‘Never have I seen such a complete failure’: FTX’s new boss reveals chaos left behind by SBF

The company’s audited financial statements – some of which were done by a firm that touted itself as the first CPA to open an office in the metaverse – should not be trusted, Ray said. Advisers are working to rebuild balance sheets for FTX entities from the bottom up, he added.

FTX “did not maintain centralised control of its cash” and failed to keep an accurate list of bank accounts and account signatories, or pay sufficient attention to the creditworthiness of banking partners, according to Ray. Advisers don’t yet know how much cash the company had when it filed for bankruptcy, but have found about $USUS560 million attributable to various FTX entities so far.

The company’s record keeping was so lax, Ray said, that advisers “have been unable to prepare a complete list of who worked for the FTX Group as of the petition date, or the terms of their employment.”

Among other alarming claims in the filing: software was allegedly used to conceal the misuse of customer funds; Alameda Research, Bankman-Fried’s trading firm, was secretly exempt from some aspects of FTX.com’s trading policies; and a single, unsecured group email was used to access private keys and sensitive data around the world, according to the court documents.

Ray also noted that lasting records of decision-making are hard to come by: Bankman-Fried often communicated through applications that auto-deleted in short order and asked employees to do the same.

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Corporate funds of FTX Group were used to buy homes and other personal items for employees, Ray said. Some of the real estate was recorded in the personal names of employees and FTX advisers, he wrote, and the company’s disbursement controls were not appropriate for a business.

“For example, employees of the FTX Group submitted payment requests through an on-line ‘chat’ platform where a disparate group of supervisors approved disbursements by responding with personalised emojis,” according to the statement.

A footnote in the documents indicates Alameda Research, a subsidiary of the crypto trading house, had lent $US1 billion to Bankman-Fried and more than $US500 million to FTX co-founder Nishad Singh as of September 30. The financial reports detailing the transactions were unaudited, produced while Bankman-Fried controlled the business, and Ray emphasised that he does not have confidence in their accuracy.

FTX is now fighting Bankman-Fried about whether his empire should be under the jurisdiction of US courts, where more than 100 related companies are in bankruptcy, or in the Bahamas, his preferred location. FTX’s legal team has blamed the meltdown in part on poor oversight by non-US regulators.

Bloomberg

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