FTX Paid More Than $25,000,000 in Hush Money to Whistleblowers, According to Court Examiner
The bankrupt crypto exchange FTX paid more than $25 million worth of hush money to whistleblowers before collapsing in November 2022, according to a new report from a court-appointed examiner.
Earlier this year, the U.S. Department of Justice (DOJ) tapped Robert J. Cleary, a lawyer who served as the lead prosecutor on the Unabomber case, to probe FTX as part of the exchange’s ongoing bankruptcy case.
In a report filed on Thursday, Cleary references an investigation conducted by Quinn Emanuel Urquhart & Sullivan, a white-shoe law firm hired by FTX chief executive John J. Ray III, who took over for disgraced former CEO Sam Bankman-Fried.
Quinn Emanuel probed how FTX handled several whistleblower complaints that alleged systemic misconduct at the company.
The law firm concluded that FTX failed to properly investigate the substance of the whistleblowers’ complaints but did pay out more than $25 million to seven people who raised issues. Bankman-Fried’s father, Stanford Law School professor Joseph Bankman, reportedly helped resolve some of the complaints.
The whistleblowers alleged that FTX and its associated entities misled investors, commingled customer funds, violated commodity regulations, committed market manipulation and insider trading and failed to install appropriate anti-money laundering controls and compliance measures, among other issues.
FTX imploded and filed for bankruptcy in November 2022 amid accusations that Bankman-Fried mishandled the exchange’s funds by loaning out billions of dollars worth of customer deposits to Alameda Research, the firm’s trading arm.
The exchange’s multi-billion dollar collapse led to a sharp downtick in crypto prices, and US federal authorities arrested Bankman-Fried the following month.
Last November, a US jury found the former FTX chief executive guilty of wire fraud and conspiracy to commit wire fraud against FTX’s customers, wire fraud and conspiracy to commit wire fraud against Alameda’s lenders, conspiracy to commit securities fraud against FTX’s investors, conspiracy to commit commodities fraud against FTX’s customers and conspiracy to commit money laundering.
In March, Judge Lewis A. Kaplan sentenced Bankman-Fried to 25 years in prison and three years of supervised release. He also ordered the 32-year-old to pay $11 billion in forfeiture. Bankman-Fried is appealing his conviction and sentence.
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Filed under: Bitcoin - @ May 25, 2024 5:22 pm