‘Weird Korean Account’ Used By FTX To Hide Alameda Liabilities: CFTC Complaint

Former CEO of FTX Sam Bankman-Fried urged business officials to reallocate Alameda Research’s huge liability with the exchange to “the weird Korean account” to disguise its obligation with the firm, according to a complaint by the Commodities Futures Trading Commission.

Following a substantial drop in the crypto markets in the spring of 2022, Alameda faced a huge number of margin and loan recalls, and the trading company greatly escalated its use of client cash to pay its external debt commitments, according to the CFTC complaint.

According to the complaint, Alameda’s entire fiat liabilities with the exchange would be roughly $8 billion by mid-2022.

Bankman-Fried urged corporate officials to reallocate cash to a Korean account he referred to as “our Korean friend’s account” and “the weird Korean account.”

According to the CFTC, the Korean account belonged to Alameda but was not labeled with an Alameda identity, allowing Alameda’s negative balance to be masked on FTX ledgers.

The U.S. Securities and Exchange Commission (SEC) lawsuit indicated that Alameda’s multi-billion dollar obligation with the exchange was maintained in an internal account in the FTX database as “fiat@ftx.com.” In 2022, the business started seeking to split out Alameda’s part of the liabilities in the “fiat@ftx.com” account, the SEC says.

The regulators claim that Alameda was given various benefits, including an “unlimited” line of credit on the exchange and an exemption from FTX’s much-touted risk management system.

The Korean account had powers to execute a transaction even if it did not have the cash to do so, using a piece of code classified as “allow negative flag,” the CFTC claimed. According to the lawsuit, this was also true for the main Alameda account and the Alameda sub-accounts.

Former FTX executive Nishad Singh, who was responsible for directing engineering at the exchange, marked code connected to the Korean account, according to a report by Bloomberg, which referenced contributions from Singh’s Github account.

The CFTC, the SEC, and the United States Attorney’s Office for the Southern District of New York (SDNY) all filed fraud charges against Bankman-Fried on Tuesday in connection with the failures of FTX and Alameda. Bankman-Fried is now being detained in a Bahamas jail awaiting an extradition hearing after failing to get bail.

Bankman-Fried allegedly committed fraud from the start, fraudulently moving FTX client assets to his majority-owned trading company Alameda Research and concealing this information from FTX stock investors and consumers.

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