The inquiry into the dramatic collapse of FTX Group shows an inevitable downfall from questionable internal management practices as Bankman-Fried confessed to processing users’ deposits from the banking accounts of Alameda Research.
FTX Downfall Explained
In an interview with the Vox, Bankman-Fried admitted misconduct in the FTX contagion debacle, whose operations illustrate the failed crypto exchange platform contravened corporate governance. Bankman-Fried confession affirmed FTX and affiliate Alameda Research were doomed to fail from collusion since their onset.
The former chief executive confirmed that FTX confronted the crypto industry difficulties where exchanges find it challenging to secure banking partners, they could utilize in processing fiat transactions. Often, conventional banks dismiss tying up with crypto firms citing the absence of regulatory oversight and vulnerability to fraudulent schemes. FTX overcame the challenge by using accounts of Alameda Research – a sister company.
Bankman-Fried Confession on Users’ Funds
Bankman-Fried self-proclaimed that FTX wired the exchange users’ deposits via Alameda’s bank accounts. He further revealed to Vox that customers were occasionally instructed to remit deposits using the affiliate’s accounts in partnership with Silvergate Capital Corporation – a provider of fintech banking services.
Also read:The conspiracy over customers’ deposits would become the source of FTX’s failure, as Bankman-Fried illustrated in the Vox interview. In particular, though he denied FTX gambled the customers’ funds, he collusion in advancing loans to Alameda Research. The former FTX chief alleged believing the loans collateralized Alameda. However, it became apparent that Alameda Research assets were in native FTX Token (FTT).
FTX Varying Claims on Users’ Funds
Bankman-Fried claims over misuse of funds within the failed exchange vary relative to the conversation. The initial claims by the embattled chief executive portrayed FTX and Alameda Research were separate, autonomous, and independent entities. However, the tweet that assured users’ funds’ safety was swiftly deleted.
The bankruptcy proceedings before the New York court would later reveal the alleged exploitation of US banking loopholes. In particular, FTX tentacles were exposed through an ownership stake at a rural Washington bank. Surprisingly, Alameda Research executed the investment to bypass the stringent requirements for a US banking license.
Surprisingly, the FTX’s wrongdoing in processing users’ deposits via Alameda accounts would escape detection by Silvergate Capital. The San Diego-based fintech bank dismissed the existence of such arrangements in a statement conveyed to Bloomberg.
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