Reuters reports that crypto exchange FTX is missing more than €970 million in customer funds. Founder and CEO Bankman-Fried allegedly moved as much as €9.7 billion to his own investment company.
The founder previously transferred $10 billion in customer funds to Alameda Research, a personal investment company. The whereabouts of $1 billion to $2 billion are currently unknown.
The missing amount was discovered when Bankman-Fried disclosed financial details to FTX executives last week. The report revealed that the CEO had built a “backdoor” into the crypto exchange’s accounting system.
The backdoor allowed Bankman-Fried to execute commands and change the company’s financial records without alerting others, including external auditors. This allowed the $10 billion transfer to go undetected without anyone being able to intervene, Reuters reports.
FTX’s problems arose when the crypto exchange appeared to be connected to Alameda Research. FTX’s liquidity turned out to be much lower than thought, prompting the CEO of Binance — FTX’s largest competitor — to sell his share of FTX’s cryptocurrency.
Many others followed suit, causing the price to drop significantly. Binance initially tried to help FTX, but renounced after examining the books.
Bankman-Fried has resigned as executive. The former CEO is under investigation by the national police of the Bahamas, where FTX headquarters are located. The crypto exchange is technically bankrupt and has filed for Chapter 11 protection. FTX was placed under the control of a trustee.