Little-known company with strange website was instrumental in misappropriating money from FTX clients, regulators say

TECHNOLOGY
featured image

Among the 130 or so companies in Sam Bankman-Fried’s vast crypto empire, North Dimension Inc. assumed a low profile. Unlike FTX, its name was not plastered on billboards or sports arenas, and its business was not promoted by celebrities.

Still, North Dimension played a crucial role in the FTX mess, regulators now say. In fact, they claim, the little-known company was instrumental in the stealthy misappropriation of funds from FTX clients.

As a subsidiary of Alameda Research, the crypto hedge fund and trading firm also founded by Bankman-Fried, North Dimension was where FTX customers were instructed to transfer money if they wanted to trade on its exchange, according to a complaint filed in Wednesday by the Securities and Exchange Commission.

But North Dimension Inc. it also appears to have been a fake online electronics retailer, an NBC News investigation has found. Your website, now deactivated, is archived on the internet.

That SEC complaint, against former Alameda CEO Caroline Ellison and former FTX co-founder Gary Wang, said that money transferred to North Dimension by FTX clients for their own use ended up funding Alameda’s business activities and other Bankman-Fried ventures.

“Bankman-Fried instructed FTX to have customers send funds to North Dimension in an effort to hide the fact that the funds were being sent to an account controlled by Alameda,” the SEC said in the complaint. North Dimension’s website did not reveal any connection to Alameda, the regulator added.

Nor did the now-defunct North Dimension website mention any link to Bankman-Fried. Instead, the company claimed to sell cell phones, laptops and other similar items from the same Berkeley, Calif., address that housed FTX US. “Our vision is to make the most popular website for purchasing cell phones and electronics by offering complete product information and a transparent purchasing procedure,” North Dimension’s archived website stated.

The Northern Dimension was not the Crazy Eddie of cryptocurrency. The site is riddled with misspellings and bizarre product pricing; for example, item listings sometimes showed “sale” prices that were hundreds of dollars above the regular price. And customers who find their way to the site may have had trouble purchasing products once they got there. Clicking on a laptop, say, would generate this pop-up: “Free fee to send a message. We collaborate with ambitious brands and people; we would love to build something great together.”

It was not possible to determine why FTX or Bankman-Fried appear to have created a fake online electronics retailer called North Dimension Inc., to which FTX customers were advised to send their money. A representative for Bankman-Fried declined to comment.

Bankman-Fried was indicted earlier this month and extradited from the Bahamas, where he has been holed up since his company collapsed in early November last week. He is under house arrest at his parents’ California home after posting bail. His former colleagues Ellison and Wang pleaded guilty to federal fraud charges on Wednesday in the Southern District of New York.

‘Eliminating counterfeits’

FTX customers sending money to North Dimension likely sent it through Silvergate Bank, the San Diego institution that is one of the largest providers of financial services to the cryptocurrency industry. North Dimension Inc. had two Silvergate bank accounts, FTX bankruptcy documents show.

Silvergate has come under congressional scrutiny for its role as FTX’s primary banking partner. Last week, responding to a request for information from four senators, Silvergate said it was reviewing transactions in accounts held at the bank associated with FTX entities.

The bank has performed “significant due diligence on FTX and its related entities,” he told senators, “both during the integration process and through ongoing monitoring. We have a history of closing accounts used for unintended purposes.”

Silvergate Bank did not immediately respond to a request for comment about the due diligence it conducted on North Dimension or whether it visited its website to verify its operations. In the past, citing customer confidentiality, a Silvergate Bank representative declined to comment on specific cases. Silvergate is overseen by the Federal Reserve Board and its deposits are guaranteed by the Federal Deposit Insurance Corp.

The bank details on its website the types of due diligence it regularly performs on the entities it assists in banking services. This includes a “site visit” and “organization compliance culture review”.

North Dimension was incorporated in August 2020 in Delaware, records show, about a year and a half after FTX began operations. Its incorporation documents, and those of a sister company called North Wireless Dimension, were drafted by Fenwick & West, the Seattle-based law firm that employed Daniel Friedberg, chief regulator of FTX, before joining the crypto empire. As NBC News reported, Friedberg was an executive at an online gaming software company that was rocked by a scandal in the early 2000s where members of a poker site called Ultimate Bet could see other players’ hands and make Winning bets accordingly.

North Dimension’s electronics retail website was created in November 2021 by an unidentified registrant in Hong Kong, according to an analysis by DomainTools, a leading website research service. In addition to advertising an “iPad 11” ich” that the site identified as a cell phone (on sale for $899, previously $410), the site also advertised a newsletter that customers could receive if they submitted their email addresses. . “We build trust by weeding out counterfeits and assisting our users in making informed purchasing decisions,” says the site.

This fall, a month before the FTX crater, a second mysterious Northern Dimension website appeared on the web. This one carried a dot-org address, indicating that it was a not-for-profit organization, although it identified itself as an established financial services company.

The second North Dimension site is sparse, with just two pages superimposed on a photo of a mountain range. The company provides “mature and stable fund management, liquidity and payment processing services,” it says. No address or contact information is provided.

A DomainTools review shows that this North Dimension website was created on October 3, 2022 and registered in Ontario, Canada. “We bring the sophistication that we have all come to expect from leading financial institutions in the field of cryptocurrencies,” says the website.

Tags