Sam Bankman-Fried is facing allegations that he siphoned billions of dollars in customer funds and used the money for personal gain.
According to authorities, the funds were used for political contributions, trading at another company called Alameda, and buying luxury real estate in the Bahamas, where FTX was based.
Two high-level software developers at FTX raised concerns about the missing funds, but their names have not been made public.
However, Gary Wang and Nishad Singh, who helped found FTX with Bankman-Fried, have been named in public charging documents. Both Wang and Alameda CEO Caroline Ellison have pleaded guilty to fraud, while Singh has not been charged.
The documents state that one of the FTX software developers, known as CC-1, discovered a negative balance on the exchange of hundreds of millions of dollars in 2020.
He suspected that Alameda was using FTX customer funds inappropriately and brought the issue to Bankman-Fried’s attention. Bankman-Fried reportedly dismissed the concerns, saying the funds were backed by a cryptocurrency that FTX had invented.
As the situation worsened, by September the firm was down by $5 billion and Bankman-Fried was considering closing the firm.
At that time, the executive told one of his counterparts that around $13 billion had been lent to Alameda and not returned, causing great alarm.
According to court papers, Bankman-Fried was gravely concerned but believed an equity raise and a climb in cryptocurrency prices could rectify the problem.
However, this did not happen, and by early November, clients were withdrawing their funds at high rates.
U.S authorities have warned Bahamian authorities that Bankman-Fried is a flight risk and may attempt to destroy valuable evidence if not apprehended.
