February 7, 2023

FTX executives have expressed concern about the use of client funds, according to the documents

Lawyers for Wang and Mr. Singh declined to comment. Ms. Ellison’s lawyer did not respond to a request for comment. A spokesperson for the US Attorney’s Office for the Southern District of New York, which is leading the criminal investigation into FTX, declined to comment.

Bankman spokesman Fred declined to comment.

The government communications came at a relatively early stage in the Bankman Fried investigation, before Ms. Ellison and Mr. Wang pleaded guilty, and it is possible that prosecutors’ understanding of some details of the case may have developed.

But according to the documents, in 2020, an FTX software developer known as CC-1 made a query in the company’s database and learned that Alameda had a negative balance in exchanges of “nearly hundreds of millions of dollars.” The data led CC-1 to conclude that Alameda was “improperly using FTX.com client funds,” according to the documents.

The CEO raised the issue with Mr. Bankman-Fried, who replied that “it’s okay,” the documents say, because the money Alameda borrowed was backed by FTT, a cryptocurrency invented by FTX.

Around the same time, FTX was under audit, according to the documents, and Alameda’s high-ranking CEO Bankman-Fried asked if the auditors would raise any concerns about Alameda’s use of client funds. The documents show that “Benckman-Fred replied that auditors do not usually focus on such issues.”

Concerns about Alameda intensified at one point last September. The company had recently lost about $5 billion, and Bankman-Fried discussed the possibility of shutting it down, according to the documents.

Around that time, the documents say, a software developer known as CC-1 told the other software developer, called CC-2, that Alameda had borrowed approximately $13 billion from FTX.