Former FTX CEO Sam Bankman-Fried, in a conversation with Vox, admitted to using Alameda’s banking facilities for FTX user deposits.
Every each day, more information about the FTX contagion saga’s wrongdoing comes to light, and the most recent one confirms that the bankrupt cryptocurrency exchange and its sibling company Alameda Research have been working together since the beginning.
Due to a lack of regulatory monitoring, banks have been reluctant to work with cryptocurrency exchanges, and FTX, like many other crypto exchanges, had trouble finding one to handle fiat transactions.
This issue was solved by FTX by processing transactions for the cryptocurrency exchange through the banking accounts of its sister company. Sam Bankman-Fried, acknowledged using Alameda’s bank accounts to wire consumer deposits in an interview with Vox. Alameda, which had a financial alliance with fintech bank Silvergate Capital, reportedly urged some customers to channel their deposits through them.
The main cause of the failure was the conflict between Alameda and FTX over the customer’s fund. The crypto exchange never bet users’ money, according to Bankman-Fried, but it did lend it to Alameda. The previous CEO asserted that Alameda had sufficient collateral to support the loans, but as reports have indicated, much of it was in the local FTX Token.( FTT $1.30 ).
The former CEO of the defunct cryptocurrency exchange has made a variety of charges involving the misappropriation of consumers’ monies. Bankman-Fried initially asserted that the exchange and Alameda were separate legal organizations before assuring that customer cash were secure in a later tweet, which he eventually deleted.
When bankruptcy proceedings showed that FTX owned an interest in a small rural bank from Washington state through its sister firm Alameda, charges regarding the abuse of banking loopholes first surfaced last week.
Many said at the time that the investment in the rural bank was made in order to gain a banking license without complying with the regulations. The agreement between the bank and Alameda will determine the extent of the violation in using FTX customers’ deposits to fund Alameda’s bank accounts. According to Silvergate’s statement to Bloomberg, it is bank policy not to comment on its clients or their operations.
