U.S. Sens. Elizabeth Warren (D-MA) and Dick Durbin (D-IL) are seeking answers from the leaders of FTX Trading Co. on the status of customers’ funds after the crypto trading exchange went bankrupt.
Warren and Durbin sent a letter to Sam Bankman-Fried, founder and former CEO of FTX, and John Jay Ray III, the newly appointed CEO of FTX, about the reported alleged misuse of billions of dollars of customer funds and other allegations.
“While the full extent of the damage wrought by FTX and its affiliates continues to unfold, billions of dollars worth of investor funds seem to have disappeared into the ether. These massive losses raise questions about the behavior of former FTX CEO Sam Bankman-Fried and other company executives, the apparent lack of due diligence by venture capital and other big investment funds eager to get rich off crypto, and the risk of broader contagion across the crypto market that could multiply retail investors’ losses – all of which ‘call into question the promise of the industry,’” Warren and Durbin wrote.
Warren and Durbin pointed out that Bankman-Fried, FTX, and its affiliated crypto hedge fund, Alameda Research engaged in a growing list of dangerous and deceptive activities. Among them, the lawmakers cite reports that Bankman-Fried secretly transferred $10 billion in FTX customer assets to Alameda to fund risky bets, a move known to FTX and Alameda executives but hidden from auditors. Also, they say around $1.7 billion in FTX customer assets have gone missing, and hundreds of millions in digital assets were stolen from FTX wallets.
They said that on the day before FTX declared bankruptcy, it had $9 billion in liabilities but only $1 billion in liquid assets.
The lawmakers are seeking an explanation of how FTX’s liquidity crisis occurred; an accounting of all customer funds transferred out of FTX, including persons responsible for and aware of those transfers; complete copies of all internal policies and procedures regarding the relationship between FTX and Alameda; an explanation of how $1.7 billion in customer assets went missing; and complete copies of internal communications and/or materials related to the Nov. 12 transactions in which $663 million in digital assets were moved out of FTX wallets.