Sam Bankman-Fried Allegedly Planned to Restart FTX Abroad

FTX Co-founder Gary Wang said Sam Bankman-Fried wanted to transfer funds and restart FTX abroad.

That’s according to a filing made Monday (Jan. 30) by the U.S. Department of Justice (DOJ), alleging the crypto exchange founder hoped to stall his imploded enterprise’s Chapter 11 bankruptcy proceedings long enough to transfer the remaining assets to a more lenient regulatory environment, where he could eventually regain control of the business.

The loss of his company appears to be quite the sore spot for the fallen founder, to say nothing of how the millions of customers and creditors behind the billions of funds he allegedly misappropriated and lost must be feeling.

On Saturday (Jan. 28), lawyers representing Bankman-Fried asked the judge presiding over the FTX case to remove certain bail conditions that prohibit him from accessing assets held by FTX and Alameda Research, alleging in their letter that “the Government sandbagged the process” of establishing Bankman-Fried’s bail conditions.

“Given that the sole basis advanced for seeking that condition [prohibiting Bankman-Fried from accessing assets] has not been supported, we believe that the bail condition imposed at the conference should be removed,” their submitted request stated.

“Because FTX’s and Alameda’s remaining assets may include stolen customer funds, fraud proceeds, or assets that are otherwise recoverable by FTX’s creditors, there is no justifiable basis for the defendant to access these assets,” the prosecutors responded, as relayed by the Wall Street Journal (WSJ).

As of Jan. 17, the monetary value of various securities held in Alameda Research’s brokerage account was $268 million, per a court filing by the restructuring team.

For his part, Gary Wang, the former chief technology officer of FTX, has pled guilty to four criminal fraud charges and is cooperating with authorities in their investigation of Bankman-Fried and the collapse of FTX.

Bankman-Fried, who is criminally charged with eight counts for allegedly stealing billions of dollars from FTX customers and misleading investors as part of a “years long” fraud, has maintained his innocence and is currently under house arrest at his parents’ home in California. His trial is set for October.

He has repeatedly claimed in blog posts penned from his childhood home that FTX was rushed into an ill-advised bankruptcy by its fee-chasing lawyers, and that he should have been allowed to continue running the company.

The Hunt for Hidden Assets

Critical to the FTX bankruptcy and restructuring is the recovery of billions of dollars of missing customer funds.

Court filings show that the current leadership in charge of FTX’s restructuring is taking an aggressive approach to recovering any money that Bankman-Fried may have inappropriately disbursed.

FTX’s advisors have asked for permission to cross-examine Bankman-Fried’s parents and brother under oath, and that they be required to provide financial documents about their personal wealth and relationship to their son’s failed cryptocurrency exchange.

A PowerPoint presentation filed alongside court documents as an appendix reveals the progress the FTX Debtors have made in maximizing recoveries for customers and other stakeholders affected by FTX’s collapse.

The presentation shows that $5.5 billion in liquid cash and assets has been found so far, as was previously reported by PYMNTS.

It separately reveals that the investigative task force has uncovered the mechanics behind how Alameda Research was able to borrow “up to $65 billion of customer assets” without collateral, as well as “how a small group of individuals had the ability remove digital assets from the exchange without being recorded on the exchange ledger.”

As reported by PYMNTS, FTX lawyers Monday filed a complaint seeking to claw back $446 million from Voyager Digital.

“Following the commencement of its chapter 11 cases, Voyager demanded repayment of all of its outstanding loans to Alameda, including, in some instances, prior to stated maturity dates. Voyager was repaid in full,” said the complaint, which alleges that Voyager’s loan repayment from Alameda Research was done preferentially versus other Alameda creditors. “The preferential transfers were made after the commencement of the Voyager Chapter 11 Cases and are therefore recoverable by Plaintiff on an administrative priority basis.”

Complicating matters is the fact that Voyager Digital, like FTX, is also bankrupt.

Making the Most of What They’ve Got

In order to repay FTX’s lengthy list of creditors, which include investment firms, tech companies including Netflix and Apple, banks, media outlets, state governments, the finance ministries of Vietnam, India and Japan and other crypto firms, the FTX Debtors are mulling over the possibility of re-opening the exchange for business.

Doing so would allow the restructuring team to liquidate a bevy of speculative alternative digital assets weighing down the company’s balance sheet. The FTX Debtors’ primary job is to identify any remaining pockets of value left in the enterprise and plumb them.

Other options on the table include exploring the potential divestment of FTX’s venture portfolio of a stake in over 300 companies, as well as the failed exchange’s real estate portfolio of 36 Bahamas properties.

Also heading to the proverbial chopping block are FTX’s wholly owned four regulated or licensed subsidiaries, LedgerX, FTX EU, FTX Japan, and Embed.

Tokyo-based online brokerage Monex Group has reportedly already expressed interest in acquiring FTX JP (FTX Japan).