Under the leadership of FTX’s new CEO John Ray III, the trading firm released a report detailing the severe control shortcomings of its former management group.
This is the first public report since its collapse on Nov 2022.
The 45-page assessment states that the FTX, which was led by SBF, “lacked key financial and accounting controls” while having billions of dollars worth of assets and a huge volume of transactions.
“The FTX Group was tightly controlled by a small group of individuals who showed little interest in instituting an appropriate oversight or control framework,” the report said.
The then CEO, Sam Bankman Fried, former director of engineering Nishad Singh, and the former chief technology officer Gary Wang were heavily criticized for their “hubris, incompetence, and greed.”
“These individuals stifled dissent, commingled and misused corporate and customer funds lied to third parties about their business, joked internally about their tendency to lose track of millions of dollars in assets, and thereby caused the FTX Group to collapse as swiftly as it had grown,” the report added.
While Singh and Wang have entered pleas of guilty and are awaiting trials, former CEO Sam Bankman-Fried is currently placed under house arrest and is being investigated for a number of crimes.
The report also spilled details on FTX’s sister firm Alameda Research which the former CEO Sam Bankman-Fried, called “hilariously beyond any threshold of any auditor being able to even get partially through an audit,” in internal communications.
“Alameda is unauditable. I don’t mean this in the sense that a major accounting firm will have reservations about auditing it; I mean this in the sense of we are only able to ballpark what its balances are, let alone something like a comprehensive transaction history. We sometimes find $50m of assets lying around that we lost track of such is life.”
The now-defunct trading firm Alamada Research’s records revealed a significant reliance on the FTX token [FTT] released by the SBF-led cryptocurrency exchange.
FTX’s Sister Firm Lacks Basic Knowledge Of Hedging Or Accounting
In the recent report, it alleged that Alameda “often had difficulty understanding its positions, let alone hedging or accounting for them.”
Further, the report wrote on the lack of basic knowledge of its own employees when it filed for Chapter 11 bankruptcy. As per the P.A, John J. Ray III, FTX’s new chief executive officer and chief restructuring officer, said,
“We are releasing the first report in the spirit of transparency that we promised since the beginning of the Chapter 11 process.”
The crypto exchange was a major donor to politics before it collapsed, both from the business itself and from its leadership team.
Recently, the firm under the new management team sent out confidential messages to political figures and other recipients of contributions requesting to return such funds to the FTX Debtors by February 28, 2023.