Shulou(Shulou.com)11/24 Report--

According to news in the morning of November 14, Beijing time, FTX, one of the largest cryptocurrency exchanges in the world, recently filed for bankruptcy. At least $1 billion of client money is mysteriously missing on the exchange, according to two people familiar with the matter.

Sam Bankman-Fred, founder of the FTX exchange, quietly transferred $10 billion of exchange client money to his own trading company, Alameda Research (Alameda Research), according to people familiar with the matter.

Of the total transfer of $10 billion, a large sum has since disappeared, according to people familiar with the matter. One person familiar with the matter estimated the missing funds at $1.7 billion, while another person familiar with the matter estimated between $1 billion and $2 billion.

Earlier, it was reported that Fred had transferred a large amount of client transaction money to Alameda, but the news of the disappearance of client money was revealed for the first time.

Last Sunday, Fred and other company executives shared business records that disclosed the financial loopholes, according to two people familiar with the matter. These business records describe the latest financial position of FTX. Until recently, the two media sources held senior positions at FTX, and their bosses disclosed the company's finances to the two people.

The FTX exchange, which is registered in the Bahamas, filed for bankruptcy on Friday after it suffered a flood of withdrawals from cryptocurrency trading customers and soared financial pressure. In addition, FTX had planned to reach a rescue deal with exchange rival Binance, but the plan went bankrupt, leading to the largest cryptocurrency bankruptcy in recent years.

In response, Fred responded that he did not agree with the so-called transfer of 10 billion dollars of customer funds. "We do not transfer funds secretly and our internal tagging system is a bit chaotic, leading to misreading of the information," he said. " However, Fred did not describe the transfer of funds in more details.

When asked about some of the missing client funds, Fred replied with three big question marks-"?"

FTX and Alameda did not comment.

On Friday, Fred posted on Twitter that he was combing through a series of recent changes at FTX. He said he was shocked by the development of the company last week and that he would write a more complete post describing the changes in detail.

According to reports, the biggest reason for the financial storm of FTX is that Alameda Research Company has made a huge loss, while many senior executives of FTX company do not know about the loss.

Last week, Zhao Changpeng, CEO of Yuan'an, said that Yuan'an decided to sell its digital currency assets of FTX, with a market capitalization of about US $580 million. Since then, FTX's customer withdrawals have risen sharply.

It is reported that the vast majority of Alameda's $14.6 billion assets exist in the form of FTX digital currency assets.

Subsequently, Fred and a number of executives held emergency talks in Nassau, the capital of the Bahamas, to discuss how much more external capital would be needed to make up for the FTX's funding black hole, according to two people familiar with the matter. Fred also confirmed to the press that such a meeting had indeed been held.

At the meeting, Fred showed some spreadsheets to the company's regulatory compliance and legal departments, showing that the company had transferred about $10 billion of customer money to Alameda, according to people familiar with the matter. These tables show how much money FTX has borrowed from Alameda and for what purpose.

About $1 billion to $2 billion of these transfers did not appear in the company's accounts, according to people familiar with the matter. The Fred spreadsheet does not show where the money went, and two people familiar with the matter said it was not clear where the money went.

Subsequently, FTX's legal and finance departments learned that Fred had previously installed a so-called "back door" in FTX's accounting system. It is reported that the company's accounting system is not standard software, but custom development.

Through this back door, Fred can execute a variety of financial instructions, such as quietly modifying financial records without disturbing others, including the audit firm. This design allows Fred to transfer 10 billion dollars to Alameda without triggering an internal financial audit or a financial system alarm.

But Fred denied the so-called back door to the accounting system.

On Wednesday, a person familiar with the matter revealed that the Securities and Exchange Commission had begun an investigation into FTX's handling of client money and activities related to cryptocurrency loans. In addition, the US Department of Justice and the US Commodity Futures Trading Commission have also begun investigations.

The bankruptcy of FTX was a startling reversal for Fred himself. Fred, 30, founded the FTX exchange in 2019. FTX quickly became an industry leader, and Fred's personal wealth climbed to $17 billion at one point. At the beginning of this year, FTX was valued at $32 billion and its shareholders include Japan's Softbank Corp. Group and American asset management giant BlackRock Group.

FTX's bankruptcy cryptocurrency market triggered an "earthquake", with the prices of mainstream cryptocurrencies plummeting. In addition, many people have compared this incident with other commercial bankruptcies in history.

On Friday, FTX said it had transferred control of the company to restructuring expert John J. Ray III, who was in charge of the liquidation of Enron, one of the largest bankruptcies in the world's history.

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