FTX Misused Client Funds from the Very Beginning, Claims New CEO

John J. Ray III, the CEO and Chief Restructuring Officer of FTX and its affiliated debtors, claimed that the once-prominent cryptocurrency exchange mixed customer deposits from its inception.

He stated that the entity owes clients approximately $8.7 billion when it filed for bankruptcy last November. However, the new management has made ‘significant progress’, recovering around $7 billion in liquid assets so far.

Shadowy from Day One

The current management team of FTX, led by John Ray, suggested in a recent report that the cryptocurrency exchange has committed a series of wrongdoings against its clients over the years.

Firstly, it mixed user funds while employees lied to banking institutions about hiring Alameda Research as a trading firm for customer transactions. According to the report, some banks became suspicious of their activities and began rejecting transactions in 2020. CEO Ray claimed that the misuse of client funds was a practice adopted by FTX since its inception.

– The image that FTX Group sought to portray as a customer-focused leader of the digital age was a facade. Since the inception of FTX.com, FTX Group has mixed customer deposits and corporate funds and misused them by design of previous senior executives – said Ray.

He also revealed that the former crypto giant owed customers $8.7 billion last November. Despite this, the current management team has managed to significantly reduce that debt, recovering $7 billion in liquid assets so far.

– We will continue to report on our analyses and findings as our work progresses and remain committed to returning as much value as possible to creditors – stated Ray.

After that, the team claimed that FTX established a new organization called North Dimension Inc, described as a cryptocurrency trading company with 2,000 other counterparties and an average monthly trading volume of $10 million. In reality, however, it was a fictitious company that financed payouts for the parent company.

Is FTX 2.0 on the Way?

Last year’s collapse of FTX, considered one of the darkest events in crypto history, shook the industry to its core and undermined its legitimacy. Many investors parted with significant amounts, while others lost faith in centralized exchanges.

Despite the bad experience from the past, CEO Ray revealed that reviving FTX is a viable option. He hinted at such plans for the first time earlier this year. The idea has garnered support from some prominent financial leaders, such as Tribe Capital.

A court filing from last month doubled down on the rumors. Ray clarified that the reorganization strategy would involve a bidding process.