Just two days before the cryptocurrency exchange was forced to close, a senior executive at FTX’s Bahamian subsidiary alerted local regulators to possible fraud.
Ryan Salame, the former co-CEO of FTX Digital Markets (FDM), informed the Securities Commission of the Bahamas (SCB) on 9th of November that FTX was moving client cash to its sister trading company Alameda Research, according to Bahamian court documents filed on the 14th of December.
Salame stated that the money was to “cover financial losses of Alameda”, and the transfer was “not allowed or consented to by their clients.”
Additionally, he informed the SCB that just three individuals—former FTX CEO Sam Bankman-Fried, co-founder Zixiao “Gary” Wang, and FTX engineer Nishad Singh—had the authorisation needed to move client assets to Alameda.
More on the allegation
Since the information “may constitute misappropriation, theft, fraud, or some other crime,” SCB executive director Christina Rolle contacted the commissioner of the Royal Bahamas Police Force to request an inquiry in response to the claim.
The SCB froze the company’s assets the following day, on Nov. 10, and the Bahamian Supreme Court appointed a provisional liquidator to try to protect the company’s assets.
The records show the first documented instance of an FTX or Alameda official supporting law enforcement.
Salame has not made any public statements since the collapse of the exchange, although it is thought that he is in Washington, D.C., according to the papers.
His final tweet was on November 7 and was a “lol [sic]” response to Binance co-founder Yi He’s explanation of why the exchange sold its FTX Token.
Authorities believe that a second former executive from one of FTX’s connected companies has been cooperating with them lately.
On December 4, rumours abounded after images purportedly showing Alameda CEO Caroline Ellison in a New York coffee shop just a short distance from the U.S. Attorney’s Office surfaced online, leading some to speculate that she might have been working out a deal with law enforcement following the collapse of FTX.
Since only Bankman-Fried from FTX and Alameda has been charged thus far, there is more reason to believe that executives from both companies are cooperating with law enforcement.
Along with wire and securities fraud, he is accused of violating laws pertaining to political campaign finance and money laundering.
According to reports, Bankman-Fried, Wang, Singh, and Ellison ran a group conversation on the secure messaging platform Signal named “Wirefraud” where they disseminated confidential information about FTX and Alameda’s operations. Bankman-Fried scoffed at any involvement or knowledge of the group.
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