Some FTX customers were told to send wire transfers through Alameda - report

Sam Bankman-Fried's crypto exchange FTX reportedly found a way to win access to regulated banks by using his trading firm, Alameda Research, as a sort of intermediary. Generally, lenders were unwilling to engage with crypto firms including FTX given their high risk profiles. In an effort to circumvent that issue, FTX and Alameda shared a tangled relationship, in which some FTX customers were told to send wire transfers through Alameda, which was allowed to have accounts at digital asset-focused bank Silvergate Capital ( SI ), Bloomberg reported, citing people with knowledge on the matter. Silvergate ( SI ) stock, meanwhile, slid 8.8% in after-hours trading. The Federal Reserve member bank, which allows its customers to transfer fiat currency such as U.S. dollars into crypto exchanges, recently disclosed that its exposure to FTX was less than 10% of its digital asset customer deposits totaling $11.9B as of September 30. The people added that some FTX customers kept sending wire transfers as recently as 2022. FTX, which filed for Chapter 11 bankruptcy protection earlier in November, did not immediately respond to Seeking Alpha's request for comment. The FTX-Alameda relationship was one of the first and primary triggers that ended up imploding SBF's crypto empire, so this news further spotlights their financial arrangement amid concerns about the misuse of client funds. “It’s very bad practice and risk management in any book to mingle your customer funds with counterparty funds and other funds,” Alma Angotti, a partner at consulting firm Guidehouse, told Bloomberg. “This is a complicated set of facts and it’s hard to say at this point what was violated. It’s bad risk management and it’s sloppy at the very least.” Previously, (Nov. 25) Morgan Stanley said Silvergate faces "wide range of outcomes and risks" from FTX fallout .