The authorities claim that Sam Bankman-Fried siphoned billions of dollars in customer funds from FTX and used the money to make political contributions, finance trading at Alameda and buy luxury real estate in the Bahamas, where FTX was based. The two managers who voiced their concerns are not named, but described as high-level software developers who worked on FTX’s code.
Nevertheless, in public charging documents, Gary Wang and Nishad Singh, who both helped found FTX with Mr. Bankman-Fried and who worked on the exchnage’s coding are named. The other unnamed person is described as being a high-level Alameda official, which potentially refers to Alameda’s CEO Caroline Ellison.
Gary Wang and Caroline Ellison have pleaded guilty to fraud, while Singh has not been charged.
The documents go on to say that one of the FTX software developers, known as CC-1, learned in 2020 of a negative balance on the exchange of hundreds of millions of dollars. CC-1 presumed that Alameda was using FTX.com customer funds inappropriately, and flagged the issue to SBF.
He in turn said it was not a problem as the funds were backed by FTT, a cryptocurrency that FTX had invented. FTX was also undergoing an audit at the time, and the same executive questioned whether the deficit would be identified. Again, SBF waved off the concerns, saying audits did not look for such things.
By September the firm was down by $5 billion, and SBF was considering closing down the firm. At around this time the exec told one of his counterparts that around $13 billion had been lent to Alameda and not returned, to which the second executive expressed great alarm and approached SBF about the matter.
According to the papers, SBF was gravely concerned, but said an equity raise and a climb in cryptocurrency price could rectify the problem. Neither materialised, and by early November clients were withdrawing their funds at high rates. Nevertheless CC-1 calculated that there were sufficient funds to cover customer withdrawals. At this point SBF informed him of a seperate, as-yet unknown account, which held an $8 billion liability to Alameda.
The court papers also show that US authorities warned Bahamian authorites that SBF was a flight risk and would attempt to destroy valuable evidence if not apprehended.