Debtors report reveal unprecedented mismanagement in failed crypto exchange FTX

A recent report filed with the US bankruptcy court in Delaware by the current leadership of the failed crypto exchange FTX has revealed control failures at the company. The report concludes that FTX and Alameda's management failures and lack of internal controls contributed significantly to the exchange's collapse.

The report is the first comprehensive account of the problems at the exchange since it collapsed last November. After reviewing more than one million documents, analyzing financial records and electronic devices, and conducting interviews with 19 employees, debtors have prepared an overview of FTX's control failures.

The report describes FTX and related entities as a poorly managed network of companies ruled over by Bankman-Fried and his cronies, who paid little attention to organization or internal controls. Reconstructing FTX's balance sheets was a bottom-up exercise that required significant effort by professionals because FTX's leadership regularly lost track of accounts and failed to cash checks,

Alameda was not even clear on its own positions, "let alone hedging or accounting for them." Bankman-Fried told employees that Alameda was "unauditable" and that they sometimes found $50m of assets lying around that they had lost track of. Bankman-Fried's internal admissions often contradicted his public statements.

FTX further stored seed phrases and private keys to various hot wallets containing hundreds of millions of dollars worth of cryptocurrency in plain text and without encryption on an FTX Group server. Despite Bankman-Fried's public assurances, the exchange held the vast majority of its crypto assets in hot wallets at all times, making it possible for a still-unknown hacker to take control of $432m worth of crypto from various FTX-controlled wallets on the night the exchange filed for bankruptcy.

Major cryptocurrencies prices on 9 am IST, 10th April 2023 (Monday):

Bitcoin: $28,320.43 USD

+0.02%

Ethereum: $1,859.77 USD
+0.24%

Tether: $1.00 USD
+0.00%

USD Coin: $0.999 USD
+0.02%