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FTX insider turned on Sam Bankman-Fried days before bankruptcy, flagging potential fraud to regulators

by admin 2 years ago

FTX founder Sam Bankman-Fried (2nd L) is led away handcuffed by officers of the Royal Bahamas Police Force in Nassau, Bahamas on December 13, 2022. 

Mario Duncanson | AFP | Getty Images

Days before FTX’s bankruptcy filing last month, co-CEO Ryan Salame told Bahamian authorities that founder Sam Bankman-Fried may have committed fraud by sending customer money from the crypto exchange to his other firm, Alameda Research.

According to a filing on Wednesday tied to FTX’s bankruptcy proceedings, Salame disclosed “possible mishandling of clients’ assets” by Bankman-Fried. The letter included in the filing was dated Nov. 9, and was sent from the Securities Commission of the Bahamas to the commissioner of police. FTX

The disclosure on Wednesday marks the first public acknowledgment of an insider turning on Bankman-Fried, who was arrested in the Bahamas on Monday after the U.S. Attorney for the Southern District of New York shared a sealed indictment with the Bahamian government. The indictment, unsealed on Tuesday, charged Bankman-Fried with eight criminal counts related to fraud, money laundering and improper use of customer funds.

Salame told regulators that only three individuals at FTX — Bankman-Fried, Nishad Singh and Gary Wang — had the kind of access and authority to engineer the possibly fraudulent transfers to Alameda, a hedge fund and trading firm. Commissioners understood Salame to have said the fund movements and commingling allegedly authorized by Bankman-Fried were contrary to “normal corporate governance” practices.”

Salame’s LinkedIn profile says he’s based in the Bahamas. He also has multiple residences in the U.S., with homes in Massachusetts, Washington, D.C., and New Jersey. He had departed the Bahamas for the U.S. by Nov. 9, according to the letter.

Like Bankman-Fried, Salame was a significant political donor, donating $20 million to Republican causes.

— CNBC’s Brian Schwartz contributed to this report.