Manipulating billions of dollars in client funds by Investing.com
Investing.com – Today it’s trying to recover from last week’s meltdown but ultimately failed. It moved below 17,000 Americans and Ethereum below $1,300.
Little by little we learn more and more about the reasons for the bankruptcy of FTX, the second exchange in the world.
According to CNBC, Alameda, the quantitative trading firm founded by Sam Bankman-Fried, owner of FTX, has reportedly used billions of dollars in FTX client funds, unnoticed by investors, employees and auditors.
This outlet claims from a source familiar with the matter that they made it so they used billions of FTX users without their knowledge.
In some of these leveraged trades, Alameda used the FTT token as collateral. The price of the FTT token fell by 75% in one day, leaving insufficient collateral to cover the trade.
In this way, FTX has reduced the amount of cash that needs to be available to withdraw. Regulators require trading platforms to hold enough funds to match customer deposits. This was not the case with FTX.
CoinDesk released information about the critical situation of FTX accounts and exposed the connection between the exchange and Alameda, sparking panic in the investment community, which demanded about $6000 million worth of FTX withdrawals. According to Reuters.
Last week, FTX went bankrupt from $32 billion. The blurred lines between FTX and Alameda Research led to a massive liquidity crisis at both companies. Benkmann-Fried also resigned as CEO of FTX, saying Alameda Research is preparing to close operations.
CNBC reported that external auditors may have missed this discrepancy because customers’ assets are not included on the balance sheet.
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