Peter Smith of blockchain.com believes online analytics will play a key role in finding missing FTX funds, but it has its limitations.
On December 20, Fox Business moderator Liz Claman said the advantage of blockchain is that it makes cryptocurrency transactions transparent and traceable, and asked Smith what could be tracked if an FTX customer lost funds.
Smith said that blockchain investigators are already doing a lot of work to find the flow of money, adding that it is actually the banking system, which could be a roadblock.
The most difficult thing for [blockchain analytics] firms working on this today is when the money leaves the chain and enters the banking system.”
He cited the example of when Sam Bankman-Fried or his partner purchased real estate. According to him, once these assets leave the crypto ecosystem, they become harder to track on the FTX and blockchain.
The interviewer also asked if shadow banks are used. This is a system of lenders, brokers, and other credit intermediaries that operate outside of traditional regulated banks and can be used to disguise transactions.
Co-founder and CEO @onemorepeter spoke with @LizClaman of @FoxBusiness today about how blockchain can and cannot play a role in tracking FTX money. https://tco/eKY6 uVbnh2
– Blockchain. com (@blockchain) December 21, 2022.
Smith explained that for funds still in the crypto ecosystem, on-chain analysis would be very helpful for liquidators to unravel the FTX mess.
The web can track where FTX and its clients lost money, such as trading bets, liquidity firms, or where they withdrew for real estate or venture capital investments. It can also be used to see how much crypto users have invested in FTX, he added.
“A lot of money has been lost on trading positions … Real estate, venture capital investments… All of these occur outside of the cryptocurrency network ecosystem.”
In a related development, Mary Celia, the FTX’s new CFO, said at a December 20 hearing on the proceedings that the company had disclosed more than $1 billion in assets.
Allegedly, FTX has uncovered about $720 million in liquid assets at U.S. financial institutions authorized by the DOJ to hold funds; Celia said about $130 million is being held in Japan, with the remaining $6 million remaining for operating expenses. She said most of the remaining $423 million in unauthorized U.S. institutions is held by a single broker, but declined to elaborate.
Prosecutors and liquidators are searching the wreckage of FTX and trying to recover $8 billion in missing client funds.