In an interview, former FTX CEO Sam Bankman-Fried admitted to exploiting Alameda's banking facilities for FTX user deposits.
The former CEO of the bankrupt crypto exchange has made numerous claims about the misuse of customer funds
And the latest one confirms the collusion between the collapsed crypto exchange and its sister company Alameda Research from the beginning.
FTX, like many other cryptocurrency exchanges, struggled to find a banking partner to process fiat transactions since banks have been unwilling to work with cryptocurrency exchanges due to a lack of regulatory oversight. FTX circumvented this issue by processing transactions for the crypto exchange using the banking accounts of its sister company.
In an interview, former FTX CEO Sam Bankman-Fried admitted that the exchange was utilizing Alameda's bank accounts to wire customer deposits. As per reports, some customers were encouraged to wire their deposits through Alameda, which had a banking connection with fintech bank Silvergate Capital.
The dispute between Alameda and FTX over the customer's fund became the primary source of failure later on. Bankman-Fried asserted that while FTX never gambled with its customers' funds, it did lend it to Alameda. As per reports, the former CEO said that Alameda had adequate collateral to back the loans, but most of it was in the native FTX Token.
The former CEO of the bankrupt cryptocurrency exchange has made various charges about the misappropriation of customer funds. First, Bankman-Fried stated that the exchange and Alameda were separate businesses, and then promised customers that their funds were safe, only to later delete his tweet regarding the assertion.
The charges of banking loophole exploitation surfaced last week when bankruptcy proceedings showed that FTX, through its sister business Alameda, acquired a stake in a small rural bank in Washington state. Many claimed at the time that the investment in the rural bank was made to avoid the requirements for obtaining a banking license.
The extent of the misconduct in using Alameda's banking accounts for FTX client deposits is determined by the agreement between the bank and Alameda. Silvergate responded in a statement that the bank does not comment on customers or their actions as a matter of policy.
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