The FTX investigation has uncovered many unexpected incidents after the exchange's implosion. Andrew Vara, the US bankruptcy trustee in the FTX case, made some shocking revelations in a recent report. Vara revealed that the now-bankrupt crypto exchange withheld information regarding the assets it intends to sell.
The Trustee disclosed that the business on sale includes LedgerX, FTX Europe, and FTX Japan. FTX plans to sell the other sister companies secretly, since it is still under investigation. According to Vara, the embattled crypto exchange refused to provide enough information regarding the businesses on sale.
In a court filing, Andrew Vara noted that FTX failed to highlight any financial affairs, detailing the assets and liabilities of each business. The exchange also wants to delay the assets and liability documentation till the end of the sales hearings.
Andrew Vara’s Objection Filing Against FTX’s Businesses Sale
Vara further explained the implications of excluding the information from the filing. According to Vara, without providing the necessary disclosure, there will be no information about the type and value of the assets intended for sale. But the company can go on with the sales while still under investigation.
However, the US trustee solicited an independent investigation into the FTX businesses on sale. He raised concerns about the supposed businesses being part of FTX's bankruptcy and the exchange withholding necessary information.
Vara’s filing noted that the sale of valuables belonging to any debtor's directors, officers, employees, or entity should not occur. The filing stated possible reasons as allegations of wrongdoing and incomplete or lack of investigation into the scope of the allegations. It also mentioned owners of assets, whether individuals or entities, who may be involved in the crime as a reason for blocking the sale.
DOJ To Seize SBF’s Robinhood Shares
Despite these charges, FTX's lawyer argued that a quick sale of the businesses is necessary to prevent a further crash in value due to suspended operations.
Both FTX and its executives remain under investigation by authorities. Last week's reports revealed that the US Department of Justice (DOJ) took control of the FTX case. During one of the hearings, the DOJ noted that it plans to seize Sam Bankman-Fried’s Robinhood shares. To this, Sam Bankman-Fried moved to block the seizure of the so-called Robinhood shares in court, saying they have no connection to FTX.
Sam Bankman-Fried (SBF) is facing multiple charges, including fraud and money laundering by United States law enforcement. Participants also accused SBF of misusing the client's money and laundering assets through Alameda Research, an FTX-affiliated company under the ex-CEO.
A Peek Into The FTX Implosion
The crypto exchange drowned a few months after a liquidity crunch that left it unable to redeem customers' withdrawal requests. Many believe FTX's ordeal began from a fallout with Binance which led to the latter’s withdrawal from a long-running agreement with it.
After the fallout with Binance, both exchanges’ CEOs, SBF and Changpeng Zhao (CZ) engaged in Twitter feuds. Binance later announced plans to liquidate all of its FTX tokens, sending the exchange users into a panic.
Within a few days, FTX experienced overwhelming bolts of withdrawal requests that it could not handle. During the same period, a report revealed that FTX and its affiliate Alameda Research had a large hole in their balance sheet, which Caroline Ellison denied. The revelation made many believe the exchange was facing a liquidity crunch due to funds mismanagement. Furthermore, FTX sold off its Ethereum holding to cover its financial difficulties sending a domino effect across the crypto industry.
After many failed attempts to calm the situation, Sam Bankman-Fried reached out to Binance for help. When news of Binance buying out the crypto exchange got out, people became reassured until the deal went south. Binance announced withdrawal from its decision to buy FTX, sending the crypto exchange and its token, FTT, deeper down a bottomless pit. In November, the once-mighty crypto exchange filed for Chapter 11 Bankruptcy in the US after suspending withdrawals on its platforms.
FTX, its former CEO, and its executive remain under investigation by United States Authorities. On Monday, December 12, 2022, SBF was arrested in the Bahamas following charges by the United States. Attorney Damian Williams of News York Southern District filed a sealed indictment shared with the Bahamian government for SBF's arrest.
After SBF’s arrest, the SEC filed a civil complaint accusing him of a scheme to defraud equity investors in FTX. In the filing, the SEC alleged that SBF raised about $2 billion in investor funds which he used to plan a year-long fraud. The SEC also alleged that FTX diverted billions of customer funds for personal benefits.
The SEC’s sister agency, the Commodity Futures Trading Commission (CFTC), joined in filing a complaint against SBF. The watchdog claims that FTX, SBF, and Alameda Research manipulated asset prices to defraud crypto investors and clients. The filing also alleged that the trio misused customers' funds.
Bankman-Fried Denies Allegations Against Him
While all these allegations count against SBF and his crypto exchange, the former CEO claims situations with FTX went beyond his control. He also denied knowledge of coalescing funds between FTX and Alameda Research. Sam Bankman-Fried blatantly denied knowledge of the billions of dollars in missing client funds which Reuters reported on November 13, 2022.
According to Reuters, SBF and FTX executives created a book-keeping back door to cover the exchange’s financial account irregularities. In an interview with Reuters, the embattle ex-CEO denied the hidden money transfers, saying they had confusing internal labeling and misread details. SBF responded that he lacks coding knowledge when asked about the book-keeping back door in a separate interview.While investigations into SBF and his team are ongoing, FTT, FTX's native cryptocurrency, kept plummeting. It has lost over 90% since FTX's crisis and bankruptcy filing. FTT is trading at $1.36, showing a gain of 4.26% in the last 24 hours.