FTX bankruptcy filing reveals jarring details of mismanagement
- Sam Bankman-Fried received a $1 billion personal loan from Alameda Research before it went bankrupt.
- The total value of crypto held by FTX International was $659,000 as of the end of September, contrary to claims made by SBF that the company held $5.5 billion.
- FTX did not maintain centralized control of its cash and further failed to keep accurate bank account lists
- FTX managers approved fund disbursements by posting emojis on an online chat platform.
FTX, along with around 130 additional affiliated companies, including Alameda Research and FTX US, filed for bankruptcy on November 11. Now, a fresh bankruptcy filing from FTX chief restructuring officer John Ray III has revealed some concerning disclosures about FTX and its management of firms.
One example of that is how former FTX CEO Sam Bankman-Fried received a $1 billion personal loan from a crypto hedge fund run by SBF-Alameda Research before it went bankrupt. The filing details hint that Alameda had an advantage when making risky leveraged trades on FTX.
The new FTX CEO Ray III cited “the secret exemption of Alameda from certain aspects of FTX.com’s auto-liquidation protocol” among a litany of bad security and financial controls that have been uncovered ever since he started overseeing the liquidation of the company,
As per the filing, over a million people/ businesses could be owed money following the collapse of FTX. The filing also highlighted lies told by SBF about FTX’s financial situation.
The fresh filing reveals that the total fair value of crypto held by FTX International was just $659,000 as of the end of September, contrary to claims made by SBF that the company held $5.5 billion in “less liquid” crypto tokens.
“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,” FTX CEO John Ray III said.
The filing further points out that the wider FTX Group did not “maintain centralized control” of its cash, failed to keep accurate bank account lists, and paid “insufficient attention to the creditworthiness of banking partners.”
The bankruptcy details reveal that the fund disbursements within FTX were in total disarray. The new CEO highlighted unprofessional practices, including managers approving fund disbursements by posting emojis on an internal chat platform and registering Bahamas real estate in employees’ names utilizing company funds,
“For example, employees of the FTX Group submitted payment requests through an online ‘chat’ platform where a disparate group of supervisors approved disbursements by responding with personalized emojis,” the filing reads.
Ray III outlines how FTX failed to carry out daily reconciliation of cryptocurrency holdings and used software to mask the misuse of customer funds. From disarrayed crypto custody to unprofessional fund disbursement measures, the filing reveals damning indictments pointing towards staggering mismanagement inside FTX, eventually leading to its downfall.