Reports have revealed additional misconduct issues at FTX, with the most recent revealing dealings between it and subsidy research firm Alameda Research.
This incident comes after numerous crypto exchanges could not reach deals with banks for fiat transaction processing, with many banking institutions citing insufficient regulations on digital currencies.
FTX used Alameda Research bank accounts to avoid issues with banks and requested some customers to wire deposits to the research wing, which had ties to Silvergate Capital, reports found.
Hey guys, last night in Twitter DMs I asked Sam Bankman-Fried when Alameda first borrowed FTX customer funds, what he really thinks of the SEC, and a lot more. https://t.co/Yq8InqNPS4
— Kelsey Piper (@KelseyTuoc) November 16, 2022
The bankrupt exchange’s former chief executive, Sam Bankman-Fried, said in the Vox report it had never gambled FTX user funds, but rather loaned them to Alameda Research and assumed the latter held sufficient collateral to back the loans.
He used the company’s native FTX token, FTT, for the collateral.
FTX and Silvergate Crypto Transfers
The news comes after the company filed bankruptcy, which revealed further abuses of bank loopholes, FTX’s Alameda Research allegedly invested in a Washington state-based rural bank, which many speculate allowed Alameda to avoid applying for a bank licence.
According to a Bloomberg report, Silvergate, the financial institution implied in the misconduct, stated it did not on customer activities due to its privacy policies.
The bank provides “on-ramp” solutions for customers by transferring fiat currencies such as USD and Euros to cryptocurrency exchanges. It held $11.9 billion in cryptocurrency customer deposits, with FTX holding 10 percent of total digital assets, the bank said in a 30 September statement.
It told Bloomberg in the report it was a federally regulated, state-chartered bank “whose solutions are built on a deep-rooted commitment and proprietary approach to regulatory compliance.”
