What blockchain analysis can and can’t do to find FTX’s missing funds: CEO of Blockchain.com
What blockchain analysis can and can’t do to find FTX’s missing funds: CEO of Blockchain.com
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Blockchain.com Founder and CEO Peter Smith believes that on-chain analysis will play a significant role in locating the missing FTX funds, although it will have its limitations.
On Dec. 20, Fox Business host Liz Claman said that blockchain’s selling point is that it makes crypto transactions transparent and traceable, and asked Smith what she could trace back in the case of FTX’s missing client funds.
Smith said that blockchain sniffer dogs have already done some work chasing the trail of money, adding that it could actually be the banking system where the trail could go cold:
“The biggest challenge for [blockchain analytics] Companies that work on it today is when money flows off the chain into the banking system because they can no longer track it.”
He gave an example when Sam Bankman-Fried or associates bought real estate because it would come from a bank. These assets are difficult to trace back to FTX or a blockchain once they exit the crypto ecosystem, he said.
The interviewer also questioned whether shadow banking was being used. This is a system of lenders, brokers and other credit intermediaries operating outside the realm of traditional regulated banking that can be used to obfuscate transactions.
Co-founder and CEO @onemorepeter spoke with @LizClaman from @FoxBusiness today on how blockchain can – and cannot – play a role in tracking FTX money.
– Blockchain.com (@blockchain) December 21, 2022
Smith explained that for liquidators still in the crypto ecosystem, on-chain analytics will be tremendously helpful in their efforts to unravel the FTX chaos “since these are records that cannot be altered or altered “.
Things that can be tracked down the chain are where FTX and its clients lost the money e.g. B. in trading betting, liquidity farming or where they have withdrawn it for real estate or venture investing. It can also be used to see how much crypto users have deposited into FTX, he added.
“A lot of the money was lost in trading positions… real estate, venture capital investments… all of this is happening outside of the on-chain ecosystem in crypto.”
In a related development, FTX’s new chief financial officer, Mary Cilia, said in a hearing on Dec. 20 that the company had identified over $1 billion in assets.
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FTX has reportedly located approximately $720 million in cash assets in U.S. financial institutions authorized by the Department of Justice to hold funds. Cilia stated that around $130 million was retained in Japan and $6 million for operating expenses. She said most of the remaining $423 million in unauthorized US institutions is primarily with a single broker, but declined to elaborate.
Prosecutors and bankruptcy trustees have been trawling through the FTX wrecks, trying to recover up to $8 billion in missing client funds.
