FTX Paid $25M to Whistleblowers Before Collapse, Reveals Examiner’s Report

The now-defunct cryptocurrency exchange FTX has been exposed for making payments worth more than $25 million to six whistleblowers who discovered problems with it.

Meanwhile, FTX still owes about $11 billion to investors who lost money after the stock market crash.

Examiner's report reveals whistleblower payments

According to a report released by examiner Robert Cleary on Thursday, one of the unnamed whistleblowers was an executive at FTX.US. They revealed that FTX Group misled regulators and investors and lacked a proper corporate structure. They then wrote to former CEO Sam Bankman-Fried, former FTX engineer Nishad Singh, and former FTX lawyer Dan Friedberg, to express their concerns.

Upon receiving the letter, Friedberg told the whistleblower that he should not have written it, especially since FTX Group may not meet investors' expectations. He also recommended that the whistleblower apologize to Bankman Fried. According to the report, the whistleblower resigned in September 2022 and received a settlement worth more than $16 million.

Separately, another whistleblower made allegations of market manipulation and insider trading. After less than two months of working at FTX.US, and receiving a salary of $200,000, they later received a settlement worth $1.8 million.

A third was offered a $200,000 settlement after alleging market manipulation and “concealing the relationship.”

The examiner's report revealed that FTX Group did not maintain an updated or comprehensive roster of employees at the time of the bankruptcy filing. In addition, many employees resigned informally, through signals or word of mouth.

Bankruptcy Judge John Dorsey appointed Cleary, who prosecuted the Unabomber case in the late 1990s, as examiner after an appeals court ruled in January that FTX should undergo an investigation by an independent investigator.

FTX's Brett Harrison responds to the Examiner's report

Several former employees resigned before the stock market crash, including former FTX.US Chairman Brett Harrison, who resigned in September 2022, and former Alameda co-CEO Sam Trabucco, who left in August 2022.

Response to Examiner's Report, Harrison to publish on social media site X on Thursday, although he did not explicitly deny being a whistleblower. He said he did not receive the $16 million and did not enter into any settlement of his exit agreement, which could be verified.

Harrison said he was allowed to retain a portion of his shares in the company upon his departure, and his exit agreement included standard non-disparagement and non-disclosure provisions.

FTX collapsed in November 2022 and has gone through the bankruptcy process since then. A year later, a New York jury found Bankman-Fried guilty of all seven criminal counts of defrauding FTX clients, lenders and investors. He was subsequently sentenced to 25 years in prison.