Alameda Research’s chief executive and senior FTX officials knew that FTX loaned its customers’ money to Alameda to help it deal with its debts, according to people familiar with the matter.
Alameda’s troubles contributed to the bankruptcy of FTX, the crypto exchange founded by Sam Bankman-Fried. Alameda is a commercial company also founded and owned by Bankman-Fried.
Alameda faced a deluge of demands from lenders after crypto hedge fund Three Arrows Capital collapsed in June, creating losses for crypto brokers such as Voyager Digital, the people said.
LILY Sam Bankman-Fried quits as FTX files for bankruptcy: How the crypto giant fell apart after 10 days of chaos
In a video meeting with Alameda employees late November 9 Hong Kong time, Alameda CEO Caroline Ellison said that she, Bankman-Fried and two other FTX executives, Nishad Singh and Gary Wang, were aware of the decision to send customer funds to Alameda, according to people familiar with the video. Singh was FTX’s engineering director and a former Facebook employee. Wang, who previously worked at Google, was the chief technology officer of FTX and co-founded the exchange with Bankman-Fried.
Ellison said on the call that FTX used customer money to help Alameda deal with its debts, the people said.
Alameda had taken out loans to fund illiquid venture capital investments, the people said.
For all crypto news and updates, head here
On Friday, FTX, Alameda, FTX US and other FTX subsidiaries filed for bankruptcy protection.
Bankruptcy means it could be a long time before individual investors and others who owed their funds could potentially recover any of them, if ever.
Ellison did not return a phone message or email seeking comment. Singh and Wang did not respond to multiple messages seeking comment. Ryne Miller, chief legal officer of FTX US, declined to comment.
This article was published by The Wall Street Journal, part of the Dow Jones