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Conor Grogan, the Director at the crypto exchange Coinbase, tweeted about the “questionable FTXUS redemption system” in response to the disgraced FTX founder Sam Bankman-Fried’s claim that FTXUS has “hundreds of millions of dollars in excess of customer balances.”
Grogan tweeted that the FTXUS redemption system that the traders used to “funnel 10s millions out of the exchange” might have an impact on the questioning of the FTX – FTXUS separation claims:
From November 9th until withdrawals were halted a few days later, traders may have used a questionable FTXUS redemption system to funnel 10s of millions of out the exchange
— Conor (@jconorgrogan) January 17, 2023
This may complicate bankruptcy proceedings and further call into question FTX->FTXUS separation claims 🧵
Notably, on January 17, SBF declared that FTX “was always solvent,” arguing that the exchange holds millions from the customer funds, despite the FTX debtors’ claim that “there is a substantial shortfall of digital assets” at both FTX.com and FTX US.
Significantly, Grogan narrated how the “toxic redemptions” were extremely costly to the FTXUS estate, losing over $40 million, by explaining the risks of Sollet BTC backed by “FTX’s insolvency:”
The problem is, Sollet BTC was backed by ‘FTX’s solvency.’ We don’t know if there was ever a ‘proof of reserves’ of a 1:1 backing of BTC. You know where this is going.
Has been notified by Grogan that the traders became aware of the risks, and sooner the “peg broke.” However, he added that FTX would redeem Sollet assets 1:1 even after the plummet of the market price. As per his words, the agreement between FTXUS and Sollet/FTX is unclear.
Interestingly, Grogan ended his series of tweets with the revelation of the “FTX exploiter’s” transaction of more than 3K FTXUS Sollet BTC balance, which he transacted back to FTXUS within hours, commenting that the former has no idea about the agenda behind the deed.
Responding to Grogan’s tweets, SBF commented that he is confident that “FTX US’s excess cash on hand is much larger than the size of the wrapped asset issue to the extent there is one.”