Alameda Research had loaned Sam Bankman-Fried (SBF) a staggering $1 billion, according to a Thursday revelation by new FTX CEO John Ray III.
In a stunning filing by Ray on Thursday, November 17, the new FTX CEO stated that the fallen company’s bankruptcy situation was a consequence of, among others, billions of dollars in customer funds lent to Alameda Research. Among these loans, a staggering $1 billion was made to SBF himself.
The drama commenced last week after SBF told investors that FTX was experiencing a shortfall of up to $8 billion from withdrawal requests and was in urgent need of funding. Events following the disclosure led to a bankruptcy filing in Delaware and SBF announcing his exit from the CEO office and saying that Alameda Research would be closing down.
In the bombshell filing, Ray reveals other wild and shocking discoveries, including FTX corporate funds used to buy personal homes, audit opinions conducted from the metaverse, and that most of the company’s digital assets have not been secured, among others.
Revelations by New FTX CEO
In the stunning filing, Ray burst open the firm’s corporate governance under Sam Bankman-Fried as the worst he’s ever seen. He stated, “Never in my career have I seen such a complete failure of corporate controls and a complete absence of trustworthy financial Information as occurred here. Citing the lack of proper checks and balances, Ray added:
“…funds were used to buy homes and other personal items for employees and advisors. Some of these money transfers were not documented as company loans, while the homes were registered under the names of the employees.”
According to Ray, Alameda Research had made $4.1 billion of related-party loans, which were still outstanding by the end of September 2022. Of the total, $1 billion went to SBF as a personal loan, while $2.3 billion went to Paper Bird, an SBF-controlled entity, where he owns 75% and Gary Wang 25%). This translates to approximately $1.73 billion at SBF’s disposal. Director of engineering at FTX Nishad Singh also got a loan amounting to $543 million. Co-CEO of FTX’s Digital Markets arm Ryan Salame got $55 million in the form of a personal loan.
Speculations on where SBF took all the money point to two possible injections- political donations and personal investments. Amid the U.S. 2022 midterms, SBF contributed up to $40 million to political causes, making him the second-largest donor to Democratic movements. Singh followed suit, chipping in $7.4 million to several left-leaning super PACs, while Salame made a $23.9 million contribution in support of Republicans.
In May, SBF said he spent $648 million to acquire a 7.6% stake in the no-fee stock trading app Robinhood. Moreover, the ex-FTX boss also revealed investments made through FTX Ventures totaling at least $500 million in venture capital firms, including one of FTX’s most prominent supporters, Sequoia Capital, and additional investments at Altimeter Capital Management and Multicoin Capital (amount not disclosed). The Information also reports SBF entities invested $200 million in Sequoia Capital, including $100 million to its wealth management fund, Sequoia Heritage. SBF also injected another $300 million into a Michael Kives’ fund, K5 Global.
Following The Money
Supposing all of his other investments were funded with loans from Alameda Research, there still needs to be $2.9 billion. Moreover, from the total, almost $1.5 billion is still unaccounted for from SBF’s cumulative loans and is certainly not attached to his Bahamas-based mansions as the filing notes he footed the bill for these.
In a leaked Twitter direct message with a Vox reporter, it was reported that FTX had moved billions of dollars of customer funds to Alameda. Consequently, customers wonder whether SBF’s assets and investments were financed with loans from Alameda that were funded by FTX customer deposits.
Shockingly, Sam Bankman-Fried has since put his Bahamas-based 12,000 sq. ft. penthouse for sale at an asking price of almost $40 million.
According to Bloomberg calculations, from an estimated net worth of $16 billion last week, the disgraced FTX founder is now totally broke, which is “one of history’s greatest destructions of wealth ever!”
Rumor has it that SBF and his borrowing counterparts may have squirreled away some assets in readiness for a ‘rainy day.’