Sam Bankman-Fried’s trading firm, Alameda Research, allegedly traded billions of dollars from FTX customers’ accounts and leveraged the crypto exchange’s native token as collateral.
CNBC reports that a source claims the quant trading firm Sam Bankman-Fried founded, Alameda Research, used customer deposit from his exchange FTX in a way that went unnoticed by investors, employees, and auditors. The source claims that Alameda Research used billions of dollars from FTX users without their knowledge.
According to the source, FTX grossly miscalculated how much of its tokens it needed on hand if users wanted to cash out. When trading platforms are regulated, they are required to hold enough money to match what customers deposit. According to the source, FTX did not have nearly enough money on hand.
FTX’s largest client was allegedly Alameda Research. Because the assets it traded were not recorded on its own balance sheet, the hedge fund was able to conceal its activities. Instead of holding any money, FTX users loaned billions to the fund, which then used it to trade, the source said.
There is no indication that FTX customers were aware of this activity. According to U.S. securities law, mixing customer funds with counterparties and trading them without explicit consent is generally illegal. FTX’s terms of service also prohibit this kind of behavior. Sam Bankman-Fried declined to comment on allegations that he misappropriated customer funds, but he did acknowledge that FTX’s recent bankruptcy was caused by problems with a leveraged trading position.