YEREVAN (CoinChapter.com) — Sam Bankman-Fried (SBF) directed FTX’s top executives to hide $8 billion in liabilities in a fake customer account which he called “our Korean friend’s account” or “the weird Korean account.”
According to a Dec 13 lawsuit the United States Commodities Futures Trading Commission (CFTC) filed against SBF, the hidden liabilities belong to his trading firm Alameda Research.
As CoinChapter earlier reported, Bankman-Fried had granted Alameda Research an unfair trading advantage on FTX. This included an unlimited credit limit with the exchange, allowing Alameda to conduct transactions even with a negative balance.
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Alameda also had a time advantage over other traders. In particular, the firm’s transaction orders were received several milliseconds faster than other API users.
According to CFTC, Alameda had unprecedented access to customer funds. At the time, Sam Bankman-Fried’s former girlfriend, Carolina Ellison, managed the firm.
As the crypto market began to decline in early 2022, Alameda faced several margin calls. To meet these obligations, the trading firm began using more customer funds on the FTX exchange.
By mid-2022, the company’s Fiat liability with FTX neared $8 billion. So, using his discretion, SBF asked the exchange’s executives to move the same amount into the discreet “weird Korean account.”
To ensure that Alameda’s liabilities remain hidden on the ledger, Sam Bankman-Fried’s team also branded the account as “FTX fiat old.” Moreover, according to the lawsuit, the secret account did not have the usual email account identifier (@alameda-research.com).
However, under the former crypto mogul’s patronage, the account had the same privileges as Alameda’s other accounts. This meant that it was exempt from liquidation characteristics.
Following FTX’s collapse in November 2022, authorities revealed that the exchange had lost over $8 billion in customer funds. Since then, much has been speculated about where all the money is left.
The latest lawsuit has revealed that most of it went to Alameda to cover the losses the firm incurred by making bad trading decisions. In addition, reports have revealed that Alameda even used customer funds from FTX to short Tether’s stablecoin USDT.
As CoinChapter earlier reported, the collapse of Bankman-Fried’s crypto empire had resulted in large losses for millions of hopeful traders.
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