Where did the money in FTX crypto collapse?

The collapse of FTX, a cryptocurrency exchange once valued at $32 billion – and the arrest of founder Sam Bankman-Fried Monday on a number of charges that he defrauded his investors – has led many to wonder: where is the money left?

FTX’s current CEO, John J. Ray III, a corporate restructuring expert who handled the restructuring of bankrupt energy retailer Enron, appeared before the House Financial Services Committee on Tuesday. He told lawmakers they are still in a “very preliminary stage” of their investigation, but it is clear that Bankman-Fried and his colleagues were “very inexperienced and inexperienced.” Ray indicated that clients and investors who put their money into FTX and its affiliates should not hold out hope for a full recovery, saying, “We will never get all of these assets back.”

In bankruptcy filings and documents provided to Congress and regulators, Ray and FTX’s new leaders organized their efforts to recover as much of customer and investor funds as possible by looking at four silos, or categories, in which corporate funds by Bankman were channeled. Fried and his collaborators: WRS, Alameda Research, FTX.com and a variety of venture investments.

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Ray noted that the new leadership team believes no outside investor held more than a 2% stake in a silo, but he has little confidence in FTX’s financials, noting Tuesday that his team is essentially starting from scratch because FTX “almost zero” had “registration infrastructure.

Here’s a look at what went into each silo:

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West Realm Shires (WRS) Inc. is the business entity under which FTX US operated as a crypto trading company that bought, sold and stored virtual currencies for clients around the world. According to the flowchart, Bankman-Fried had an interest of about 53% in this silo; Gary Wang and Nishad Singh, former FTX executives, held about 17% and 8%, respectively; and outside investors held just over 22%.

The WRS/FTX US silo includes LedgerX, a crypto trading platform regulated by the federal Commodity Futures Trading Commission (CFTC) that acquired FTX and rebranded it as FTX Derivatives; stockbroker-dealer FTX Capital Markets; Embed Clearing, a clearing house for brokers; FTX gaming; and FTX NFTs.

It also includes loans to BlockFi, a cryptocurrency lender that received investment from FTX and also lent money to Alameda before it went bankrupt amid the wider contagion in crypto markets caused by the failure of FTX.

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Alameda is a hedge fund specializing in trading within the crypto space. It was co-founded by Bankman-Fried and Tara Mac Aulay. Mac Aulay tweeted that she and “a group of others” all quit in 2018, in part due to concerns about risk management and business ethics. Bankman-Fried had a 90% stake in the company, which was led by Caroline Ellison before its collapse.

Reports say that Alameda improperly received billions of dollars in FTX client funds and used those funds to make risky investments that failed to materialize and led to the bankruptcy of both the hedge fund and FTX when the companies failed to repay their lenders. Notably, BlockFi has filed a lawsuit against a Bankman-Fried holding company that failed to honor a promise to repay Alameda’s debts with shares in Robinhood Markets before the firms went bankrupt.

The Alameda silo contained cryptocurrencies, crypto ETFs, other digital assets and treasuries. Alameda also made some equity investments in cryptominer Genesis Digital Assets; Modulo Capital; Pawn (throw); and others.

FTX CEO Sam Bankman-Fried

Sam Bankman-Fried, founder and former CEO of FTX Cryptocurrency Derivatives Exchange, speaks during an interview on an episode of Bloomberg Wealth with David Rubenstein in New York, US, on Wednesday, August 17, 2022. Crypto exchange FTX plunged early November to late investors rush to get their money back.

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The ventures silo includes a number of venture investments from Bankman-Fried, which according to the flowchart may have had a 100% interest in this category, although Gary Wang and Nishad Singh may have direct or indirect interests.

Entities that have received funding within this silo include AI security firm Anthropic; venture capital firm K5; financial app Dave Inc.; Sequoia Capital, one of the oldest and largest venture capital firms in Silicon Valley; blockchain startup Mysten Labs; and other companies.

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Known as the “dotcom silo” in the flowchart, about 75% of this category was owned by Bankman-Fried, while outside investors held a 25% stake. The parent company of the dotcom silo was FTX Trading Ltd., which operated as FTX.com.

Aside from holding the FTX exchange and a number of subsidiaries in non-US jurisdictions, this silo contained a number of real estate assets. Bankman-Fried and others associated with FTX have been accused of improperly buying homes and personal items in the Bahamas using corporate funds.

Ray has noted in bankruptcy filings that “there appears to be no documentation for certain of these transactions as loans, and certain real estate is registered in the personal names of these employees and consultants in the Bahamas records.”

Kelly O’Grady of Fox Business contributed to this report.

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