“There’s much less money in the crypto wallets than there should have been,” he said.
An expert witness in the ongoing FTX and Sam Bankman-Fried case made an intriguing revelation concerning the missing billions of dollars in customers’ funds.
Expert witness says FTX was always low on funds
Specialist in financial statement analysis and Notre Dame alumni Professor of Accountancy Peter Easton noted on Wednesday that FTX exchange wallets contained only $5B at the peak of the crypto market.
The forensic accountant made this revelation following an indepth analysis into the exchange’s bank statements, wire transfers, and other relevant documents. Easton noted that a total of $11.3B in FTX customer funds were meant to be held on Alameda Research books. However, only $2.3B was deposited in the bank accounts.
“There’s much less money in the crypto wallets than there should have been,” he said, adding that details from transactions on the Blockchain made the analysis much finer and robust.
Among the several charts presented to the jury, the professor showed one that focused on FTX customers’ crypto deposits. He explained that when customers deposited funds, it was swept along to another wallet that pooled customer funds.
According to Easton’s analysis, since January 2021, FTX’s digital wallets have never contained funds equal to the whole amount indicated in customer accounts. The data, which through October 2022, showed a consistent billion-dollar deficit.
It turned out that the deficit cash was invested in other investment vehicles, such as SkyBridge Capital, owned by Anthony Scaramucci, and Modulo Capital, owned by Lily Zhang. Interestingly, during Caroline Ellison’s testimony in SBF’s criminal trial, Modulo Capital, FTX, and Alameda Research were mentioned. An additional unrecorded investment made possible by the deposits of FTX customers was the partial repayment of a loan that Alameda obtained from Genesis Capital.
A case of fraud
Three close lieutenants to Bankman-Fried have provided testimonies in the past three weeks: Caroline Ellison, Gary Wang, and Nishad Singh. Together, they painted a picture of how Bankman-Fried orchestrated the purported scam and continued to take chances in spite of warnings from close friends. The trio have entered guilty pleas and are assisting the authorities.
“When I started working at Alameda, I don’t think I would have believed you if you told me I would be sending false balance sheets to our lenders, or taking customer money, but over time, it was something I became more comfortable with,” Ellison earlier told jurors.
It seems that the jury doesn’t need a spoiler alert. There’s a guilty verdict written in bold letters on the wall. Bankman-Fried may, if convicted, spend decades in jail if prosecutors claims that he misappropriated customers’ funds is strongly upheld.
As the third week of the trial closes, prosecutors have started to wrap up their case with Easton being among their final witnesses.
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