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FTX Used Client Funds, FTT Tokens, and Robinhood Shares to Prop Up Alameda: Report

FTX chief Sam Bankman-Fried allegedly used customer funds to support the exchange’s sister firm Alameda Research.

3 min read
FTX has been caught out for mixing client funds and began shuttering operations in 2022. Image: Shutterstock.

After Alameda Research suffered a series of losses in May and June this year, the trading firm’s founder Sam Bankman-Fried set at least $4 billion in FTX funds to Alameda, according to a Reuters report citing people familiar with the operations.

A portion of these funds reportedly were FTX customer deposits, two people told Reuters, although their exact value is unclear. Bankman-Fried did not tell other FTX executives about the move, the people said, adding he was afraid this information could leak.

Another chunk of the funds used to prop up Alameda was secured by assets including FTT, the native token of the FTX crypto exchange, and shares in the trading platform Robinhood, per the report. Bankman-Fried purchased a 7.6% stake in Robinhood back in May.

While Reuters could not determine the full extent of losses Alameda suffered, these reportedly included a $500-million loan agreement with crypto investment firm Voyager Digital, which filed for bankruptcy protection in June.

FTX.US, the American arm of the FTX exchange, won the bid to buy out Voyager Digital in September after it offered a $1.4 billion deal, beating out Binance and Wave Financial.

A tentative deal between FTX.US and Voyager was struck last month and could result in customers of the bankrupt crypto broker recovering about 72% of their funds.

FTX and Binance

The report comes amid the crypto market turbulence sparked by the news of FTX—the industry’s leading player until very recently—suffering a liquidity crunch and finding itself on the brink of bankruptcy.

In an incredible series of developments around FTX this week, Binance, the world’s largest crypto exchange by trading volume, first expressed its intention to purchase the rival company but ditched the deal on Wednesday with CEO Changpeng Zhao citing issues that “are beyond our control or ability to help [to provide liquidity to FTX].”

In 2019, Binance announced its strategic investment in FTX, with Zhao saying the two entities aimed "to grow the crypto economy together.”

Then in 2021, SBF told Decrypt that the firm had "repurchased shares from Binance to buy them out of our cap table. I think it just makes sense, given the role that our businesses are playing in the space. It can also give us more flexibility going forward.”

Binance received those funds partly in FTT tokens.

Last Sunday, Zhao announced that he would begin dumping those holdings on the open market.

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