FTX misappropriated $8.7 billion in customer assets, new report shows

By Sarah Lizee

Olympia, Wash., June 26 – FTX Trading Ltd.’s chief executive officer, John J. Ray III, delivered a second investigative report detailing the debtors’ commingling and misuse of customer deposits at FTX.com, according to documents filed Monday with the U.S. Bankruptcy Court for the Southern District of Delaware.

The report shows that as of the petition date about $8.7 billion in customer-deposited assets was misappropriated from the FTX.com exchange, most of which was in the form of cash and stablecoin.

“The image that the FTX group sought to portray as the customer-focused leader of the digital age was a mirage,” Ray said in the report.

“In fact, as set forth in this report, from the inception of the FTX.com exchange, the FTX group commingled customer deposits and corporate funds, and misused them with abandon.”

FTX co-founder and former CEO Sam Bankman-Fried, FTX.com co-founder Gary Wang and director of engineering Nishad Singh, along with others at their direction, used the commingled customer and corporate funds for speculative trading, venture investments, and the purchase of luxury properties, as well as for political and other donations designed to enhance their own power and influence, Ray said.

“Bankman-Fried, with the assistance of a senior FTX group attorney and others, lied to banks and auditors, executed false documents, and moved the FTX group from jurisdiction to jurisdiction, taking flight from the United States to Hong Kong to the Bahamas, in a continual effort to enable and avoid detection of their wrongdoing,” he said.

“In doing so, they showed little of the concern for customers that they publicly professed.”

Ray said it has been “extremely challenging” to trace substantial assets of the debtors to any particular source of funding, or to differentiate between the FTX group’s operating funds and deposits made by its customers.

To date, the debtors have recovered about $7 billion in liquid assets, and they anticipate additional recoveries.

The debtors will continue to provide reporting on their analysis and findings as their work progresses, Ray said.

FTX has headquarters in the Bahamas. The company filed Chapter 11 bankruptcy on Nov. 11, 2022 under case number 22-11068.

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