3 - 5 minute read
A Delaware judge has ruled that FTX’s trading arm Alameda Research should receive nearly $53 million for a loan initially made to Deltec International Group in 2021. The case is part of a broader attempt by the court to unwind the affairs of FTX after it filed for bankruptcy last November. However, the process has been complicated by a lack of reliable records kept by the crypto exchange. During the trial, it emerged that the director of a further company called Norton Hall, Ryan Salame, had approved the loan contract that FTX Digital Markets had signed with Deltec. Salame himself never held the position of director of Norton Hall nor was he authorized to act on behalf of the company.
The payment, originally made from Alameda to Deltec, was for 50 million USDT, Tether’s stablecoin pegged to the U.S. dollar. Deltec, a Cayman Islands company, serves stablecoin firm Tether’s banking arm. Bankruptcy judge John Dorsey has directed Deltec to pay Alameda $52,859,644 plus $10,538 in interest each day. However, bankruptcy expert John J. Ray III, who recently took over as CEO of FTX, has complained about poor governance before his tenure. In fact, Ray stated in a filing on Sunday that Alameda had fabricated portfolio reports, and the company’s financial transactions and loan records were inaccurate, contradictory, or missing entirely.
FTX’s filing for bankruptcy in November 2022 caused much controversy, with many investors and traders questioning the exchange’s leadership and governance practices. This incident with Alameda only exacerbates these concerns as the courts attempt to unwind FTX’s affairs. John J. Ray III has voiced his criticism of FTX’s prior leaders’ lack of governance repeatedly. The fact that Alameda fabricated portfolio reports and FTX’s financial transactions and loan records were inaccurate, contradictory or missing entirely raises questions surrounding the reliability of crypto exchanges and highlights their need for transparency and responsible governance.
This ruling has implications for traders who may have invested in FTX or Deltec. It is a clear indication that governance is a crucial factor for exchanges when it comes to financial reporting and transparency. Traders and investors must pay close attention to the governance practices of the exchanges they use to invest in cryptocurrencies to avoid a similar fate to FTX.
Traders are advised to diversify their investments across several exchanges to minimize their risk. They should also conduct extensive research into the governance practices of the exchanges they use to ensure that they meet the necessary standards. Furthermore, traders should keep themselves updated on the latest news about any exchanges they have invested in to be aware of any potential risks or opportunities that may arise.
The Bottom Line
This court ruling raises questions about the importance of governance practices and transparency for cryptocurrency exchanges. The lack of reliable records kept by FTX and fabricated portfolio reports by Alameda indicate a lack of responsible leadership and working practices. As such, traders must remain vigilant and conduct extensive research when selecting exchanges to invest in. By diversifying their investments and keeping abreast of the latest developments, traders can minimize their risk in the ever-changing world of cryptocurrencies.
