This little-known firm with a weird website was central to the misappropriation of FTX customers' money, regulators say – NBC News
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Among the 130 or so companies in Sam Bankman-Fried’s sprawling crypto empire, North Dimension Inc. assumed a low profile. Unlike FTX, its name wasn’t splashed on billboards or sporting arenas, and its business wasn’t promoted by celebrities.
Still, North Dimension had a crucial role in the FTX mess, regulators now say. In fact, they contend, the little-known company was central to the furtive misappropriation of FTX customers’ funds.
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 told to wire money if they wanted to trade on its exchange, according to a complaint filed Wednesday by the Securities and Exchange Commission.
But North Dimension Inc. also appears to have been a fake online electronics retailer, an NBC News investigation found. Its website, now disabled, is archived on the internet.
That SEC complaint, against former Alameda CEO Caroline Ellison and former FTX co-founder Gary Wang, said money wired to North Dimension by FTX clients for their own use wound up funding Alameda’s trading activities and Bankman-Fried’s other ventures instead.
“Bankman-Fried had directed 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 disclose any connection to Alameda, the regulator added.
Neither did North Dimension’s website, now out of commission, mention any ties to Bankman-Fried. Instead, the company claimed to sell mobile phones, laptops and other such items out of the same Berkeley, California, address that housed FTX US. “Our vision is to become most popular website for purchasing mobile phones and electronics by offering complete product information and a transparent purchasing procedure,” the archived North Dimension site stated.
North Dimension was no Crazy Eddie of crypto. The website is rife with misspellings and bizarre product prices; for example, item listings sometimes showed “sale” prices that were hundreds of dollars above a regular price. And customers finding their way to the site may have had trouble actually buying products once they got there. Clicking on a laptop, say, would generate this pop-up: “Fee free to send a message. We collaborate with ambitious brands and people; we’d love to build something great together.”
It could not be determined why FTX or Bankman-Fried appears to have created a fake online electronics retailer called North Dimension Inc. that FTX customers were advised to send their money to. 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’ home in California after posting bail. His former colleagues Ellison and Wang pleaded guilty to federal fraud charges on Wednesday in the Southern District of New York.
FTX customers sending money to North Dimension likely wired it through Silvergate Bank, the San Diego institution that is one of the largest providing financial services to the crypto industry. North Dimension Inc. held two bank accounts at Silvergate, FTX bankruptcy documents show.
Silvergate is under scrutiny by Congress for its role as FTX’s main 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 that were associated with FTX entities.
The bank conducted “significant due diligence on FTX and its related entities,” it told the senators, “both during the onboarding process and through ongoing monitoring. We have a track record of closing accounts that are used for purposes outside of their expected use.”
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 client confidentiality, a representative for Silvergate Bank has 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 with banking services. These include a “site visit” and “review of organization’s culture of compliance.”
North Dimension was incorporated in August 2020 in Delaware, records show, about a year and a half after FTX commenced operations. Its incorporation papers, and those of a sister company called North Wireless Dimension, were drawn up by Fenwick & West, the Seattle-based law firm that employed Daniel Friedberg, FTX’s chief regulatory officer, before he joined the crypto empire. As NBC News has reported, Friedberg was an executive at an online gaming software company that was rocked by scandal in the early 2000s in which insiders at a poker website called Ultimate Bet could view other players’ hands and place winning bets accordingly.
The electronics retailing website for North Dimension was created in November 2021 by an unidentified registrant in Hong Kong, according to an analysis by DomainTools, a prominent website research service. In addition to advertising an “iPad 11 ”ich” which the site identified as a cellphone (on sale for $899, previously $410), the website also advertised a newsletter customers could receive if they submitted their email addresses. “We build trust by eliminating counterfeits and assisting our users in making informed purchasing decisions,” the site says.
This fall, a month before FTX cratered, a second mysterious North Dimension site appeared on the web. This one carried a dot-org address, indicating it was a nonprofit, although it identified itself as an established financial services firm.
The second North Dimension website 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.
An analysis by DomainTools shows this North Dimension site was created on Oct. 3, 2022, and registered in Ontario, Canada. “We bring the sophistication we have all come to expect from mainstream financial institutions in the realm of cryptocurrencies,” the website says.
Gretchen Morgenson is the senior financial reporter for the NBC News Investigative Unit. A former stockbroker, she won the Pulitzer Prize in 2002 for her “trenchant and incisive” reporting on Wall Street.
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