FTX Used Billions in Customer Funds to Reclaim Binance Stake

According to an expert witness, FTX misappropriated billions of customer funds to reclaim Binance’s stake in the exchange.

Sam Bankman-Fried dressed as a Magician, making money disappeared.
Created by Gabor Kovacs from DailyCoin
  • FTX used billions in customer funds to reclaim Binance’s stake in the exchange.
  • An expert witness testified in court.
  • Customer funds were also redirected to other business and personal investments.

As prosecutors continue to line up witnesses against Sam Bankman-Fried (SBF) in his criminal trial, more revelations are emerging on how FTX misappropriated customer deposits.

During Wednesday’s hearing, the court learned how SBF’s company used billions of funds to buy back the entire stake that rival crypto exchange Binance held at FTX, just a day after former executive Nishad Singh testified that he “was putting himself ahead of customers” while at the exchange.

Expert Witness Reveals It All

According to Peter Easton, an accounting professor at the University of Notre Dame hired by the U.S. Department of Justice (DOJ) as an expert witness in the Bankman-Fried case, FTX used user deposits to fund investments in real estate and businesses and to make political donations.

Specifically, Easton revealed that FTX spent over a billion dollars to buy back Binance’s share in the exchange.

Assistant United States Attorney (AUSA) Nicolas Roos asked Easton, “Have you analyzed the spending out of the "Allow Negative" accounts?” Easton said “Yes,” adding that, “Over a billion dollars came from customer funds from FTX exchange,” when asked to clarify about the Binance buy-back.

But how did we get here, and did FTX spend more than Easton quoted on the buy-back move?

FTX and Binance Relationship

In December 2019, Binance announced a “strategic investment” in the crypto derivatives exchange FTX and never indicated the amount of money involved in the business move.

About two years later, when FTX imploded, Binance CEO Changpeng “CZ” Zhao revealed in a Twitter (X) post on November 6 that his exchange had received $2.1 billion in BUSD and FTT as part of Binance’s exit from FTX equity.

Whether the entire $2.1 billion came from customer funds remains unclear, but Easton clarified that the customer funds used in the buy-back were in the range of “billions.”

Read the latest developments around an FTX hacker:
Blockchain Trail Links FTX $477 Million Hacker to Russia

Stay updated on how the FTX trial unearthed a BTC price manipulation plot:
Shocking FTX Trial Unearths Bitcoin Price Manipulation Plan

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Brian Danga

Brian Danga, a Kenyan crypto reporter, is dedicated to delivering breaking news and updates from the cryptocurrency world. With a background as a Web3 writer and project manager, he recognizes the importance of unbiased reporting. Holding an LLB degree from the University of Nairobi, Brian's analytical skills contribute to his accurate news reporting. His personal interests include cooking, watching documentaries, reading, and engaging in intellectual discussions.