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

The now-defunct crypto exchange FTX has been exposed for making payments worth over $25 million to six whistleblowers who discovered issues with it.

Meanwhile, FTX still owes around $11 billion to investors who lost money after the exchange collapsed.

Examiner’s Report Exposes Whistleblower Payments

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

Upon receiving the letter, Friedberg told the whistleblower that he shouldn’t have written it, especially because the FTX Group might not meet investor 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 employment at FTX.US, earning a $200,000 salary, they later received a settlement worth $1.8 million.

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

The examiner’s report revealed that the FTX Group did not maintain an up-to-date or comprehensive list of employees at the time of the bankruptcy filing. Additionally, 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 had to undergo investigation by an independent examiner.

FTX’s Brett Harrison Responds to Examiner’s Report

Several former employees resigned before the exchange’s collapse, including former FTX.US President Brett Harrison, who quit in September 2022, and former co-CEO at Alameda Sam Trabucco, who left in August 2022.

Responding to the examiner’s report, Harrison posted on the social media site X on Thursday, although he did not explicitly deny being a whistleblower. He argued that he was not paid $16M and did not enter into any settlement for his exit agreement, which could be verified.

Harrison said he was permitted to keep a portion of his equity in the company upon leaving, and his exit agreement included standard non-disparagement and non-disclosure provisions.

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