FTX Attempting to Consolidate Cash Into Approved Bank Accounts

During a recent creditors’ meeting, FTX management revealed that it is working on consolidating about $1.2 billion in cash into accounts at financial institutions approved by the United States Department of Justice.

It already has almost $500 million in U.S. banks and found another $720 million that it will work on consolidating. $130 million in Japanese banks is being reserved to pay back customers of FTX Japan, an FTX subsidiary that was formerly known as the Liquid exchange.

“We are reaching out to all of those banks and changing the signatories on the accounts so that we can get access to the accounts and move the cash as much as we can to authorized depository institutions,” FTX chief financial officer Mary Cilia said during testimony at a bankruptcy hearing.

According to Cilia, $6 million is being held in reserve to pay operating expenses. Most of the $423 million in unauthorized U.S. institutions is being held by a single broker, though she declined to identify the broker. $485 million is already in an account at an authorized financial institution.

FTX’s current senior staff estimates that it could take months to track down all the assets, mostly due to the company’s shoddy accounting practices under founder and former CEO Sam Bankman-Fried. Slack and Google Drive were often used to store financial records and files like customer terms and conditions. Cilia said FTX may not be able to file a required statement of assets or financial position until April at the earliest.

Current FTX CEO John Ray III seemed to agree during testimony in front of a Congressional committee, saying that it would take time to find everything. His staff is still looking for some digital asset wallets.

John Ray III is best known for having overseen Enron’s bankruptcy after its meltdown in 2001. He admitted that FTX is an even bigger mess than Enron was. Enron simply used accounting tricks to hide its poor financial shape before its collapse. FTX barely used sound accounting practices at all.

FTX is unlikely to reopen for business. It filed to sell some of its subsidiaries, including LedgerX, FTX Japan, FTX Europe and Embed Business. During testimony, John Ray III said that these companies had been acquired by FTX’s global organization relatively recently and still functioned largely as independent organizations. Other subsidiaries like FTX US were not necessarily as separate as FTX wanted the public (and possibly regulators) to believe.

Sam Bankman-Fried Ready for Extradition … Maybe

Meanwhile, Forbes reported that Sam Bankman-Fried planned to drop his opposition to being extradited to the United States during a December 19 hearing. However, he seemed to flip-flop on whether he agreed to extradition or not while in the courtroom and requested a copy of the United States’ indictment, causing confusion for his lawyer and the court.

During a previous hearing, Bankman-Fried was denied bail due to an extradition treaty between the United States and the Bahamas. Prosecutors argued that he was a flight risk, possibly invoking shades of the Do Kwon case. Terraform Labs founder Do Kwon faces charges for his role in the Terra stablecoin meltdown in May 2022, which sent shockwaves through the digital asset industry, and is currently an international fugitive.

If he is extradited, he will face charges that include securities fraud, wire fraud, conspiracy to commit fraud, money laundering, and violating campaign finance regulations. Under Sam Bankman-Fried, FTX allegedly mixed customers’ funds with company funds and may have also sent money to Alameda Research so that it could trade digital assets.

Officially, he donated $40 million to Political Action Committees (PACs) that support the Democrat Party and Democrat political candidates’ campaigns. A few Democrat candidates have said that they will donate the money to local charities in their states. He also admitted to donating to Republicans through “dark” but still technically legal routes, saying that the media would “freak the fuck out” over donations to Republicans. FTX officials say that they will seek voluntary return of the money.

Former Alameda Research CEO Caroline Ellison is rumored to be cooperating with authorities. Attorneys agree that somebody with knowledge of the internal operations of Sam Bankman-Fried’s now-collapsed crypto empire probably cut a deal with prosecutors to cooperate with the investigation – and that somebody might be Ellison. Unconfirmed reports of her whereabouts include a rumored sighting of Ellison with her pet dog at a cafe in Manhattan. Bankman-Fried had attempted to shift part of the blame for the collapse of his businesses to a “former girlfriend” who might have been Caroline Ellison.

Sam Bankman-Fried has denied having knowingly broken the law. He tapped defense attorney Mark Cohen for his future U.S. trial. Mark Cohen is best known for having represented Gwynn Maxwell during her sex-trafficking trial, as well as representing Mexican cartel boss Joaquín “El Chapo” Guzmán. A date for the U.S. trial is still pending while he awaits extradition.