Hush Money and Huge Purchases: FTX Saga Laid Bare in New Report

Sam Bankman-Fried may now be behind bars, but the FTX saga continues.

The disgraced entrepreneur has reportedly been shuffled to a new prison as he attempts to appeal a 25-year sentence for fraud. Other executives are awaiting their fate. And a new 230-page report has shed fresh light on the circumstances that led to the exchange's collapse.

One particularly staggering revelation in the damning dossier written by examiner Robert J. Cleary reveals that $25 million was paid to seven whistleblowers who had made allegations of improprieties within the group. 

Among them was an FTX US executive who wrote a letter to Bankman-Fried, as well as the doomed company's head of engineering Nishad Singh, to claim that regulators had been misled — and there was an inadequate corporate structure. They were told that the letter shouldn't have been written, and SBF was owed an apology. That whistleblower ended up resigning in September 2022, two months before FTX collapsed, after reaching a settlement of $16 million.

Another received $1.8 million after raising concerns about market manipulation and insider trading, despite the fact they had worked at FTX US for less than two months.

The report also makes uncomfortable reading for Ryan Salame, the former co-CEO of FTX, who is due to be sentenced this week for crimes including violating campaign finance laws. Prosecutors want him to receive up to seven years behind bars. According to the examiner, Salame:

"Misappropriated FTX Group assets to buy real estate, restaurants, and food service companies, and to make other purchases and investments, including a private jet; and withdrew millions of dollars from his FTX.com account shortly before FTX.com halted customer withdrawals. The debtors also identified millions of dollars of FTX Group-funded political contributions made by Salame."

There was better news for Sullivan & Cromwell, the law firm that served as FTX's primary bankruptcy counsel. Although one of its partners had told Voyager Digital that the exchange's finances were "rock solid" just four days before its collapse, the examiner concluded S&C was not complicit in the fraud.

All of this will be a moot point for FTX customers, who are still awaiting to be compensated. While much has been made of the fact that they'll be repaid in full, this doesn't tell the whole story. Why? Because crypto payments will be made based on each digital asset's value back on Nov. 11, 2022.

Bitcoin was worth $17,000 then — it's nudging $70,000 now. Ether was languishing at $1,287, a far cry from the $4,000 recently seen following the SEC's approval of exchange-traded funds based on its spot price. It's especially painful if you had Solana tied up in an FTX account. That was valued at about $17 when withdrawals were abruptly frozen. Fast forward to now, and SOL is worth 10 times more than that.