(Bloomberg) — Advisors currently overseeing the wreckage of Sam Bankman-Fried’s FTX Group are struggling to locate the company’s cash and cryptocurrency, criticizing internal oversight poor and record keeping at the now bankrupt company.
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John J. Ray III, the group’s new chief executive officer, who previously oversaw the liquidation of Enron Corp. a sworn statement filed in bankruptcy court.
For the full statement filed in FTX bankruptcy, click here
Read the craziest part of the new bankruptcy filing
From having compromised system integrity and faulty regulatory oversight abroad, to concentrating control in the hands of a very small group of inexperienced individuals, he added. unsophisticated and potentially compromised, this situation is unprecedented.”
Documents that describe a freelance crypto business are largely devoid of all the policies and practices that would be standard for most other companies. Sloppy and disorganized record-keeping will make it harder for many of FTX’s advisors to work around the clock to recover the billions of dollars owed by customers.
Ray did not insist on the statement, calling Bankman-Fried’s recent public statements “erratic and misleading.” In an effort to round off FTX’s cash, advisors asked financial institutions to freeze withdrawals and rejected any instructions from Bankman-Fried.
Ray said advisors have identified “only a small fraction” of the digital assets they hope to recover in a Chapter 11 bankruptcy. To date, they have secured about $740 million in funds. electronics in offline cold wallets, a storage method designed to prevent hacks.
Ray said the company’s audited financial statements were unreliable. The advisors are working to rebuild the balance sheet for FTX entities from the bottom up, he added.
According to Ray, FTX “failed to maintain centralized control of its cash” and failed to maintain an accurate list of bank accounts and account signers, or did not care enough about reputation. of banking partners. Advisors still don’t know how much cash the company had when it filed for bankruptcy, but have found about $560 million so far attributed to various FTX entities.
Among the alarming claims in the filing: software allegedly used to conceal misuse of customer funds; Alameda has secretly been exempted from certain aspects of FTX.com’s trading policy; and a single, unsecured group email was used to access private keys and sensitive data around the world, according to court documents.
Ray also notes that it is difficult to get a long-term record of the decision-making process: Bankman-Fried often communicates through auto-delete apps on short notice and asks employees to do the same.
Ray said FTX Group’s corporate funds were used to purchase homes and other personal items for employees. Some properties are listed in the personal names of FTX employees and advisors, he wrote, and the company’s disbursement controls are inconsistent with the business.
“For example, employees of the FTX Group submitted payment requests through an online ‘chat’ platform, where a different group of supervisors approved disbursements by replying with emojis. personalized emoji,” according to the statement.
A footnote in the documents shows that Alameda Research Ltd., a subsidiary of the crypto trader, lent Bankman-Fried $1 billion and more than $500 million to FTX co-founder Nishad Singh as of September 30. The financial statements detail unaudited transactions, conducted while Bankman-Fried controlled the business and Ray stressed that he has no confidence in its accuracy. of them.
FTX is currently battling Bankman-Fried over whether his empire should fall under the jurisdiction of US courts, where more than 100 companies involved are bankrupt, or in the Bahamas, his preferred location. . The FTX’s legal team has blamed the crisis in part on poor oversight by non-US regulators.
The case is FTX Trading Ltd., 22-11068, United States Bankruptcy Court for the County of Delaware.
(Updated with additional information throughout from the court’s bankruptcy declaration)
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