Report: FTX Used Customer Funds to Prop up Alameda Research

In a bid to prop up his trading firm Alameda Research, Sam Bankman-Fried reportedly loaned the firm billions of dollars from his FTX platform, including more than $8 billion in customer funds, a move that apparently set in motion FTX’s collapse.

That’s according to a report Thursday (Nov. 10) by the Wall Street Journal (WSJ) that cited an unnamed source.

Bankman-Fried told an investor this week that Alameda owes FTX about $10 billion, and that the FTX CEO has called his decision to use customer funds to support Alameda a lapse in judgment, according to the report.

In total, FTX had $16 billion in customer assets, the report stated, meaning FTX lent more than half of its customer funds to its Alameda.

PYMNTS has reached out to FTX for comment.

The WSJ report comes one day after news that federal regulators were apparently investigating FTX for — among other things — possible mishandling of customer funds and the company’s relationship with Alameda.

The news follows a series of devastating setbacks for FTX, beginning with a run on its assets that led to a liquidity crunch.

Earlier this week, it seemed as though rival crypto trading platform Binance might step in to rescue FTX via an acquisition.

However, it took just two days of due diligence — and reports of regulatory investigations and mishandled customer funds — for Binance to walk away from the deal.

On Twitter Thursday, Bankman-Fried issued a lengthy apology to customers and said the company is “spending the week doing everything we can to raise liquidity.”

“I can’t make any promises about that,” he wrote. “But I’m going to try. And give anything I have to if that will make it work.”

But as PYMNTS noted Wednesday (Nov. 9), the implosion of the deal goes beyond just FTX. Following the acquisition’s collapse, the crypto industry has taken a reputational hit, while crypto-linked equities have reportedly lost $10 billion in value.

The end of the deal put a spotlight on shaky confidence in crypto, as gyrating prices and various announcements from crypto firms about the security of their own holdings have underlined the uncertainty that has become trademarks of the crypto space.

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