A high-ranking executive at FTX’s Bahamian entity tipped off local regulators of potential fraud perpetrated at the cryptocurrency exchange just two days before the exchange was forced to close.
According to Bahamian court records filed on Dec. 14, Ryan Salame, the former co-CEO of FTX Digital Markets (FDM), told the Securities Commission of the Bahamas (SCB) on Nov. 9 that FTX was sending customer funds to its sister trading firm Alameda Research.
Salame said the funds were to “cover financial losses of Alameda” and the transfer was “not allowed or consented to by their clients.”
He also told the SCB only three people had the access required to transfer client assets to Alameda: Former FTX CEO Sam Bankman-Fried, FTX co-founder Zixiao “Gary” Wang and FTX engineer Nishad Singh.
The allegation spurred SCB executive director Christina Rolle to contact the commissioner of the Royal Bahamas Police Force to request an investigation, as the information “may constitute misappropriation, theft, fraud or some other crime.”
The next day, on Nov. 10, the SCB froze FDM’s assets, suspended its registration in the country and the Bahamian Supreme Court appointed a provisional liquidator attempting to preserve the company’s assets.
The records reveal the first known instance of an executive from FTX or Alameda assisting authorities.
Salame is believed to be in Washington D.C., according to the filings, and has not spoken publicly since the collapse of the exchange.
His last public tweet was on Nov. 7 in which he replied “lol [sic]” to Binance co-founder Yi He, after He explained the reason that the exchange sold its FTX Token holdings.
Another former executive from FTX’s affiliated companies is also thought to have been assisting authorities in recent weeks
On Dec. 4, speculation abounded after pictures purported to show Alameda CEO Caroline Ellison in a New York coffee shop a short walk away from the U.S. Attorney’s Office, leading some to believe she may have been cutting a deal with authorities in the wake of the FTX collapse.
Bankman-Fried is the only person from FTX and Alameda to have been charged so far, adding credence to the speculation that executives from both firms are assisting authorities.
He faces charges related to money laundering and political campaign finance violations, along with wire and securities fraud.
Bankman-Fried, Wang, Singh and Ellison are reported to have operated a group chat on the encrypted messaging app Signal called “Wirefraud” used to send secret information about FTX and Alameda's operations. Bankman-Fried denied any knowledge or involvement in the group.
A former employee of crypto exchange FTX has seemingly exposed the company’s excessive luxury expenditures, obsessive workplace culture and grueling work hours that led to the hiring of a company psychiatrist in the year before its collapse.
Danielle Cloud, who worked in FTX's marketing department, posted a series of tweets on Dec. 13 saying that FTX hired her in October 2021 and she resigned roughly two weeks ago.
“Things felt off. Cult-like,” Cloud wrote, describing the feeling when she first joined the exchange and comparing it to fraudulent ventures such as the luxury music festival Fyre Festival and health technology company Theranos.
She claimed to have “never heard of” FTX or its founder, Sam Bankman-Fried, when she started, but sa “everyone employed at FTX was obsessed” with him.
“I supposed it made sense. The kid was young, the principles were revolutionary, the ideas were golden [...] who was I to challenge that?”
Cloud claimed the “best way” to land a role at FTX was to “be the female spouse of an existing employee” who could apparently within “a month or two” make their way into an executive position.
“Those who challenged it were churned,” she claimed.
Time off from work was also a “joke,” according to Cloud. “The work week was Monday to Sunday,” she said. A coworker was “chewed out” for asking if the company had time off for Thanksgiving.
Cloud started as a Know Your Customer (KYC) analyst at FTX US, the company’s United States arm, and was promoted to a full-time marketing role in May 2022 — a position that required her “to work out of the Bahamas majority of the time.”
FTX’s excess luxury expenditures
“The entire operation was iconically and moronically inefficient,” Cloud said, regarding the exchange's headquarters in the Bahamas. “I never knew all the things money could buy.”
She claimed FTX either purchased or rented multimillion-dollar homes for its executives, who threw lavish house parties and had private chefs.
Employees were provided “expensed stays in luxury hotels” in addition to access to the “half dozen condos” rented or bought by the company.
FTX’s Bahamian office had “food catered 24/7” with employee perks purported to include free groceries, a monthly pop-up barber and fortnightly massages.
The Commodities Future Trading Commission (CFTC) on Dec. 13 filed a lawsuit against Bankman-Fried, claiming he used FTX customer funds for luxury real estate purchases.
FTX reportedly spent over $250 million on real estate, buying 35 properties in the Bahamas, according to a Dec. 13 report from CNBC.
Why a shrink was brought into FTX
Due to the high workload demands, Cloud said that Bankman-Fried brought in a psychiatrist, Dr. George K. Lerner.
A now-deleted profile on Bankman-Fried written in September by venture firm Sequoia Capital described Lerner as “the person who knows [Bankman-Fried] the best” and “the FTX company therapist.”
Cloud said Lerner was “propositioned as a coach” there to consult on business growth and was said to be “critical” to FTX employee satisfaction and its retention strategy, but alleged Lerner asked her intimate questions about her relationship with her fiancé.
She also claimed administration staff were “pushed to illegally ship prescriptions to Nassau,” which were written in California and Florida.
At a congressional hearing on Dec. 13, FTX CEO John Ray said there was “no recordkeeping whatsoever” at the company, and that many invoices and expense receipts were submitted through the messaging app Slack.
FTX also used the accounting software Quickbooks, according to Ray, who said he has “nothing against Quickbooks” but it’s not a tool “for a multi-billion-dollar company.”
This Daily Dose was brought to you by Cointelegraph.