FTX bosses joked about losing millions of dollars, damning report claims
Oliver Gill
Mon, 10 April 2023
SBF - David Dee Delgado/Reuters
FTX bosses joked about losing tens of millions of dollars and signed off expenses with emojis, according to a damning official filing into the crypto exchange's collapse.
Founder Sam Bankman-Fried and senior executives are accused of “hubris, incompetence, and greed” in a 39-page report published by FTX's restructuring experts.
A tight-knit group of individuals “stifled dissent, commingled and misused corporate and customer funds, lied to third parties about their business, joked internally about their tendency to lose track of millions of dollars in assets”, the report found.
It said that Mr Bankman-Fried claimed FTX's trading arm Alameda Research was “hilariously beyond any threshold of any auditor being able to even get partially through an audit”
According to the report, Mr Bankman-Fried said: “Alameda is unauditable. I don’t mean this in the sense of ‘a major accounting firm will have reservations about auditing it’; I mean this in the sense of ‘we are only able to ballpark what its balances are, let alone something like a comprehensive transaction history.’
“We sometimes find $50m of assets lying around that we lost track of; such is life.”
The report goes on to reveal that money transfers were not properly documented.
It said: “To make matters worse, Slack, Signal, and other informal methods of communication were frequently used to document approvals. Signal and Telegram were at times utilised in communications with both internal and external parties with “disappearing messages” enabled, rendering any historical review impossible.
“Expenses and invoices of the FTX Group were submitted on Slack and were approved by ‘emoji.’ These informal, ephemeral messaging systems were used to procure approvals for transfers in the tens of millions of dollars, leaving only informal records of such transfers, or no records at all.”
Veteran restructuring executive John J. Ray III, who ran the insolvency of Enron two decades ago, is overseeing FTX’s bankruptcy proceedings.
Mr Ray’s “first interim report” includes the findings of more than one million company documents and 19 employee interviews.
Mr Ray said: “We are releasing the first report in the spirit of transparency that we promised since the beginning of the Chapter 11 process.”
FTX collapsed last November after analysts raised questions about its solvency.
As Mr Bankman-Fried’s empire imploded, further questions about alleged wrongdoing have been raised.
He has been charged with fraud and breaches of campaign-finance law and after pleading not guilty is due to face trial in November.
The debtors’ report found that FTX was operated at the most senior level by Mr Bankman-Fried, minority shareholder Gary Wang, and Nishad Singh, who joined from Alameda.
Mr Singh pleaded guilty in February to fraud as part of a cooperation deal with prosecutors.
Mr Wang and Caroline Ellison, Mr Bankman-Fried ex-girlfriend and former chief executive of Alameda, pleaded guilty last year to charges in connection to their roles at FTX and Alameda Research and are working with the US government.
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