Could the trail to the $10 billion allegedly missing from Sam Bankman-Fried’s collapsed FTX crypto exchange lead through Australia?
New documents covering ASIC’s response to the FTX collapse suggest our regulation of financial services might make Australia the ideal destination for any launderer of cryptocurrency.
ASIC did not answer questions about whether its suspension and liquidation of FTX had been poorly structured and could have even provided a path for any director of a company determined to hide money from creditors.
“We are not aware of any evidence they did,” the regulator said.
But the freedom-of-information release of an internal ASIC group chat held as staff planned FTX Australia’s winding up provides a different inside view.
One executive suggested contacting the federal money laundering regulator for advice before she was told in reply: “They know less than we do”.
Winding search
Mr Bankman-Fried stands accused of fraudulently directing billions in customer deposits out of the cryptocurrency exchange he founded in the Bahamas, which came to a halt in November when customers started withdrawing cryptocurrency in large numbers.
FTX’s business spans 134 companies and nearly 27 countries and owes money to an estimated nine million people.
One was still standing in Australia this week and seemingly free of any regulatory restraints: Alameda Aus Research, of which Mr Bankman-Fried remains the director.
His service in the Australian corporate world began only 18 months ago when he was appointed the director of FTX Australia on the same day that Guofei Chen, a Chinese national, resigned his post.
Previous company shareholders include two Russian younger relatives of the Governor of Rostov, a staunch ally of Vladimir Putin’s currently sanctioned by the US State Department.
Alameda is key
Alameda Aus’ debts and assets are listed at somewhere between $10 billion and $50 billion, or equal to those of the broader FTX empire.
So far Australian liquidators say they might reclaim about $40 million in recovered assets from FTX’s local companies, which still would leave thousands of customers financial victims.
Alameda companies have been the focus of early asset recovery efforts in other countries and were allegedly used to funnel resources by Mr Bankman-Fried.
Alameda was a trading company run by Mr Bankman-Fried’s girlfriend, Caroline Ellison, responsible for making large, very risky purchases totaling $10 billion which eventually brought down the crypto empire, according to the US Department of Justice.
Because the Australian Alameda company filed for bankruptcy in Delaware unlike other FTX Australia companies, some Australian customers fear they will receive no compensation.
“I don’t know how that was decided,” liquidator John Mouawad said of the overseas restructurings.
ASIC wouldn’t say if the arrangement could have theoretically allowed Mr Bankman-Fried to have continued directing Alameda Aus in the days before liquidators were appointed and before his arrest more than three weeks later.
Lines
Since the global financial crisis, international treaties have banned companies undergoing liquidation in America from traveling to Australia to trade.
“It’s not the same with crypto – it’s smoke and mirrors,” a source said, of controlling non-bank transactions.
ASIC allowed FTX to trade for a month after its license was suspended on November 16 but on the condition that it could only pay out customer accounts.
The bankruptcy filing was followed by a report an unknown FTX international employee had allegedly ‘hacked’ $550 million from customers.
But Australian auditors only began the process of applying for access to company bank accounts 24 hours after that hack, the emails show.
Thanks for sharing
On the eve of FTX’s collapse, one ASIC staffer reads a Financial Review report questioning FTX’s solvency and becomes concerned when a phone number for Chris Chen from the company’s compliance division does not begin to ring.
“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 senior bureaucrat replied: “Thanks for sharing.”
That afternoon a “senior specialist” at ASIC emailed notes of a claimed conversation also held with Mr Chen in the Bahamas which includes an assurance that FTX can prove it is “in compliance” in a few days.
They get a week but collapse almost immediately.
Licensed to shill
A license allowing money to be sent offshore without triggering money laundering alarms is essential for international businesses especially those dealing in cryptocurrency.
FTX bought its transaction license from a company directed by the shaggy-haired crypto entrepreneur and the founder of Finder, Fred Schebesta, a bankruptcy court was told.
“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?”
It’s not clear if the licenses and their use have been actively monitored in recent years.
Suspicious cryptocurrency transaction alerts across Australia have more than quadrupled in three years to reach more than 8000.
Investigations into FTX’s assets are continuing and will likely be followed by a lengthy legal battle.
