Failed crypto giant FTX’s failure was rooted in SBF’s ‘incompetence and greed’
Failed crypto exchange FTX was governed by “hybris, incompetence and greed,” according to a new report from the company’s debtors.
The report is the first released by FTX debtors since the meteoric collapse of the billion-dollar digital asset company in November.
The Bahamas-based crypto empire was run without adequate financial and accounting controls and tended to lose track of millions of dollars in assets, which members of the company would internally joke about, the report said.
“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 oversight or control framework,” the report said.
A recently released accounts receivable report on FTX’s collapse attributes a significant portion of the company’s failure to the “hybris, incompetence and greed” of its top executives
John Ray III was named CEO and Chief Restructuring Officer of FTX after the company collapsed in November. He has overseen the Chapter 11 trial
“These individuals,” including Bankman-Fried, and top executives including former chief technology officer Nishad Singh and former chief technology officer Gary Wang, “stifled dissent, mixed and misused company and client funds, lied to third parties about their company, joked internally about their tendency to lose track of millions of dollars in assets, causing the FTX Group to collapse as quickly as it had grown,” the report continued.
“While the failure of the FTX Group is new in the unprecedented scale of damage it has caused to an emerging industry, many of the root causes are well known: hubris, incompetence and greed.”
The report shed light on specific details of the bankrupt company’s disorganization, including that at the time the company filed for Chapter 11 bankruptcy last year, there wasn’t even a full list of its employees.
In a press releaseFTX’s new CEO and Chief Restructuring Officer, John Ray III, said the company is publishing “the first report in the spirit of transparency we have promised since the Chapter 11 process began.”
“We continue our efforts to review the events that contributed to the fall of FTX and to identify and recover as much value as possible for creditors,” he said.
The report went on to say that “the reconstruction of accounts receivable balance sheets is an ongoing, bottom-up exercise that continues to require significant effort from professionals.”
So far, digital assets worth more than $1.4 billion have been recovered and secured, while another $1.7 billion have been identified and are currently being recovered.
Debtors reviewed more than 1 million documents and analyzed the company’s available financial records and electronic devices, in addition to interviewing nearly 20 employees to learn the aspects of the company that led to the spectacular failure.
In the report, the debtors concluded that “FTX Group had no independent or experienced personnel or leadership in finance, accounting, human resources, information security or cybersecurity, and no internal audit function of any kind. Moreover, there was in fact no management supervision.’
“Individuals,” including Bankman-Fried, and top executives, including former chief technology officer Nishad Singh and former chief technology officer Gary Wang, “stifled dissent, mixed and misused corporate and client funds, lied to third parties about their business, internally joked about their tendency to lose sight of millions of dollars in assets,” the debtor’s report read
Former Alameda Research CEO Caroline Ellison pleaded guilty last year to charges related to her role at the company. She works with detectives
Bankman-Fried is expected to appear in court in October after pleading innocent to fraud and campaign finance charges several months ago. It was recently revealed that he transferred $2.2 billion from FTX to his personal account before the company went under
Bankman-Fried is expected to appear in court in October after pleading innocent to fraud and campaign finance charges several months ago.
Several other company executives have already pleaded guilty to various charges.
Singh, who is cooperating with prosecutors, pleaded guilty to fraud in February.
Wang and former Alameda Research CEO Caroline Ellison also pleaded guilty last year to charges related to their role at FTX and its sister trading firm.
Last month it was revealed that Sam Bankman-Fried had secretly transferred $2.2 billion from FTX to his personal account and $1 billion to five members of his inner circle before the cryptocurrency exchange collapsed, according to bankruptcy courts.