Just two days before the cryptocurrency exchange was forced to close, a senior executive at FTX’s Bahamian subsidiary alerted local regulators to possible fraud.
Ryan Salame, the former co-CEO of FTX Digital Markets (FDM), informed the Securities Commission of the Bahamas (SCB) on November 9 that FTX was sending client funds to its sister trading company Alameda Research, according to Bahamian court documents filed on December 14.
Salame mentioned the funds were used by FTX to cover Alameda’s losses
Salame claimed that the transfer was “not allowed or consented to by their clients” and that the money was intended to “cover financial losses of Alameda.”
Additionally, he informed the SCB that only three individuals—former FTX CEO Sam Bankman-Fried, co-founder Zixiao “Gary” Wang, and FTX engineer Nishad Singh—had the authorization needed to transfer client assets to Alameda.
The claim prompted Christina Rolle, executive director of the SCB, to request an investigation from the commissioner of the Royal Bahamas Police Force because the information “may constitute misappropriation, theft, fraud or some other crime.”
The SCB froze the company’s assets the following day, on Nov. 10, and the Bahamian Supreme Court hired a provisional liquidator to try to protect the company’s assets.
The records show the first recorded example of an FTX or Alameda executive assisting law enforcement.
According to the filings, Salame is reportedly in Washington, D.C. He hasn’t made any public statements since the exchange’s demise. His final tweet was a “lol [sic]” response to Binance co-founder Yi on his explanation of the exchange’s decision to sell its FTX Token holdings on November 7.
Authorities believe that a second former executive from one of FTX’s affiliated companies has been cooperating with them lately.
On December 4, rumors abounded after images purportedly showing Alameda CEO Caroline Ellison in a New York coffee shop just a short distance from the U.S. Attorney’s Office surfaced online, leading some to speculate that she might have been working out a deal with law enforcement following the collapse of SBF’s exchange.
Since only Bankman-Fried has been charged thus far, there is more reason to believe that executives from both companies are cooperating with law enforcement.