursement of money he’d spent to buy out rival Binance’s stake in FTX a few months earlier.

Reuters reported that Sam’s parents, Joseph Bankman and Barbara Fried, both Stanford University law professors, were listed as the owners of a $16.4 million beachfront vacation home in the Old Fort Bay section of the Bahamas. Reuters cited property records from the island nation.

Bankman-Fried’s parents were in the process of returning the home to FTX, according to a spokesperson, the Post reported.

“Since before the bankruptcy proceedings, Mr. Bankman and Ms. Fried have been seeking to return the deed to the company and are awaiting further instructions,” the spokesperson told Reuters.

Last week, FTX’s new CEO John J. Ray said in a court filing that “only a fraction” of FTX’s digital assets have been located and secured, the Post reported. Ray also has accused Bankman-Fried of working with Bahamian regulators to “undermine” the US bankruptcy case and shift assets overseas, the paper added.

The Post reported that in total, the company is said to owe more than $3 billion to investors and creditors, which could number more than 1 million across the companies various entities worldwide, according to a court filing. The question now is whether the customers and creditors can claw back some of their money from the company, which is said to have a cash balance of $1.24 billion.

“It will most likely take time, but eventually, many will recover their funds,” Derek Jacques, a bankruptcy attorney with the Mitten Law Firm near Detroit, told The Post. “This is assuming that no criminal penalties are doled out, which still appears to be a distinct possibility in this case.”

Blue-chip venture capital firms such as Temasek, Tiger Global were among those who extended funds to FTX in October of last year, when the company was valued at some $25 billion, the Post reported.

Those firms and others including Sequoia and the Ontario Teachers’ Pension plan plowed a total of $1.8 billion of capital into FTX. Paradigm, a crypto-focused investment firm, invested $215 million in FTX — the largest of any entity, as was reported by the Post.

On Wednesday, the AP reported that the company tasked with locking down the assets of FTX says it has managed to recover and secure $740 million in assets so far, a fraction of the potentially billions of dollars likely missing from the company’s coffers.

The numbers were disclosed on Wednesday in court filings by FTX, which hired the cryptocurrency custodial company BitGo hours after FTX filed for bankruptcy on November 11, the AP reported.

The biggest worry for many of FTX’s customers is they’ll never see their money again. Bankman-Fried was reportedly looking for upwards of $8 billion from new investors to repair the company’s balance sheet, the AP reported.

Bankman-Fried “proved that there is no such thing as a ‘safe’ conflict of interest,” BitGo CEO Mike Belshe said in an email to the Associated Press.

The $740 million figure is from Nov. 16. The AP reported that BitGo estimates that the amount of recovered and secured assets has likely risen above $1 billion since that date.

The assets recovered by BitGo are now locked in South Dakota in what is known as “cold storage,” which means they’re cryptocurrencies stored on hard drives not connected to the internet. The AP also reported that  BitGo provides what is known as “qualified custodian” services under South Dakota law. It’s basically the crypto equivalent of financial fiduciary, offering segregated accounts and other security services to lock down digital assets.

Several crypto companies have failed this year as bitcoin and other digital currencies have collapsed in value, the AP reported.  FTX failed when it experienced the crypto equivalent of a bank run, and early investigations have found that FTX employees intermingled assets held for customers with assets they were investing.

“Trading, financing, and custody need to be different,” Belshe said, as was reported by the AP.

The assets recovered include not only bitcoin and ethereum, but also a collection of minor cryptocurrencies that vary in popularity and value, such as the shiba inu coin, according to the AP reported.

California-based BitGo has a history of recovering and securing assets. The AP reported that the company was tasked with securing assets after the cryptocurrency exchange Mt. Gox failed in 2014. It is also the custodian for the assets held by the government of El Salvador as part of that country’s experiment in using bitcoin as legal tender.

FTX is paying Bitgo a $5 million retainer and $100,000 a month for its services, as was reported by the AP.