The Blubber

As Sam Bankman-Fried’s FTX enters bankruptcy protection, Reuters reports that between $1 billion to $2 billion of customer funds have vanished from the failed crypto exchange.

Both Reuters and The Wall Street Journal found that Bankman-Fried, now the ex-CEO of FTX, transferred $10 billion of customer funds from his crypto exchange to the digital asset trading house, Alameda Research.

The heads of FTX’s regulatory and legal teams were reportedly in the room, as Bankman-Fried revealed multiple spreadsheets detailing how much cash FTX had loaned to Alameda and for what purpose, according to Reuters.

Those documents, which apparently reflected the most recent financial state of the company, showed a $10 billion transfer of customer deposits from FTX to Alameda. They also revealed that some of these funds — somewhere in the range of $1 billion to $2 billion — could not be accounted for among Alameda’s assets.

The financial discovery process also unearthed a “back door” in FTX’s books that was created with “bespoke software.”

The two sources speaking to Reuters described it as a way that ex-CEO Bankman-Fried could make changes to the company’s financial record without flagging the transaction either internally or externally. That mechanism theoretically could have, for example, prevented the $10 billion transfer to Alameda from being flagged to either his internal compliance team or to external auditors.