With each passing day, the revelations about the mismanagement of the cryptocurrency exchange FTX become more shocking. A new report published by the Wall Street Journal describes that around three-fourths of $420 million recently raised to operate the business went instead directly to former CEO and Democratic super donor Sam Bankman-Fried.
In October 2108, FTX reportedly recruited a wide range of well-known powerful investors to chip in the $420 million in capital to improve the firm’s platform and user experience, broaden its customer base, and develop a better relationship with government regulators.
The Wall Street Journal reports that during a funding round that raised $420 million for the cryptocurrency exchange FTX, almost three-quarters of the money went directly to founder and Democrat super donor Sam Bankman-Fried. https://t.co/kvp0veBZ5j
— Breitbart News (@BreitbartNews) November 20, 2022
The WSJ based its analysis on an examination of available FTX financial records and interviews with people familiar with the round of capital financing and determined that around $300 million of the money raised went into the pockets of Bankman-Fried instead of the projects described in the fundraising.
Even in the often freewheeling world of Silicon Valley financing, Bankman-Fried’s cash grab was larger than legitimate payments to entrepreneurs that are questioned because they come before profits are paid to investors.
Bankman-Fried has claimed that he used much of the capital to buy out the stake in FTX that was held by the rival cryptocurrency business Binance. He said that he reimbursed investors a portion of the money he spent for that purpose.
Analysis of the funding agreement reveals that Bankman-Fried transferred money between himself and various companies associated with FTX. He used much of the money as a funding mechanism for a number of “effective altruistic” charitable donations and political contributions to high-powered Democratic Party interests and politicians.
Bankman-Fried also used the money to purchase shares for himself in Robinhood Markets Inc., the stock trading platform that became notorious during the GameStop stock short-squeeze crisis.
Now that FTX and its associated investment firm Alameda Research have filed for bankruptcy in U.S. federal court, his checkered business dealings are coming under detailed scrutiny. New FTX CEO John Ray was appointed by the bankruptcy court to take over control of the company for the protection of creditors and customers.
Ray has already determined that it appears that FTX is facing a “funding gap” of at least $8 billion because of loans it made to Alameda using customer funds it held.
Ray has also said that the work of winding up FTX and Alameda will involve a “comprehensive, transparent and deliberate investigation into claims” against Bankman-Fried and other founders and managers of the companies.
He also worked on the massive bankruptcy case involving the Enron fraud some two decades ago. Ray has already said the FTX case is the worst he has ever seen in his long career, saying that what he has reviewed to date indicates the “concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals.”