FTX insider turned on Sam Bankman-Fried days before bankruptcy, flagging potential fraud to regulators

Days earlier than FTX’s chapter submitting final month, co-CEO Ryan Salame advised Bahamian authorities that founder Sam Bankman-Fried could have dedicated fraud by sending buyer cash from the crypto alternate to his different agency, Alameda Research.

According to a submitting on Wednesday tied to FTX’s chapter proceedings, Salame disclosed “possible mishandling of clients’ assets” by Bankman-Fried. The letter included within the submitting was dated Nov. 9, and was despatched from the Securities Commission of the Bahamas to the commissioner of police. FTX declared chapter on Nov. 11.

The disclosure on Wednesday marks the primary public acknowledgement of an insider turning on Bankman-Fried, who was arrested within the Bahamas on Monday after the U.S. Attorney for the Southern District of New York shared a sealed indictment with the Bahamian authorities. The indictment, unsealed on Tuesday, charged Bankman-Fried with eight prison counts associated to fraud, cash laundering and improper use of buyer funds.

Salame advised regulators that solely three people at FTX — Bankman-Fried, Nishad Singh and Gary Wang — had the form of entry and authority to engineer the presumably fraudulent transfers to Alameda, a hedge fund and buying and selling agency. Salame stated he suggested Bankman-Fried and Alameda executives that the doable mishandling of buyer funds, which have been commingled with Alameda, was opposite to “normal corporate governance.”

Salame’s LinkedIn profile says he is based mostly within the Bahamas. He additionally has a number of residences within the U.S., with properties in Massachusetts, Washington, D.C., and New Jersey. He had departed the Bahamas for the U.S. by Nov. 9, in response to the letter.

Like Bankman-Fried, Salame was a major political donor, donating $20 million to Republican causes.

— CNBC’s Brian Schwartz contributed to this report.