Bankman-Fried Wanted Crypto Prices to Go Up to Plug FTX Hole

Top FTX executives came to him with concerns about Alameda’s liabilities on multiple occasions.

Cover artwork: Jeenah Moon/Bloomberg/Getty Images, Relight Motion (edited by Mariia Kozyr)

Key Takeaways

  • Top FTX executives worried about Alameda using FTX customer money back in 2020, the New York Times has revealed.
  • Sam Bankman-Fried reportedly dismissed the concerns, saying that Alameda’s liabilities were backed by FTT.
  • Pressed on the matter again in September 2022, Bankman-Fried said that crypto prices going up would help correct the situation.

Members of Sam Bankman-Fried’s “inner circle”—quite possibly FTX co-founder Gary Wang and FTX chief of engineering Nishad Singh—issued multiple warnings to Sam Bankman-Fried about Alameda’s negative balance.

If Only Prices Went Up

FTX executives were well aware of the exchange’s dangerous situation prior to its collapse.

New documents obtained by the New York Times indicate that two top executives at FTX came to then-CEO Sam Bankman-Fried with concerns about the company’s liabilities to Alameda Research on multiple occasions before the exchange collapsed. 

While both of the executives remained unnamed in the documents, they were described as “high-level software developers who worked on FTX’s code.” It therefore seems likely for them to have been FTX co-founder Gary Wang and FTX head of engineering Nishad Singh.

According to the Times, one of the executives approached Bankman-Fried as far back as 2020 with concerns about Alameda’s negative balance on FTX—the trading firm was already “hundreds of millions of dollars” in the red. The executive realized that situation could only be possible if Alameda were “inappropriately using customer funds.” But Bankman-Fried dismissed their concerns, saying “it was okay” because Alameda’s liabilities were backed with FTX’s FTT token.

Later on, in September 2022, after Alameda reportedly lost approximately $5 billion, Bankman-Fried discussed the possibility of shutting the trading firm down. But Alameda was now roughly $13 billion in debt to FTX, the top executives found out. Bankman-Fried, who acknowledged being concerned as well, said that “the situation could correct itself if they raised more equity, and cryptocurrency prices went up.”

Wang and former Alameda CEO Caroline Ellison have already pleaded guilty to multiple fraud charges. Singh has yet to be charged.

Disclaimer: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.

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Alameda’s Caroline Ellison Enters Plea Agreement with DOJ

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