Crypto Task Force joins fight to find FTX’s missing billions

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Federal prosecutors form a joint task force to track down and recover the missing FTX funds.

It was then that former CEO and founder of the exchanges, Sam Bankman-Fried, pleaded not guilty during his federal indictment to the eight counts ranging from fraud to conspiracy brought against him by the US Department. of Justice (DOJ).

Established Tuesday, January 3, by the United States Attorney’s Office for the Southern District of New York (SDNY), the task force will also be responsible for handling investigations related to the dramatic collapse of cryptocurrency exchanges in November of Last year.

The crypto collection team will be led by Andrea Griswold, U.S. Attorney Damian Williams, SDNY First Deputy, and will draw its team of prosecutors from the Securities and Commodities Fraud, Public Corruption, Money Laundering units. and Transnational Criminal Enterprises.

This investigation is ongoing and moving very quickly, Damian Williams said in a public statement, adding that further announcements from the agency will follow.

An SDNY spokesperson has not yet responded to a request for comment from PYMNT.

The Securities and Exchange Commission (SEC) alleged in its own complaint that FTX clients lost approximately $8 billion due to fraudulent trading at FTX and its sister hedge fund, Alameda Research.

The SEC filing refers to the former Bankman-Frieds empire as a house of cards that was fraudulent from the start, a description that contrasts sharply with the company’s previous self-description as having the best brand in crypto .

The SDNY-led task force will leverage the agency’s asset forfeiture and cyber capabilities to track and recover these billions of dollars in allegedly embezzled customer funds.

Two of Bankman-Fried’s top inside allies, Caroline Ellison who ran Alameda Research and Gary Wang, the company’s chief technology officer and one of the founders of FTX, have turned against him and are cooperating with federal authorities in their investigation.

Creditors want their money back

As previously reported by PYMNT, bankrupt cryptocurrency exchange FTX owes its 50 largest creditors more than $3 billion, with claims ranging from just $21 million to over a quarter of a billion dollars. dollars.

Based on our review, we are pleased to learn that many regulated or licensed subsidiaries of FTX, inside and outside the United States, have solvent balance sheets, responsible management and valuable franchises, John J. Ray III, FTX’s current CEO in charge of corporate bankruptcy and restructuring, said.

Ahead of FTX’s day one queries in November last year, $1.24 billion in cash was recovered by advisory firm Alvarez & Marsal.

In total, the collapsed crypto platform has over 1 million creditors spread across the globe. The bankrupt company was able to make final salary and benefit payments for its former employees.

A zero-sum game

Although newly formed, the SDNY task force is entering choppy waters.

With billions of dollars at stake, tensions are growing between the many parties that have entrusted their funds to FTX and even between the national governments responsible for recovering these assets.

As reported by PYMNTS, the Bahamas Security Commission seized $3.5 billion worth of FTX digital assets without alleged prior authorization. Now FTX debtors want that money back.

We don’t trust the Bahamian government, said attorney James Bromley, representing FTX.

Separately, an ad hoc committee representing FTX’s non-US clients is seeking to establish that funds transferred from client accounts to other FTX affiliates are not part of FTX’s bankruptcy and should instead be returned to those clients.

There can be no fair outcome or maximization of value in these cases if the only parties with a seat at the table conflict in the interests they are obligated to represent, the committee alleged in a recent public statement. .

In December, FTX’s newly installed management team hired its own team of forensic investigators to help track down the company’s missing billions of cryptocurrencies.

It remains unclear whether the SDNY task force will work with the private team at financial advisory firm AlixPartners and is led by Matt Jacques, a former chief accountant in the SEC’s enforcement division.

Last weekend (December 30, 2022), more than $1 million worth of crypto assets were moved between wallets formerly associated with Bankman-Fried.

The fallen FTX founder has denied making the transfers, and prosecutors are working to determine who was responsible, but the anonymous movement of seven-figure sums provides insight into the scale and difficulties faced by federal players in tracing and recover missing assets from old exchanges.

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See more in: Alameda Research, bankruptcy, creditors, Crypto Task Force, cryptocurrency, Editor’s Pick, fraud, FTX, News, Sam Bankman-Fried, United States Attorney’s Office for the Southern District from New York

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