FTX used corporate funds to purchase employee homes and new deposit offers

The FTX logo is seen on a flag at the entrance to the FTX Arena in Miami, Florida, November 12, 2022.

Marco Bello | Reuters

The companies’ money was used to purchase Bahamas homes and “personal items” in the name of FTX employees and consultants, a bankruptcy declaration said, days after founder Sam Bankman-Fried’s penthouse was listed for nearly $40 million.

It was not immediately clear where the companies’ funds came from.

In a court filing, FTX’s newly appointed CEO, John Ray III, said the lack of exchange controls meant that spending was calculated in a manner “inappropriate for a commercial enterprise.”

Corporate housing arrangements are not unusual, particularly in high-cost areas, but Ray’s dossier noted that “some of the properties were registered in the personal names of these employees and consultants”, which was an atypical arrangement.

A penthouse in the same private complex where Bankman-Fried and other FTX executives lived was listed for less than $40 million a few days ago. The penthouse has been widely reported as being owned by the billionaire and founder of FTX.

In the same filing, Ray blasted the former CEO’s team for a “total lack of financial oversight,” saying he did not trust FTX companies’ balance sheet statements.

Ray writes that the audit of one of FTX’s segments — what Ray referred to as “Silos” — was conducted by Prager Metis, a company “with which I am not familiar.”

Bankman-Fried was not immediately available for comment.

Ray, who oversaw Enron’s bankruptcy and restructuring proceedings, said he had 40 years of corporate bankruptcy experience.

“Debtors do not have an accounting department,” Ray wrote, noting that he expected it to be “some time” before reliable financial statements could be prepared.

FTX and its affiliates, including Alameda Research, Bankman Fried’s cryptocurrency exchange, filed for Chapter 11 bankruptcy protection earlier this month.

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