The case of where the money went is starting to come to light.
The founder of the exchange, Sam Bankman-Fried, filed for Chapter 11 protection on November 11. After a lot of withdrawals left the exchange illiquid, the decision was made.
Bankman- Fried arrived in the US on Wednesday. According to the AP, a US judge kept a secret that two of his former associates, the CEO of Alameda and the co- founder of FTX, pleaded guilty to fraud charges and were cooperating with the feds. If Bankman- Fried knew his partners had turned on him, he would fight the deportation.
Alameda Research borrowed billions of dollars from the exchange and lost it to a series of bad trades. Customer deposits were the source of the money.
According to a lawsuit filed by the Commodity Futures Trading Commission, Bankman- Fried directed FTX executives to move Alameda's $8 billion in liabilities to an unknown customer account on FTX's systems.
Bankman-Fried referred to the account as "our Korean friend's account" or "the weird Korean account," according to the lawsuit. Although it was a sub account of Alameda, it did not have a typical investment firm's email address. The account was labeled as "FTX fiat old" in the notes.
Alameda's negative balance on FTX was masked by this. The account had the same privileges as the ones in Alameda.
FTX's former engineering director created a code that would hide Alameda's ballooning liabilities on the exchange according to a report.
The collapse of FTX shocked the community. Bankman-Fried told investors that the worst of the market's liquidity crunch had probably passed.
Bankman-Fried walked out of a New York federal court after being released on bail.
Ellison pleaded guilty to seven counts of federal fraud on December 18. She has agreed to cooperate in exchange for a less severe sentence.
Wang pleaded guilty to some of the charges. He will face up to 50 years in prison if he is found guilty.
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