If the questioning of Ray is handled properly, Bankman-Fried could be put in an extremely difficult position. If I [a securities litigator with decades of trial experience] were on the committee, here are the 10 questions I would ask Ray, a storied lawyer who helped liquidate Enron.
The ‘Original Sin’
There have been numerous reports that Bankman-Fried transferred billions of dollars of assets from FTX customers’ accounts to Alameda. He has repeatedly said that “he never intended to commingle client assets.”
Can you resolve this issue once and for all – have you seen sufficient evidence to conclude that Bankman-Fried did, in fact, misappropriate FTX customer assets for the benefit of Alameda?
You filed a declaration in the bankruptcy case that said someone at FTX “used software to conceal the misuse of customer funds.”
Was that someone Bankman-Fried?
Something fishy in the Bahamas
FTX filed papers in the bankruptcy court that stated: “The Bahamian government is responsible for directing unauthorized access to the Debtors’ systems for the purpose of obtaining digital assets of the Debtors – that took place after the commencement” of the U.S. bankruptcy cases.
This is obviously a very serious charge. Tell us, what evidence do you have that Bahamian authorities essentially misappropriated assets belonging to the FTX debtors after the bankruptcy case was filed?
In your bankruptcy court declaration, you stated that $372 million of unauthorized transfers of the debtors’ cryptocurrency took place on or about Nov. 11, the day the bankruptcy was filed.
Have you figured out who was behind the unauthorized transfer of all that cryptocurrency? Any suspects?
The Alameda piggy bank
In the bankruptcy filings you show a balance sheet for Alameda. That balance sheet shows loans from Alameda to insiders at FTX in the following amounts:
- Sam Bankman-Fried, personal loan: $1 billion
- Paper Bird, a company controlled by Bankman-Fried, loan: $2.3 billion
- Nishad Singh, FTX director of engineering, personal loan: $543 million
- Ryan Salame, FTX executive, personal loan: $55 million
So, that’s right around $4 billion drained from Alameda by Bankman-Fried and his colleagues. Where did all that liquidity come from for Alameda to have $4 billion in cash to lend to Bankman-Fried and the others?
Was that $4 billion taken out of Alameda during the same period when Bankman-Fried was illegally transferring FTX customer funds to Alameda? And have any of these “loans” been repaid?
So then would it be fair to say that Bankman-Fried and the others taking $4 billion out of Alameda contributed to Alameda’s insolvency and the necessity of filing bankruptcy?
Campaign contributions and clawbacks
Bankman-Fried told New York Times columnist Andrew Ross Sorkin in a recent interview that the money he contributed to candidates for public office came from “trading profits of Alameda.”
Are you able to confirm Bankman-Fried’s story – that trading profits generated by Alameda were distributed to Bankman-Fried and that he, in turn, donated that money to political candidates?
Do you intend to pursue clawbacks of Bankman-Fried’s political contributions?
A blockchain research group called Arkham Intelligence published a report listing the largest
withdrawals from FTX in the days leading up to the FTX bankruptcy. That report shows a trading firm called Jane Street managed to withdraw $24 million from FTX on the eve of the bankruptcy.
As you know, Bankman-Fried and [former Alameda Research CEO] Caroline Ellison both got their start at Jane Street. That is quite a coincidence. Have you seen evidence of Bankman-Fried or other FTX insiders tipping off favored customers to get their money out of FTX before it was too late?
FTX.US – not dead yet?
Bankman-Fried has repeatedly declared in interviews that FTX.US is not insolvent, that all customer assets are in safe-keeping and, as far as he is concerned, customers of FTX.US should be permitted to withdraw their funds immediately.
My question is whether FTX.US is solvent and if customer assets are secure right now?
The secret customer list
You have filed a motion in the bankruptcy court seeking to keep the creditors list secret. This is highly unusual. According to the U.S. Supreme Court, the public has a First Amendment right to know what is going on in our court system, and secrecy of this kind can lead to cynicism about what might be happening behind closed doors.
Your declaration in the bankruptcy court states that FTX had the worst corporate governance you had ever seen and that it lacked meaningful regulatory compliance systems, record-keeping and financial reporting systems. It sounds like FTX was the absolutely ideal platform for bad actors to hide proceeds of illegal activities or engage in money laundering, tax evasion and other financial crimes.
So, here is my question: Has your team discovered any FTX customer accounts that were used by drug cartels, terrorist organizations, illegal arms dealers, Russian government officials or oligarchs, Chinese Communist Party officials, government officials of other repressive regimes, entities subject to sanctions, or Biden or Trump family members or any of their related companies?