Blockchain.com founder and CEO Peter Smith believes that onchain analytics will play an important role in locating missing FTX funds, although it will have its limitations.
On Dec. 20, Fox Business host Liz Claman said that the selling point of blockchain was that it makes crypto transactions transparent and traceable, asking Smith what he could track in the case of customer funds. missing from FTX.
Smith said that blockchain sleuths have already done enough work to follow the money trail, adding that it might, in fact, be the banking system where the trail could turn cold:
โThe most challenging for [blockchain analytics] The companies that are working on this today is when the money leaves the chain and enters the banking system because they can no longer track it.โ
He cited an example of when Sam Bankman-fried or associates purchased real estate as if it had originated from a bank. It would be difficult to trace those assets back to FTX or a blockchain once they leave the crypto ecosystem, she said.
The interviewer also questioned whether shadow banking was used. This is a system of lenders, brokers, and other credit intermediaries that operate outside of the realm of traditional regulated banking, which can be used to mask transactions.
Co-founder and CEO @onemorepeter talked with @LizClaman from @FoxBusiness today on how blockchain can, and cannot, play a role in tracking FTX money. https://t.co/eKY6uVbnh2
โ Blockchain.com (@blockchain) December 21, 2022
Smith explained that for funds that are still in the crypto ecosystem, on-chain analysis will be tremendously helpful to liquidators in their efforts to untangle the FTX mess "since those are records that cannot be changed or tampered with."
The things that can be traced on the chain are where FTX and its clients lost the money, such as in trading bets, liquidity farming, or where they withdrew it for real estate or venture investments. It can also be used to see how many cryptocurrency users have deposited with FTX, he added.
โA lot of the money was lost in trading positionsโฆ real estate, VC investmentsโฆ all of that happens off-chain ecosystem in crypto.โ
In a related development, FTX's new chief financial officer, Mary Cilia, said in a due process hearing on December 20 that the company had identified more than $1 billion in assets.
Related: SBF signs extradition papers, ready to face charges in the US again.
FTX reportedly located around $720 million in cash assets at US financial institutions authorized to hold funds by the Department of Justice. Cilia stated that around $130 million was being held in Japan and $6 million was being kept for operating expenses. She said most of the remaining $423 million in unauthorized US institutions is mainly in a single broker, but declined to elaborate.
prosecutors and liquidators have been going through the remains of FTX trying to recover up to $8 billion in missing customer funds.
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