How FTX, Alameda Lost Billions | $477 Million FTX Hack

FTX TOP CREDITORS TO KEEP ANONYMITY FOR NOW

The collapsed crypto exchange will be allowed to keep the identities of its largest creditors private for the time being, the judge overseeing the FTX bankruptcy case has ruled on the first day of hearings. FTX lawyers argued that providing information such as physical and email addresses would not only encroach on the privacy of individual customers who would not want to be identified but also be detrimental to the potential sale of the company’s assets. European customers would also have to have their names and addresses redacted due to local rules, creating a separation of entities there and elsewhere, even though they are supposed to have equal status in court, attorneys for the exchange contended. The court has scheduled a hearing on December 16 at 10 a.m. over the unsealing of creditor information.

In a motion filed Saturday in the Delaware district court, the bankruptcy pros now managing most of FTX founder Sam Bankman-Fried’s corporate empire said that the entities’ 2021 tax returns collectively showed a net operating-loss carryover of $3.7 billion. The leading theories on why Alameda lost so much range from big bets gone wrong to having godawful accounting records. Those theories might explain why Alameda lost money in 2022 when crypto was crashing, but its losses through 2021 remain a big mystery.

CONTAGION SPREADS

Genesis Global Capital, the troubled crypto lender, has reportedly hired the investment bank Moelis & Co. to explore options including a potential bankruptcy filing. The company was one of FTX’s key partners and said that $175 million of its assets were stuck at the exchange when withdrawals were frozen shortly before it filed for bankruptcy.

Grayscale Investments, Genesis’ sister company under the Digital Currency Group, also faces trouble. Its major fund, Grayscale Bitcoin Trust (GBTC), was trading at a record 45.2% discount, its lowest level below net asset value, earlier this week.

Additionally, Nasdaq-listed financial services firm Eqonex Group has filed for judicial management with the High Court of Singapore after failing to meet obligations and obtain liquidity financing, the firm said in a statement to shareholders Monday. In a filing with the U.S. Securities and Exchange Commission, Eqonex said its Hong Kong and Singapore-based entities, Diginex and Eqonex Capital, are to be liquidated.      

Source: Forbes Digital Assets, powered by Nomics.  Prices as of 1:45 p.m. on November 23, 2022.

FTX HACKER ON THE MOVE

The unknown attacker who stole approximately $477 million worth of tokens from FTX shortly after it filed for bankruptcy on November 11 sent 180,000 ether (ETH) coins, worth nearly $200 million, to at least a dozen digital wallets Monday morning. On November 20, the hacker began to convert ETH to another cryptocurrency called RenBTC and then send the funds to the Bitcoin blockchain through the RenBridge service. Ren was acquired by FTX affiliate Alameda Research last year. According to blockchain analytics firm Elliptic, the service has been used to launder hundreds of millions of dollars worth of crypto, including assets believed to have been stolen by North Korea.

Forbes has also learned that the Bahamian government, erroneously reported to have been involved in the incident, was in fact desperately trying to protect an additional $400 million of FTX assets from the same fate. On November 12, crypto security firm Fireblocks helped authorities move the remaining assets away from the exchange, though many questions remain about the haphazard nature and legality of those transfers.      

UNSOLICITED CHARITY

Bankman-Fried rose to fame in part because of his pledge to give all his money away. But the process through which one nonprofit received a donation from FTX’s charity arm raises questions about the philanthropic team’s methods. CarbonPlan, a California-based nonprofit organization that researches climate solutions such as carbon capture, told Forbes that it neither solicited nor agreed to accept any donation from FTX or its affiliates but got $200,000 from the crypto firm anyway. It wasn’t the only grantee to receive money it wasn’t expecting; an independent researcher who received a grant in the tens of thousands of dollars related a similar experience.

Beyond the issue of handing out unsolicited funding to recipients, it’s unclear exactly how much money the FTX Foundation has given. As of a few weeks ago, FTX said it had donated $190 million. At least five grantees who spoke with Forbes disputed the numbers on Future Fund’s and the FTX Foundation’s websites. “The company could never give a straight answer on [the] amount donated vs. earmarked,” a former FTX employee said, adding: “The entire operation was idiotically inefficient.”      

ELSEWHERE

Bankman-Fried Apologizes To FTX Employees, Details Amount Of Leverage In Internal Letter [CoinDesk]

New York Signs Two-Year Crypto Mining Moratorium Into Law [Decrypt]

U.S. Prosecutors Opened Probe Of FTX Months Before Its Collapse [Bloomberg]  

Nina Bambysheva
Reporter
Forbes Money & Markets

Steven Ehrlich
Editor 
Forbes CryptoAsset & Blockchain Advisor

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