Could the trail to more than $10 billion missing from Sam Bankman-Fried’s collapsed FTX crypto exchange lead through Australia?
New documents suggest that weaknesses in national regulation of financial services might have made Australia an ideal place for an enterprising cryptocurrency launderer to strike.
ASIC did not answer questions about whether its winding up of FTX had been so poorly overseen it could have aided Mr Bankman-Fried or other company directors should they have wanted to funnel creditors money out of Australia after the collapse.
“We are not aware of any evidence they did,” the regulator said.
An internal ASIC group chat held as it was planning FTX Australia’s liquidation paints a franker picture. One executive suggested contacting the money laundering regulator for help and was told: “They know less than we do”.
Mr Bankman-Fried stands accused of directing billions in customer deposits out of the cryptocurrency exchange he founded in the Bahamas, which came to a halt in November when his customers started taking out too much all at once.
FTX’s business spans 134 companies and nearly 27 countries and owes money to an estimated nine million people.
One company was still standing in Australia this week and appeared free of government control: Alameda Research. Mr Bankman-Fried was still its director.
Though Mr Bankman-Fried had bought his financial services license from another company and not applied for his own, the company did not receive any serious penalty until its collapse.
Alameda was key
According to documents filed in an American bankruptcy court, the company’s debts and assets are somewhere between $10 billion and $50 billion, or equal to those of the broader crypto empire.
So far Australian liquidators have identified about $40 million for recovery, but thousands of former FTX customers have said they fear they might lose out.
Alameda was a wing of the company run by Mr Bankman-Fried’s girlfriend, Caroline Ellison, responsible for making large, very risky investments which eventually brought down the crypto empire, according to the US Department of Justice.
Mr Bankman-Fried is alleged to have given his girlfriend’s business billions out of customer deposits, before she ploughed it into losing investments.
Despite this, the Australian Alameda company still has not been shut and was allowed to go to the American state of Delaware to declare bankruptcy, unlike other FTX Australia companies.
“I don’t know how that was decided,” liquidator John Mouawad told The New Daily on Tuesday.
ASIC did not respond to the same question.
But a source said this had the effect of placing Alameda in a kind of international legal no man’s land.
Since the global financial crisis, financial treaties have stopped companies undergoing liquidation in America from doing business here.
“It’s not the same with crypto – it’s smoke and mirrors,” the source said, of non-bank transactions.
ASIC allowed FTX to trade for a month after it was placed into administration on November 16 but only so it could cash out customer accounts.
A few days earlier, an unknown FTX employee in an unknown country is alleged to have delivered a final insult when they stole $600 million from customers.
Licensed to shill
A licence to send money offshore without triggering money laundering alarms would appear to have been essential for any crypto business in Australia.
FTX bought its from the shaggy-haired crypto entrepreneur and founder of Finder, Fred Schebesta.
“I’m not sure of the dealings they did after we sold it,” Mr Schebesta told The New Daily.
“We had zero involvement after we sold the business.
“Is that clear?”
Under the most recent term of government, suspicious cryptocurrency transactions alerts more than quadrupled in three years to reach more than 8000. But money laundering punishments have been exceedingly rare.
Before ASIC put FTX Australia into administration a staff member notes her concerns about the whereabouts of its executives after reports question the exchange’s solvency and when a number for Chris Chen from the FTX compliance division rings out.
“It was not set up for voicemail,” they said. “Given it sounded like his phone was off I am not hopeful of a call back anytime soon.”
A reply follows from a senior staff member: “Thanks for sharing”.
Later a “senior specialist” at ASIC emails notes of a claimed account of a conversation also held with Chris Chen in the Bahamas which includes an assurance that the company is “in compliance” and can provide proof by the end of the week.
FTX entered Chapter 11 bankruptcy days later but it was not placed into administration here for another seven days.
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