Sam Bankman-Fried treated FTX like a “personal fiefdom,” as he and a handful of associates looted the now-defunct crypto exchange’s coffers to fund an epic spending spree that included a $300 million splurge on Bahamas real estate, lawyers for the corporate claimed.
FTX’s bankruptcy team detailed the wild spending under 30-year-old Bankman-Fried in a closely watched court hearing on Tuesday — revealing rampant mismanagement by top executives until the platform collapsed with greater than $1 billion in client funds missing.
Attorneys said the $300 million spent on real estate was mostly used to purchase mansions and beachfront vacation properties for Bankman-Fried and other senior FTX executives.
The purchases went undisclosed during a months-long media blitz through which the scruffy-looking Bankman-Fried, typically wearing shorts and a T-shirt, portrayed himself as a socially conscious benefactor for Democrats and progressive causes.
“Unfortunately, the FTX debtors weren’t particularly well run, and that’s an understatement,” attorney James Bromley of the law firm Sullivan & Cromwell said in a Delaware courtroom.
Bromley added the bankruptcy process had “allowed everyone for the primary time to see under the covers and recognize the emperor had no clothes,” in keeping with the Financial Times.
FTX declared bankruptcy earlier this month.SOPA Images/LightRocket via Getty Images
Under Bankman-Fried’s watch, “substantial amounts of cash were spent on things not related to the business,” Bromley stated.
Attorneys are scrambling to parse FTX’s slipshod accounting to uncover what happened to client holdings. The bankrupt entity has an estimated 1 million creditors with losses that would reach several billion dollars. The highest 50 creditors alone are owed greater than $3 billion.
“We have now witnessed some of the abrupt and difficult collapses within the history of corporate America,” said Bromley.
Sam Bankman-Fried and his associates bought $300 million in luxury real estate.TNS
The disclosures in Delaware court followed an earlier Reuters report revealing that Bankman-Fried’s parents, Stanford law professors Joseph Bankman and Barbara Fried, were amongst those in FTX’s circle who acquired luxury property within the Bahamas.
The report cited property records that showed Bankman and Fried co-signed the deed for a beach house within the exclusive Old Fort Bay gated community. The property was identified as a “vacation home” for the family.
When confronted with the records, a spokesperson for Bankman-Fried’s parents said they intend to return the property.
A branch of FTX purchased seven beachfront condos for nearly $72 million within the ritzy Albany community.Albany Bahamas
“Since before the bankruptcy proceedings, Mr. Bankman and Ms. Fried have been looking for to return the deed to the corporate and are awaiting further instructions,” a spokesperson for Bankman-Fried’s parents told the outlet.
In total, the report uncovered records for a minimum of 19 properties with a complete value of nearly $121 million.
A unit of FTX bought seven beachfront condos for nearly $72 million within the Bahamas’ ritzy Albany resort town — the identical community where Bankman-Fried and his “cabal of roommates” lived while running FTX and its doomed sister cryptocurrency trading platform, Alameda Research.
FTX executives ran the corporate from a luxury penthouse within the Bahamas.Seaside Real Estate
The actual estate disclosures were amongst probably the most notable details to emerge from the hearing during what has already been a chaotic bankruptcy process. The corporate’s representatives are planning to unload parts of the business which might be still viable.
FTX’s lawyers said the cryptocurrency platform has suffered “substantial” losses to its remaining assets as a result of a series of cyberattacks.
Attorneys said the corporate was investigating the circumstances behind a deal last yr through which rival platform Binance sold off its stake in FTX.
Last week, the Wall Street Journal reported Bankman-Fried cashed out $300 million in 2021 just after FTX closed a $421 million fundraising round. On the time, he reportedly portrayed the money grab to investors as a partial reimbursement for purchasing out Binance’s stake.
At its peak, FTX was once valued at a whopping $40 billion across its US and international properties. The number highlighted the stunning extent of the firm’s downfall into chapter 11 following a sudden liquidity crunch earlier this month.
The penthouse went in the marketplace after the crypto empire fell.Seaside Real Estate
The chaos began after a CoinDesk report revealed Alameda was heavily invested in FTT, a token offered by FTX. The revelation crushed confidence within the token’s viability and led panicked investors to dump their holdings.
Bromley said FTX filed for bankruptcy after a crush of withdrawals that was an “effective run on the bank.”
Bankman-Fried has faced intense scrutiny for his personal role in the corporate’s freefall. The ex-CEO shocked the general public last week after he ripped regulators and called ethics a “dumb game we woke Westerners play” in a wild interview with Vox.
Bankman-Fried also appeared to pin the blame for FTX’s collapse on Alameda — despite the proven fact that he also owned that firm and that his ex-lover Caroline Ellison served as its CEO.
With Post wires