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FTX’s Chapter 11 bankruptcy filing sheds new light on how poor internal controls were at the crypto exchange until it spectacularly imploded last week.
One particularly disturbing revelation is that the total fair value of cryptocurrencies held by FTX International was just $659,000 at the end of September, compared to founder Sam Bankman-Fried’s claims that the company had $5.5 billion in “less liquid » crypto tokens.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of reliable financial information as occurred here,” said FTX’s new CEO, John Ray III, who is overseeing the company’s liquidation.
That’s exactly the statement coming from Ray, as he oversaw the liquidation of Enron after its more than $60 billion bankruptcy in 2001.
There were indications that the internal numbers would be dire, as FTX founder Sam Bankman-Fried warned in multiple tweetstorms about FTX’s financials as “approximate” and “to the best of my knowledge” and “I’m looking into all these numbers “. as rough”.
FTX’s assets as of Sept. 30 totaled about $2.2 billion, according to the bankruptcy filing, though it’s unclear how different those numbers might be today given the recent stock market rout and high-profile hacks that occurred last week.
Another example of how unprecedented the situation is includes the fact that Alameda Research, the crypto hedge fund managed by Bankman-Fried that used customer deposits from FTX to plug the money-losing hole, gave Bankman-Fried a $1 billion loan before that. going bankrupt.
“From systems integrity at risk and flawed regulatory oversight overseas, to the concentration of control in the hands of a very small group of inexperienced, unskilled and potentially compromised individuals, this situation is unprecedented,” Wray said.
