According to a report by FTX's creditors, failed cryptocurrency exchange FTX Trading Ltd. It lacked basic financial and accounting controls.
Creditors of Failed Cryptocurrency Exchange FTX Publish First Report Explaining Reasons for FTX's Failure
The report is the first published by FTX creditors since Sam Bankman-Fried's digital asset empire plunged into bankruptcy in November and billions of dollars in client funds were lost.
According to the report, the "arrogance, incompetence and greed" of Bankman-Fried and its top executives, including former engineering director Nishad Singh and former chief technology officer Gary Wang, are at the root of FTX's dramatic collapse.
"Despite the image of a responsible business it seeks to create in the public, the FTX Group is tightly controlled by a small group of individuals who show little interest in establishing an appropriate framework of oversight or control," the report said.
“These individuals stifled opposition, scrambled and misused company and client funds, and lied to third parties about their business,” the report said.
He joked internally about the tendency to lose track of millions of dollars in assets, thus causing the FTX Group to collapse as quickly as it had grown.
According to the report, when FTX applied for Chapter 11, the company didn't even have a complete list of who its employees were.
"We are releasing the first report in the spirit of transparency we have promised since the beginning of the Chapter 11 process," said John J. Ray III, FTX's new chief executive officer and chief restructuring officer, in a press release.
Despite its multi-billion dollar asset levels and enormous transaction volumes, FTX "lack of fundamental financial and accounting controls.
Restructuring debtors' balance sheets is a bottom-up effort that continues to require significant professional effort.
*Not investment advice.