FTX Trading Ltd and its affiliated debtors under the leadership of John Ray III, the new Chief Executive Officer (CEO) have released a 45-page report which details the financial control failures of the crypto firm.
The interim report submitted at the Delaware Bankruptcy Court showed several lapses on FTX’s part including sloppy and careless record-keeping, a lack of robust cybersecurity defences, and limited expertise in core areas like finance.
Ray III spared no details on how various deficiencies in the FTX Group controls have contributed to the collapse of the Bahamian-headquartered cryptocurrency exchange. Apart from the inappropriate accounting control and slapdash record-keeping, he spotted the lack of management structure.
According to John Ray III, the now-bankrupt crypto exchange was being run by three inexperienced people who were fresh out of college. He believes that these inexperienced individuals including the former CEO Sam Bankman-Fried depended majorly on a ‘hodgepodge’ of online documents and several apps to run the company.
The filing listed Google Docs, Slack communication, shared drives and Excel spreadsheets as some of the tools utilized by FTX to manage assets and liabilities. Also, the filing stated that FTX used QuickBooks, which according to the new CEO, is an accounting software used by small and medium-scale businesses. The QuickBooks app showed over 80,000 unprocessed transaction entries.
Former FTX CEO Declares Alameda Unauditable
More interesting is the news about Alameda Research, the FTX sister trading company that was given unrestricted access to billions of customers’ funds.
Per a published statement in the report, Alameda Research “often had difficulty understanding what its positions were, let alone hedging or accounting for them.” Amidst the bankruptcy proceeding which began a few months ago, it was discovered that a June 2022 portfolio summary for Alameda was falsified.
The document which was meant to detail the components of the trading firm’s crypto position turned out to be something that was created at the request of a top executive who asked the team to “come up with some numbers? Idk.”
“Alameda is unauditable. I don’t mean this in the sense of ‘a major accounting firm would 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,” Bankman-Fried said to his employees at the time.
