FTX’s new leadership has released a detailed report on what led to the bankruptcy of the cryptocurrency exchangepainting a picture of somewhat questionable operations conducted under the leadership of the founder and CEO Sam Bankman-Fried.
The real reasons for failure
I FTX debtorstogether with the new CEO and head of restructuring John J. Ray IIIthey wrote in a report that ” although FTX group failure is unprecedented considering the damage it has caused in the crypto industry, many of the root causes are old fashioned: arrogance, incompetence and greed”.
“Despite the public image it sought to create as a responsible company, the FTX group was tightly controlled by a small group of individuals who showed little interest in establishing an appropriate supervisory or control framework,” the report reads.
“These individuals have stifled dissent, stirred and misuse of company and customer fundslied to third parties about their business, internally joked about their tendency to lose track of millions of dollars in assets, thus causing FTX to collapse as quickly as it had grown,” he added.
According to the assessment of the new management under the direction of the former leadership, FTX and its affiliated entities lacked the management, governance and organizational structure necessary for the size of the company, as well as the financial and accounting controls necessary for a multi-billion dollar company.
The report goes on to cite Bankman-Fried’s internal communications to reflect the poor record keeping at affiliated hedge fund, Alameda Research, which he co-founded.
“Alameda is not verifiable,” Bankman-Fried wrote to colleagues. “I don’t mean that a large accounting firm will have reservations about audit’; I mean ‘we’re only able to establish what his balances are, let alone something like a complete transaction’. Sometimes we find $50 million worth of assets lying around that we’ve lost track of; this is the life”.
FTX, former top management under accusation
The former FTX and Alameda executives are currently facing federal charges related to the companies’ bankruptcies, which resulted in tens of billions of dollars in losses for clients.
Gary Wang e Nishad Singhco-founders of FTX, as well as the former CEO of Alameda, Caroline Ellison they all admitted to wrongdoing at the failed entities and pleaded guilty to multiple charges related to their alleged fraud roles. All three former executives are reportedly cooperating with prosecutors.
While Sam Bankman-Fried declared himself not guilty of all 13 federal counts against him and remains under house arrest in his parents’ California home on $100,000 bond $250 million until his trial, which is scheduled for October 2023.