FTX and Alameda, its sister company, colluded from the start to settle financial problems before it went bankrupt, according to Bloomberg.
Due to a lack of regulatory monitoring, banks have been unwilling to work with crypto exchanges; hence FTX is having difficulty obtaining its banking partner to process fiat transactions. The company has addressed this issue by processing bitcoin exchange transactions through the sister company’s bank account.
Allegations of banking loophole abuse surfaced last week when bankruptcy proceedings revealed that FTX owned a stake in a small bank in Washington state through sister company Alameda. Many people believed at the time that the investment in the rural bank was made to avoid the requirements of obtaining a banking license.
According to reports, some consumers were encouraged to wire their money through Alameda, which has a banking connection with fintech bank Silvergate Capital.
The clash between Alameda and FTX over the customer’s fund became the primary source of failure later on. Bankman-Fried asserted that while FTX never gambled with its customers’ money, it did lend it to Alameda. According to reports, the previous CEO stated that Alameda had adequate collateral to support the loans, but most of it was in the FTX native token, FTT.
The extent of the misconduct in using Alameda’s banking accounts for the client deposits is determined by the agreement between the bank and Alameda. Silvergate responded in a statement to Bloomberg that the bank does not comment on customers or their actions as a matter of policy.
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