FTX Employees Were Encouraged to Keep Life Savings in the Now-Bankrupt Exchange, Sources Say

Sources told CoinDesk that FTX was used as a bank by many of its employees. Now, their money is probably gone.

AccessTimeIconNov 16, 2022 at 10:45 p.m. UTC
Updated Nov 16, 2022 at 10:49 p.m. UTC

Cheyenne Ligon is a CoinDesk news reporter with a focus on crypto regulation and policy. She has no significant crypto holdings.

Retail and institutional investors weren’t the only ones to get rug pulled by FTX’s swift and stunning collapse last week.

In addition to losing their jobs at the now-bankrupt exchange, many of FTX’s employees also appear to have significant amounts of personal wealth locked in the platform – wealth that is likely gone after being sucked into the black hole of the FTX disaster.

FTX’s deficit was allegedly created, according to a Wall Street Journal report last week, by former CEO Sam Bankman-Fried’s penchant for playing fast and loose with customer funds, using them to cover the debts of his quant trading firm, Alameda Research, violating the exchange’s own terms and conditions.

Former FTX Head of Marketing Nathaniel Whittemore, who is also a CoinDesk podcaster, said this week that he and the majority of the exchange’s other employees had no idea about the allegedly fraudulent treatment of customer funds. His account rhymes with claims other former employees have made on social media, as well as a CoinDesk report last week that showed Bankman-Fried’s inner circle may have had an unusual level of control over the company.

In an episode of The Breakdown released Monday, Whittemore said that employees were kept in the dark, and that many of them – especially FTX’s non-U.S. staff – used the exchange like a bank, and did not know that their savings had already allegedly been squandered.

“You have to understand just how devastated the average FTX employee was” after Binance’s bailout of FTX fell through, Whittemore said. “Not only, then, did it seem that they might be out of a job, but they were also potentially facing the total loss of their savings.”

Another former employee who asked to remain anonymous seconded Whittemore’s claim, telling CoinDesk that many of FTX’s staff kept the money from their paychecks at the exchange because it was convenient, utilizing FTX’s easy fiat off-ramps to withdraw money when they needed.

Employees’ use of FTX as a bank was encouraged by Bankman-Fried and other higher-ups, according to former employees speaking to CoinDesk on the condition of anonymity.

According to anonymous Twitter account Autism Capital, after FTX bought out Binance’s shares in the company last year, employees were encouraged to invest in FTX.com at a 50% discount, which the company promised to match up to $250,000 – a deal that was allegedly heavily promoted internally. That equity, along with other employee funds (including bonuses sometimes given out in the form of FTT, the exchange’s native token) was then allegedly stored on the FTX platform.

A former employee confirmed the veracity of Autism Capital’s allegations, and provided CoinDesk with a screenshot of an internal spreadsheet that appears to show FTX employees’ holdings as part of a larger list of investments in the platform.

It is currently unclear whether any employees were able to withdraw their funds from the exchange before withdrawals were halted.

If Whittemore’s account on the Breakdown is anything to go off of, the likely answer is “no.”

“For me, all I could feel was rage and white, hot anger as Sam and those around him wouldn’t even give these people the fucking courtesy of a message on Slack to give them any explanation for what they could expect,” Whittemore said.

“It wasn’t just … that Sam and a small group around him perpetrated fraud, which they did,” Whittemore added. “From the moment the fraud was called out and the market started to react, every single ounce of their effort went into self preservation,” he added. “It was callous, cruel and utterly devoid of any genuine human consideration.”

Representatives for both FTX and Bankman-Fried did not return CoinDesk’s requests for comment.

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Cheyenne Ligon is a CoinDesk news reporter with a focus on crypto regulation and policy. She has no significant crypto holdings.

CoinDesk - Unknown

Cheyenne Ligon is a CoinDesk news reporter with a focus on crypto regulation and policy. She has no significant crypto holdings.