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FTX Lacked “Accurate List” of Bank Accounts, Failed at Basic Bookkeeping

posted by janrinok on Friday November 18 2022, @05:21AM   Printer-friendly

An Anonymous Coward writes:

Employee expenses were approved by posting emoji in Slack channels, DMs:

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.

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  • (Score: 0) by Anonymous Coward on Saturday November 19 2022, @07:06PM

    by Anonymous Coward on Saturday November 19 2022, @07:06PM (#1280524)

    FTX crypto executive 28 yo Caroline Ellison [theguardian.com]:

    In posts on her account, since deleted, she wrote about ... her ideal man (“controlling most major world governments [and having] sufficient strength to physically overpower you”), and her exploration of polyamory. “When I first started my first foray into poly, I thought of it as a radical break from my trad past,” she wrote in 2020, “but tbh, I’ve come to decide the only acceptable style of poly is best characterised as something like ‘imperial Chinese harem’. None of this non-hierarchical bullshit. Everyone should have a ranking of their partners, people should know where they fall on the ranking, and there should be vicious power struggles for the ranks.”

    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.

    FTX didn’t have a bank account that customers could send money to; Alameda, the hedge fund, did. So they would wire the cash to Alameda, and FTX would add it to its account. And, in all those years, Alameda never passed the cash on. No one noticed, and the firm apparently traded, and lost, $8bn of customer funds that it should never have had in the first place.

    Hardcore...? Hard time more likely. With vicious power struggles for the ranks, as requested.