FTX exchange mishandling funds on a grand scale

BloombergNovember 10, 2022

Sam Bankman-Fried reportedly borrowed his trading company Alameda Research billions of dollars from his FTX platform, including more than $8 billion in customer cash. This action is believed to have precipitated FTX's complete implosion. According to a report published by the Wall Street Journal (WSJ) on Thursday, November 10, this is the case.
Bankman-Fried told an investor this week that Alameda owes FTX about $10 billion, and that the FTX CEO has called his decision to use customer funds to support Alameda a lapse in judgment, according to the report. In total, FTX had $16 billion in customer assets, the report stated, meaning FTX lent more than half of its customer funds to Alameda, totally against its own Terms of Service.
The WSJ article comes a day after it was reported that federal regulators were reportedly looking into FTX for, among other things, suspected consumer money handling errors and the company's connections to Alameda. It appeared earlier this week that rival cryptocurrency trading platform Binance might buy FTX to save it. However, it took just two days of due diligence — and reports of regulatory investigations and mishandled customer funds — for Binance to walk away from the deal.
As it stands right now, it seems that FTX will undergo bankruptcy proceedings, meaning that funds of Several high-profile market makers, hedge funds, crypto project treasuries and countless of retail market participants are frozen. Taking a look at a similar fiasco in 2013 with Mt. Gox, this can take quite a while, as the proceeds are still not paid out in 2022.
Fourstacks opinion echoes one of a famous Bitcoin proponent Andreas Antonopoulos: ‘Centralized Crypto Exchanges are like public bathrooms; you use them and you leave’. However, many don’t. It is frustrating to see that one of the biggest exchanges in the world can defraud customers on such a scale in an industry that is supposed to do the opposite.
Time and time again, blockchains survive, blocks get built and the core properties of blockchains shine. Time and time again though, centralized actors take advantage of the space and build opaque businesses on top of this industry and take it for a ride. Whether it's Mt. Gox, Cryptsy, Cryptopia, Quadriga, Voyager, Celsius, Babel or BlockFi, its all the same.
Fourstack holds zero exposure to the FTX International or FTX US Exchange, nor does it lend out customer funds to any other centralized party. We have zero exposure to the FTX ecosystem, from bridges like Wormhole or Stargate, blockchains such as Aptos or Solana, the FTT token, or projects built on these blockchains.
We use risk management to employ funds solely on decentralized blockchains and use the blockchain to support projects on the blockchain, fully open-source, 24/7 to showcase exactly where your funds are at any time. When building this, we agreed that was pivotal, however, as more time goes on, it is showcased how important this truly is.