FTX customers are unlikely to get all of their money back, according to an analysis conducted by the Wall Street Journal. The cryptocurrency exchange, which collapsed last November, left billions of dollars missing, and only approximately half has been recovered so far. Customers reportedly had approximately $16 billion in funds on FTX prior to its collapse, and the new management has recovered $7.3 billion that can be put towards paying customers back. However, the analysis found that FTX insiders spent the other $7.7 billion.
The misappropriated funds were used for various purposes, including investments, real estate, political donations, and payments to FTX executives. Approximately $5 billion went to investments in tech companies, $250 million was spent on real estate in the Bahamas, and $86 million went to political and charitable donations. Executives, including FTX founder and former CEO Sam Bankman-Fried, received over $2 billion in payments, many of which came from personal loans that were never repaid. Approximately $1 billion is still unaccounted for and may have been used to fund bets at FTX's associated hedge fund, Alameda.
During the trial, Gary Wang, the former CTO of FTX, testified that he and Bankman-Fried were aware of the hole in the hedge fund's books but decided against shutting down Alameda, as there would be no way to repay the funds. Wang and Caroline Ellison, who was running Alameda, both pleaded guilty in December and have been cooperating with prosecutors.
Another witness, Adam Yedidia, described a $35 million penthouse owned by Bankman-Fried where some FTX employees lived. Yedidia recalled a conversation in which Bankman-Fried said he "assumed" that Alameda would be responsible for paying for the penthouse. Yedidia later changed his allegiance to Bankman-Fried after learning that loans to creditors had been paid using FTX customer deposits.
Bankman-Fried's trial, which began earlier this month, is expected to last six weeks and may result in a life sentence. Key testimony from Ellison is anticipated during the trial.
