FirstFT: Bankman-Fried’s ‘personal fiefdom’

FTX founder Sam Bankman-Fried ran the cryptocurrency exchange as his “personal fiefdom” before it imploded, according to a lawyer working on the bankruptcy, with “substantial amounts of money” spent on items unrelated to the business such as vacation homes in the Bahamas.

The company filed for US bankruptcy protection on November 11 as its customers fled and executives discovered billions of dollars in missing funds, exacerbating turmoil in cryptocurrency markets.

“We have witnessed one of the most abrupt and difficult collapses in the history of corporate America” — James Bromley, partner at Sullivan & Cromwell, in a US court hearing

Lawyers charged with winding down FTX are attempting to identify a complex web of assets in order to repay creditors. The case has been dogged by allegations of misconduct and major governance failures, as well as a jurisdictional dispute between the US and the Bahamas, where FTX’s small inner circle ran the business.

According to the company, FTX’s overall valuation peaked at $40bn — $32bn for its international business and $8bn for its US operations based on funds raised from venture capital investors.

Bromley said the bankruptcy team had found that “substantial funds” were transferred from the exchange to Bankman-Fried’s crypto hedge fund Alameda Research, and “substantial amounts of money were spent on things not related to the business”.

In a letter to former employees, Bankman-Fried wrote that he “did not realize the full extent of the margin position, nor did I realize the magnitude of the risk posed by a hyper-correlated crash”.

Five more stories in the news

1. Russia threatens to restrict western Europe gas flows Gazprom, Russia’s state-backed gas pipeline monopoly, accused Ukraine yesterday of taking gas meant for Moldova from lines running through the country and warned that it may reduce supplies from November 28.

2. Glazers weigh up Manchester United sale The club’s US owners are searching for outside investments and considering a sale, potentially making it the latest prestigious team in the lucrative Premier League to go on the market in recent months. Yesterday’s confirmation came as United announced Cristiano Ronaldo’s departure after the Portuguese star claimed in an interview that the Glazers “don’t care about the club”.

3. Openreach cutbacks hit UK future projects BT’s networking division will limit its investment in the rollout of ultrafast fibre broadband as the group seeks to curb costs and get “bang for its buck” with UK inflation running at its highest level in four decades.

4. Iran to expand nuclear enrichment programme Tehran has announced an expansion of its programme in response to a rebuke by the UN’s watchdog over the alleged existence of undeclared nuclear sites. The head of the Atomic Energy Organization of Iran yesterday said it had added the underground Fordow facility to the list of locations where it was enriching uranium to the 60 per cent purity level, just below weapons grade.

5. Labour plans to extend UK devolution A Labour party review of the constitution by former prime minister Gordon Brown is set to recommend banning second jobs for MPs, beefing up the Electoral Commission and extending further devolution to both the English regions and the parliaments in Scotland, Wales and Northern Ireland.

The day ahead

Ruling on Scottish independence vote The UK Supreme Court delivers its judgment on whether a second independence referendum can take place without Westminster’s approval. The expectation is that the court will rule against the proposal put forward by first minister Nicola Sturgeon. (Sky)

Cyril Ramaphosa in London The South African president’s UK tour is the first state visit for King Charles III since he became monarch following the death of Queen Elizabeth II. (Reuters)

Economic indicators S&P Global publishes its manufacturing and services purchasing managers’ indices for the EU, France, Germany, the UK and the US. Analysts expect the eurozone’s PMI to contract despite an expansion in its economy in the third quarter. South Africa also releases October consumer inflation, which is forecast to fall slightly to 7.4 per cent year on year from 7.5 per cent the month before. The US has durable goods and new home sales data for October. (FT, Bloomberg)

Central banks Sweden’s Riksbank holds its monthly monetary policy meeting, while in the US, the Federal Reserve publishes minutes from its November meeting, where officials raised the target federal funds rate by three-quarters of a percentage point.

World Cup Morocco and Croatia go head to head at 1pm local time, while Germany and Japan kick off at 4pm local time. Follow our latest coverage of the football tournament here.

What else we’re reading

The market needs to deliver the green transition faster Suppose it was more profitable to use solar, wind or other renewable sources of energy than fossil fuels. Market forces would then drive the transformation of economies in a climate-protecting direction on their own. Is that the world we live in, Martin Wolf asks, and if not, how might we create it?

‘Immunity debt’ is a dangerous concept There’s speculation that pandemic mitigations, including lockdowns, have created a harmful “immunity debt”, with children left vulnerable through a lack of exposure to the usual cut and thrust of viral infections. Anjana Ahuja argues there is no evidence that an individual is worse off for having avoided earlier infection.

This £6.5bn Bulb blowout is still in the dark The energy supplier went pop last November owing to rising wholesale gas and power prices and inadequate hedging. Then last week, the Office for Budget Responsibility put the total cost of Bulb’s bailout at £6.5bn — sparking alarm at the soaring tab and lack of transparency. Helen Thomas asks, why the secrecy?

How retailers are reshaping advertising They’re barely noticeable, but promoted items on digital sales platforms are at the vanguard of an industry worth tens of billions of dollars. Today, their dominance is part of a broader shift away from bricks and mortar that gives consumer brands powerful new ways to reach shoppers.

Immigration overshadows UK economy worries After Boris Johnson’s rambling speech last year in which Peppa Pig made an unexpected appearance, business leaders at this week’s CBI conference were grateful for signs of normality. But Prime Minister Rishi Sunak offered little in the way of comfort on pleas for help with visas to address worker shortages.

Fashion

Clothes are always a costume. And there is no costume more traditional, or more stagy, for people in power than the costume of indifference, such as that worn by FTX founder Sam Bankman-Fried, writes Robert Armstrong.