Prosecutors with the CFTC allege that FTX executives hid $8 billion in liabilities in a client account Bankman-Fried referred to as “our Korean friend’s account.”

• Alameda Research has borrowed billions of dollars in client funds from the FTX exchange.

• The company’s liabilities were then hidden under a pseudonymous account on FTX.

• Caroline Ellison and Gary Wang have pleaded guilty to several counts of fraud.

The “Where Did the Money Go” issue began to unravel for cryptocurrency exchange FTX.

On November 11, the exchange’s founder, Sam Bankman-Fried, filed for Chapter 11 bankruptcy protection for FTX and about 130 of its affiliates. The decision came after a series of withdrawals left the exchange illiquid.

On Wednesday, Bankman Fried arrived on US soil after being delivered from the Bahamas. On Friday, the Associated Press It was reported that a US judge kept it secret that two of his former associates, Caroline Ellison, CEO of Alameda and Gary Wang, co-founder of FTX, had pleaded guilty to fraud charges and were cooperating with the feds. Prosecutors feared that Bankman-Fried would fight extradition if he learned his accomplices had turned on him.

Alameda Research, a trading and investment fund set up by Bankman-Fried, borrowed billions of dollars from the stock exchange, and lost it to a series of bad trades and deals. It was later revealed that this money came from customer deposits.

a The lawsuit filed by the Commodity Futures Trading Commission On December 13 it states that Bankman-Fried directed FTX executives to transfer approximately $8 billion of Alameda’s liabilities to an unknown customer account on FTX systems.

The lawsuit also alleged that Bankman-Fried would later refer to this account as “our Korean friend’s account” and/or the “Korean stranger account”. She added that despite being an Alameda sub-account, it did not have the typical investment firm’s “@alameda-research.com” email id. The notes associated with the account described it as “FTX fiat old.”

The lawsuit claims that this helped hide Alameda’s negative balance on FTX. However, the account had the same privileges as Alameda accounts, including exemption from liquidation properties.

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A day later, on December 14, Bloomberg reported That a GitHub account under the name Nishad Singh, former engineering director of FTX, created code that hid Alameda’s bloated commitments to the exchange.

The implosion of FTX sent shock waves throughout the crypto community. A few months before its fall, Bankman-Fried assured investors that the worst liquidity crisis in the cryptocurrency market has likely passed. He added that he still had “a few billion” on hand To support distressed companies that could further destabilize the digital asset industry.

On Thursday, Bankman-Fried walked out of New York federal court after being released on $250 million bail.

On December 18thEllison pleaded guilty to seven counts of federal fraud including conspiracy to commit wire fraud against FTX clients and money laundering. She could face up to 110 years in prison but she agreed to cooperate fully in exchange for a lesser sentence.

Wang pleaded guilty to four counts of similar charges. He could face up to 50 years in prison and he also agreed to cooperate with the feds.

Read the original article at Business interested