Friday 18 November 2022 06:14 PM 10 damning revelations about FTX in bankruptcy report - including payments ... trends now
'Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,' writes John J. Ray III, the man appointed as CEO of FTX to guide it through its collapse.
And that's coming from a man who helped deal with the fallout from the Enron scandal, once the largest corporate bankruptcy in US history.
The observations he makes in bankruptcy filings for FTX are so damning that it's remarkable the company did not implode sooner.
Ray, who has 40 years of legal and restructuring experience, lists a litany of failures from 'inexperienced... potentially compromised' leadership to hiding misuse of customer funds and splurging company cash on houses in the Bahamas.
These are ten of the most damning revelations included in the FTX bankruptcy filing:
Bankman-Fried loaned $1bn… by his own company
At the height of his success, Bankman-Fried was worth an estimated $26 billion. His reputation helped him secure the backing of celebrities like supermodel Gisele Bundchen. The filings show he was loaned a massive $1 billion by Alameda Research, the company he founded which was handed billions of dollars in FTX clients' money
FTX founder Sam Bankman-Fried meets Katy Perry, Bill Clinton, Tony Blair and the Prime Minister of the Bahamas, Philip Davis, at the Crypto Bahamas event organized by FTX
The filings reveal Sam Bankman-Fried was loaned $1 billion by Alameda Research. FTX co-founder Nishad Singh was loaned $543 million by Alameda.
That’s suspicious because Alameda Research, a trading firm, was founded and owned by Bankman-Fried. Alameda is accused of secretly using billions of dollars of FTX client funds for risky investments which failed.
FTX is believed to have lent around $10 billion dollars worth of customer funds to Alameda. FTX collapsed when spooked clients rushed to withdraw their money and the firm couldn’t pay out.
Empire run by inexperienced, unsophisticated, potentially compromised individuals
Bankman-Fried's on-off lover, Caroline Ellison, 28, was CEO of Alameda Research, which was loaned billions of dollars of FTX clients' cash to make risky investments . She had only 18 months of professional experience when she joined Alameda.
Nishad Singh co-founded FTX with Bankman-Fried. The bankruptcy filings say he was loaned $543 million by Alameda Research, the company founded and owned by Bankman-Fried. Alameda was loaned billions of dollars worth of client money by FTX.
FTX co-founder Gary Wang was one of Bankman-Fried's inner circle. The bankruptcy filing says the FTX group's leadership was 'inexperienced, unsophisticated and potentially compromised'
At its peak, FTX was worth $32 billion. The trading platform had around one million customers and processed trades worth nearly a billion dollars per day.
But this behemoth of the crypto sphere was controlled by ‘a very small group of inexperienced, unsophisticated and potentially compromised individuals’, Ray states in the bankruptcy filing.
Later in the document, he notes that Bankman-Fried and FTX co-founder Gary Wang ‘controlled access to digital assets of the main businesses in the FTX Group’.
The integrity of its systems was compromised and there was ‘faulty regulatory oversight abroad’.
FTX staff lavished with homes and luxuries - using company funds
Bankman-Fried and nine members of his inner circle, including his on-off lover Caroline Ellison, lived in a $40 million penthouse in the Bahamas. The filings detail how FTX's money was used to purchase homes in the Bahamas and other 'personal items' for employees
The swimming pool at Bankman-Fried's luxury penthouse. The penthouse is on a Bahamas resort part-owned by Tiger Woods and Justin Timberlake.
It’s known Sam Bankman-Fried and his inner circle lived in a $40 million penthouse in the Bahamas, the Caribbean tax haven where FTX was headquartered.
And the bankruptcy filing raises questions about how the luxurious home - at a resort owned by individuals including Tiger Woods and Justin Timberlake - was paid for.
The bankruptcy filing explains that the company’s corporate funds were used to buy several homes in the Bahamas. Money was also splurged on ‘personal items’ for staff and advisors.
Ray writes: ‘In the Bahamas, I understand that corporate funds of the FTX Group were used to purchase homes and other personal items for employees and advisors.
‘I understand that there does not appear to be documentation for certain of these transactions as loans, and that certain real estate was recorded in the personal name of these employees and advisors on the records of the Bahamas.’
FTX supervisors signed off payments with 'personalized emojis' in online chat platforms
International companies which handle transactions worth
