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Sam Bankman-Fried's failed FTX business empire misused customer funds and lacked trustworthy financial statements or any real internal controls, according to the new boss of the collapsed $32 billion crypto exchange.
John Ray III, a veteran insolvency professional who oversaw the liquidation of Enron, said in a US court filing on Thursday that FTX was the worst case of corporate failure that he had seen in his more than 40-year career.
"Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here," he wrote.
The statement underlined the chaos and mismanagement at the heart of what was once a leading crypto industry player with deep ties in Washington DC. The demise of Bankman-Fried's FTX empire has plunged crypto markets into a crisis. Bankman-Fried did not immediately respond to a request for comment on the new filing.
Ray said he had found at FTX international, FTX US and Bankman-Fried's Alameda Research trading company "compromised systems integrity," "faulty regulatory oversight," and a "concentration of control in the hands of a very small group of inexperienced, unsophisticated, and potentially compromised individuals."
The scathing filing in the federal bankruptcy court in Delaware painted a picture of severe mismanagement by Bankman-Fried at FTX, a company that raised billions of dollars from top-tier venture capital investors such as Sequoia, SoftBank and Temasek.
FTX failed to keep proper books, records, or security controls for the digital assets it held for customers; used software to "conceal the misuse of customer funds"; and gave special treatment to Alameda, said Ray, adding that "the debtors do not have an accounting department and outsource this function."
He said the company did not have "an accurate list" of its own bank accounts, or even a complete record of the people who worked for FTX. He added that FTX used "an unsecured group email account" to manage the security keys for its digital assets.
(Score: 4, Insightful) by Frosty Piss on Friday November 18 2022, @05:45AM
Hopefully the entire crypto pyramid will soon collapse and I can once again afford a decent graphics card.
Blockchain is interesting and all, though it seems to be a solution in search of a problem. But cryptocurrency is a pyramid scam and always has been.
(Score: 3, Interesting) by khallow on Friday November 18 2022, @06:00AM (3 children)
So basically a three year old company, really named "FTX", got handed a bunch of cryptocurrency assets and has since gone bankrupt. Says some ugly things about the acumen of the involved traders/investors. Similarly, I see that the CEO repeatedly mentioned for his heavy participation in these shenanigans, Sam Bankman-Fried, was born in 1992. He would have been 27 when the company was started. Reading on, he spent four years at a "proprietary trading firm" (trades securities with the firm's own currency), started up Alameda Research, a qualitative trading firm, scored big on bitcoin arbitrage between Japanese and US markets, and founded FTX in 2019. By now, FTX was managed by a trader with barely nine years of experience in the industry and little experience running a large firm.
Finally, it's a derivatives business. I wouldn't be surprised to find that they were massively leveraged with a huge amount of liability per asset owned. Nobody who knows enough about that is commenting, but it's almost a guarantee given how little care the whole community put towards any sort of accounting integrity.
Tell me if you start getting surprised. I'll slow down.
This is classic economic bubble behavior - a complete acceptance of huge levels of risk. I'm sure the reasoning is that crypto buyers figured that some of it would be fraudulent/risky, but enough would be legit/safe that they would get massively wealthy all the same.
(Score: 5, Insightful) by driverless on Friday November 18 2022, @06:55AM (1 child)
Not surprised at all, I'm more surprised that some of these things are still around. You see, when you take all the controls and regulation and checks and balances and legal precedent and long list of other stuff that were added to the banking system over the years not because it was fun but because they were needed to control errors and mistakes and a million types of fraud, and decide you can do better and invent your own not-really-a-bank with no controls or checks and balances or anything else and equally little actual knowledge of what it takes to make a financial exchange work, the only real surprise is that it didn't collapse quicker than it actually did.
(Score: 1) by khallow on Friday November 18 2022, @01:44PM
There are several things I find interesting about the crypto markets. This lack of regulation is one of those things. My take is that we're already seeing some private-side regulation to control the problems you describe. The catch is that in a bubble economy, there are a bunch of participants who aren't interested in investing in or using those.
We'll just have to see how things evolve.
(Score: 0) by Anonymous Coward on Saturday November 19 2022, @07:06PM
FTX crypto executive 28 yo Caroline Ellison [theguardian.com]:
Is this what L Ron Mush would consider "hardcore"? Ultra protein breakfast and a power nap, before disrupting the major world economies and reimagining the entire federal government no doubt.
Hardcore...? Hard time more likely. With vicious power struggles for the ranks, as requested.
(Score: 5, Touché) by Opportunist on Friday November 18 2022, @08:44AM (23 children)
You wanted no oversight and control, you wanted "da man" to keep his nose out of crypto, you got it. Now you complain about a lack of oversight and control?
(Score: -1, Troll) by Username on Friday November 18 2022, @09:45AM (22 children)
DNC is angry their fraud pyramid scheme was uncovered, and GOP is doing everything they can to make it public.
Simple politics. Nobody would care if the party wasn't involved.
(Score: 2) by janrinok on Friday November 18 2022, @10:10AM (18 children)
It isn't a US thing - it isn't a problem caused by any political party. If you wish to believe that it is then by all means carry on but I think that is simply because you choose to make it so.
People all around the world use crypto currencies.
(Score: -1, Troll) by Anonymous Coward on Friday November 18 2022, @11:03AM (17 children)
This particular crypto was being used to launder money to the US Democrat party. The Dems gave billions of tax dollars to Ukraine, Ukraine “invested” the money in FTC, and FTC donated the money to the Dems.
(Score: 3, Insightful) by zocalo on Friday November 18 2022, @12:12PM (15 children)
If Ukraine gets a lump sum cash infusion in the billions to aid the war effort it's highly unlikely they're going to be able to spend it all in one go on supplies they need, and would almost certainly want to keep a war chest for any curveballs they might need for things like infrastructure repair. What are they supposed to do, stick it under Zelensky's mattress? The logical thing is to ring fence it into an investment fund of some kind. Crypto might not have been the most prudent option, especially with hindsight, but hey, whatever - there's a legit reason for potentially making that fiat to crypto transfer, and that gives you plausible deniability.
As for SBF bunging money to the Dems. Yeah, I can see that. Lots of wealthy people make political "donations" in return for some consideration or other, and given he was apparently misappropriating a whole bunch of crypto tokens from FTX and funnelling them to Alameda and who knows where else without anyone apart from maybe a few other members of his inner circle, supporting a given political party certainly isn't out of the question, is it? I doubt very much you're going to be able to prove much of that either given the apparent lack of any viable financial controls or records at FTX though. Again, plausible deniability.
Frankly, regardless of the truth of the matter, this is almost perfect conspiracy theory fodder. Just enough facts to lay out a story, but enough gaps or plausible deniability that you're probably never going to be able to adequately prove what happened. And even if you could and it fell apart, the beauty of conspiracy theories is that enough people remain true believers to keep the lie alive.
UNIX? They're not even circumcised! Savages!
(Score: -1, Troll) by Anonymous Coward on Friday November 18 2022, @12:54PM (12 children)
The smart money is on the conspiracy theory. Remember how Trump was colluding with the Russians? Remember how Hunter Biden's laptop was Russian disinformation? I could name dozens of examples of stories that were pushed hard by the mainstream media that turned out to be lies.
(Score: 4, Informative) by Anonymous Coward on Friday November 18 2022, @01:24PM (10 children)
"Smart money"? I'd suggest staying away from casinos.
FTX was doing good old fashioned bipartisian influence buying [politico.com] to influence [theintercept.com] (i.e., write) crypto legislation.
As for your conspiracy theories, Ukraine support is generally bipartisan [voanews.com]. It is only certain Russian-financed parts of the Republican party and media outlets that make noise against it. You don't have to launder money to Ukraine when there is broad support for sending it directly.
(Score: -1, Troll) by Anonymous Coward on Friday November 18 2022, @01:51PM (2 children)
They weren't laundering money to Ukraine. They were laundering money from Ukraine to the Democratic Party.
It will be fun to watch this unravel. Remember, the Biden family was deeply invested in Ukraine. Remember "10% for the big guy".
(Score: 0) by Anonymous Coward on Friday November 18 2022, @04:14PM (1 child)
Where does all this Ukraine money come from?
(Score: 0, Interesting) by Anonymous Coward on Friday November 18 2022, @05:00PM
The U.S. tax payers.
(Score: 0, Troll) by Anonymous Coward on Friday November 18 2022, @02:27PM (6 children)
(Scott Adam's) Hoax Quiz:
How many of these hoaxes do you still believe are true?
1. Russia Collusion Hoax
2. Steele Dossier hooker story
3. Russia paying bounties on US soldiers in Afghanistan
4. Trump called Neo-Naizs "Fine People"
5. Trump suggested drinking/injecting bleach to fight COVID
6. Trump overfed koi fish in Japan
7. Trump cleared protestors with tear gas for a bible photo op
8. Hunter's laptop was Russian disinformation
9. Elections were fair because no court found major fraud
10. January 5th was an "insurrection" to overthrow the government
11. Trump tried to grab the steering wheel of The Beast
12. Border Patrol Agents whipped illegal border crossers
13. Trump stored nuclear secrets at Mar-a-Lago
14. Governor Whitmer kidnapping plot
I'll add a couple of my own:
Jussie Smallet was attacked by "MAGA" people
Bubba Smith was "threatened" with a "noose"
The Covington High School kids were attacking a Native American who was just minding his own business
Kyle Rittenhouse was the aggressor and was attacking black people
The COVID vaccine will prevent you from getting COVID
(Score: 2, Informative) by Anonymous Coward on Friday November 18 2022, @04:21PM
Wow, is that really his list? I haven't read his comic in 25 years, but Adams used to seem kind of clever. I didn't realize what a complete idiot he is, or at least useful idiot.
#7 is pretty funny when it was all caught on lots and lots of film. They even brought in helicopters to use against US citizens, and flew in the 82nd Airborne to want to use them, but the Defense Secretary purposely didn't let them leave Andrews to go to DC.
(Score: 4, Informative) by DeathMonkey on Friday November 18 2022, @06:37PM (1 child)
GOP operative convicted in scheme to funnel Russian money into Trump campaign [axios.com]
(Score: -1, Troll) by Anonymous Coward on Saturday November 19 2022, @04:42AM
That is clearly a left leaning news site. Given the level of conspiracy theory and bullshit from both sides that link proves nothing to anyone. Democrats will see it as proof of Trumps collusion with Russia, despite this quote from the story;
while Republicans will see it as Leftist media crucifying someone for supporting Trump.
The divide has gone deep enough that neither side will trust anything the other side said. If you want to convince someone of something you will need to provide links to media they trust, not something that can be immediately dismissed as partisan for the other side.
(Score: -1, Troll) by Anonymous Coward on Saturday November 19 2022, @06:21AM (2 children)
1. Russia Collusion Hoax
That was to cover up HRC's murder of Seth Rich, the real leaker to wikileaks.
2. Steele Dossier hooker story
Hoax. Given the level of attack on Trump, if they had anything it would have come out.
3. Russia paying bounties on US soldiers in Afghanistan
Hoax. Not sure what the point of it was though.
4. Trump called Neo-Naizs "Fine People"
Hoax. He said some of the people protesting the removal of statues were fine people.
5. Trump suggested drinking/injecting bleach to fight COVID
Hoax. He said "Bleach and UV kill the virus on contact. Wouldn't it be nice if we could find something that would do the same inside the body."
6. Trump overfed koi fish in Japan
Never heard that one. Googled it. Story from CNN making a big fuss about him being rude and overfeeding the fish, and then found this, https://mobile.twitter.com/RagesFury/status/927460234007805952 [twitter.com] He only dumped the box after Abe dumped his box first. Whole story was garbage.
7. Trump cleared protestors with tear gas for a bible photo op
He did clear protesters and had a photo op. Don't know who used the tear gas, but decisions like that don't generally get all the way up to the president.
8. Hunter's laptop was Russian disinformation
Hunter's laptop was not only true, it was suppressed by the FBI and ignored by the media.
9. Elections were fair because no court found major fraud
No court proved fraud. Either there was no fraud or the fraud was successful. Good luck convincing either side.
10. January 5th was an "insurrection" to overthrow the government
I assume you mean 6th. It was a riot, assault and vandalism, but if a bunch of idiots armed with signs and loud voices could overthrow the government then the government deserved it.
11. Trump tried to grab the steering wheel of The Beast
Isn't The Beast the prez's limo? He sits in the back, how could he even attempt to grab the wheel?
12. Border Patrol Agents whipped illegal border crossers
Sounds likely. I have personal knowledge of people who were beaten by cops. BP agents are going to be at least as bad as regular cops.
13. Trump stored nuclear secrets at Mar-a-Lago
There was a lot of stuff they seized during that raid. Seems likely there was nuclear stuff amongst it.
14. Governor Whitmer kidnapping plot
Sounded like a lone nutjob, but I didn't pay much attention to it.
(Score: 0) by Anonymous Coward on Sunday November 20 2022, @08:14AM (1 child)
OK STFU now.
"Suppose that we hit the body with a tremendous, whether it's ultraviolet or just very powerful light," Trump said, adding: "Supposing you brought the light inside the body, which you can do either through the skin or in some other way... Is there a way we can do something like that by injection inside or almost a cleaning?"
(Score: 1, Touché) by Anonymous Coward on Sunday December 04 2022, @12:23AM
Whereas all the media reported he said "if you get COVID you should inject bleach".
Which paraphrase is closer to your quote?
(Score: 4, Insightful) by khallow on Friday November 18 2022, @01:49PM
How many hundreds of lies did you have to swallow to get to that point? We have a Soylentil who warbles about "despicable warmongering" every time a story negative to the Russians comes out. He automatically generates the lies every time.
(Score: 1, Informative) by Anonymous Coward on Friday November 18 2022, @12:57PM
https://www.coindesk.com/policy/2022/03/14/ukraine-partners-with-ftx-everstake-to-launch-new-crypto-donation-website/ [coindesk.com]
(Score: 3, Informative) by Beryllium Sphere (r) on Saturday November 19 2022, @08:44AM
It is checkable, and has been checked.
https://www.factcheck.org/2022/11/bogus-theory-misinterprets-ftx-support-for-ukraine/ [factcheck.org]
(Score: 2) by Opportunist on Friday November 18 2022, @01:07PM
And then the money was funneled into a pizza shop without a basement where a child sex trafficking ring operated from that basement. Just believe it, trust me.
(Score: 3, Insightful) by Thexalon on Friday November 18 2022, @11:37AM (2 children)
Uhh, this is crypto, which generally started out as a libertarian thing, and was intentionally structured or at least advertised as a way to do currency without government interference.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 2) by Opportunist on Saturday November 19 2022, @01:49PM (1 child)
Yes. Exactly. So what's the complaint now? The governments stayed out of it and it turned out exactly as expected, so what exactly seems to be the problem now?
(Score: 0) by Anonymous Coward on Saturday November 19 2022, @11:35PM
Living the Somalian dream.
(Score: 4, Interesting) by NotSanguine on Friday November 18 2022, @02:50PM (2 children)
While the ideal of decentralized, unhackable currency is a good one, that promise has not been achieved.
Rather, we've lurched from one scam to another by opportunists, whether to straight-up steal from other folks and/or to apply the greater fool theory [investopedia.com] to enrich themselves at the expense of the ignorant.
In fact, the primary viable use case (to this point) for cryptocurrency has been grey/black markets for illegal goods. Bitcoin is no longer viable [wired.com] (if it ever was) for that, so currencies like Monero [monero.how] are picking up that mantle.
Unless and until (as the FTX debacle, among many, many others show) there is reasonable regulation of exchanges and the general knowledge and usable software to make ("not your keys, not your coins" [ledger.com]) private wallets ubiquitous, we're going to continue seeing these kinds of malfeasance/scams as the greater part of the cryptocurrency ecosystem.
But that's a big hill to climb. As an example, the recent NOVA episode [pbs.org] ("Crypto Decoded") clearly shows the dearth of knowledge among the hoi polloi about Cryptocurencies, the history of money and how all this is supposed to (vs. the reality) work.
All that said, it's only been 14 years [wikipedia.org] since Bitcoin became a thing. As such, cryptocurrencies are in their infancy. Will we achieve the promise of (like cash) anonymous, fungible, widely distributed digital money? Eventually, I think so.
For now, however, it's mostly the domain of scammers and black marketeers. I don't see that changing in the near term.
No, no, you're not thinking; you're just being logical. --Niels Bohr
(Score: 4, Interesting) by Thexalon on Saturday November 19 2022, @03:34AM (1 child)
It's not really surprising that it would become popular for illegal goods:
The dream of many a libertarian-driven project is to have life outside of the control of governments. I get it, sometimes the government does things I don't like too. However ...
Do you know who else loves life outside of the control of governments? Criminals! Mob bosses, drug lords, human traffickers, terrorist groups, ransomware rings, etc. So no matter how honest the original intentions, it's going to attract the kind of people you definitely don't want to be interacting with, and whatever it is you're trying to do will soon become a wretched hive of scum and villainy.
And there's good evidence that the original intentions weren't honest at all. The entire value of crypto was built on the "bigger fool" theory, and the dance was to continue to hype how wonderful it was so that some other sucker would be holding it when it crashed. And it's also worth noting that the lack of banking regulations made it really easy for the quasi-banks to simply steal the pseudo-money and sell it off for cash that was actually worth something, which has happened at least a couple of times. The more you look at both how it was designed and how the people heavily involved in it behaved, the more it looked like a good old-fashioned Ponzi scheme, but with computers.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 0) by Anonymous Coward on Sunday November 20 2022, @08:20AM
I am shocked, shocked that the Bahamas are not taking this problem more seriously. Do they not wonder if this will affect their reputation as a legitimate banking destination? With titties and beaches? I ask you.