On Thursday, November 17, FTX, the second largest cryptocurrency exchange in the world that hastily filed for bankruptcy last week, broke out again with "judgement and even speechless".
The new CEO John Ray III, who was once in charge of Enron's bankruptcy liquidation, exposed for the first time the chaos and failure of FTX Group's internal accounting, risk control and management.
He said that in his 40-year career in corporate restructuring that has experienced some of the largest bankruptcies in history, "never seen such a bad thing":
" In my career, I have never seen such a complete failure of corporate control, and such a complete lack of trustworthy financial information.
This not only includes impaired system integrity and defects in foreign regulation, but also represents that corporate control is concentrated in the hands of a very small number of people who lack experience, inexperienced, inexperienced and possibly immoral, which is unprecedented."
Creditors only find a small number of digital assets, and only under tens of billions of dollars in debt. Nearly 6html $500 million in cash and 7html $500 million in cryptocurrency
In the past week when FTX Group filed for US Chapter 11 bankruptcy protection, the new CEO took over and tried to protect creditor assets, they only found "a small portion of the FTX Group's digital assets that they hope to recover", including about 740 million in cryptocurrency stored in offline cold wallets, while FTX Group disclosed liabilities of up to $10 billion to $50 billion in bankruptcy filings.
file also disclosed that after FTXCh Group filed for bankruptcy protection, there was also an unauthorized 3 US$500 million FTTh token "minted". A huge transfer of creditor assets may have occurred in the days, weeks and months before the bankruptcy filed. :
"The approximately $740 million cryptocurrency found cannot be confirmed whether it can be distributed among the different business groups of the FTX Group.
also has many cryptocurrencies that creditors cannot control, including: 1) At least $372 million was transferred unauthorized on the day of bankruptcy protection application; 2) After the application was initiated, approximately $300 million of the FTX platform native representative FTT was created by an unauthorized source; 3) and other wallet addresses that the group co-founder and other relevant persons have not identified but contain creditor assets." The latest document stated that FTX Group "has not centrally controlled its cash, nor has it retained an accurate list of bank accounts and its signatories, and has never paid enough attention to the credibility of global bank partners. Due to the failure of cash management, creditors are not clear about how much cash FTX Group held when it filed for bankruptcy protection last week. It has been found that about 5.6 USD 500 million can be attributed to FTX entities .
embezzled public funds to buy houses for employees. Former CEO encouraged communication with the following information. Some employees were unable to confirm their identity.
FTX Group's internal management of the company's funds were confusing:
"In the location of its headquarters, Bahama , the company's funds were used to purchase houses and other personal belongings for employees and consultants. Some of the transactions did not seem to be considered "loans". In the Bahamas records, some real estate was registered under the personal names of the above-mentioned employees and consultants."
At the company's expenditure control level, FTX Group is also making trouble:
"The FTX Group filing for bankruptcy protection does not have the type of payment control that I think is suitable for commercial enterprises. For example, group employees submit payment applications through online chat platforms, and different supervisory groups approve payments by replying to emoji emoticons."
FTX Group does not have the appropriate corporate governance model , never holds a board meeting, former CEO Sam Bankman-Fried allegedly uses software that automatically deletes messages to communicate major decisions and communicate, and asks employees to do the same, and the operation of FTX.com is therefore "lack of lasting records."
The group also mixed together the dispatched employees of its different subsidiaries and external contractors to count. Not only is the scope of responsibilities unclear, it is impossible to find a complete and clear employee list and employment terms:
"So far, many attempts to locate certain assumed employees to confirm their identity have not been successful." The crypto tokens held by the exchange on
FTX cryptocurrency is only worth 66 50,000 US dollars, and the financial statements are "untrusted" regardless of whether they have been audited or not
At the FTX exchange level, the document collectively calls it and similar exchanges in non-US jurisdictions "Dotcom Silo's business group, the crypto token held by the core platform FTX.com currently has a value of only 65.9 50,000 US dollars, while the valuation revealed by former CEO and founder Sam Bankman-Fried last week was as high as billions of US dollars.
At the same time, FTX.com does not seem to include user-side liabilities in the financial statements, and the identity of Prager Metish, the audit company of the business portfolio and financial statements, is doubtful. experienced John Ray III said he was not familiar with the company, whose official website showed that they were "the first certified public accountant firm in history to officially open the Metaverse headquarters on the Metaverse platform Decentraland."
Another business group is called "WRS Silo". Its assets that are not included in this bankruptcy protection include: LedgerX, a crypto derivatives trading platform regulated by , the US Commodity Futures Trading Commission, and another asset, FTX US, is included in the bankruptcy filing.
This business portfolio and financial statement audit company Armanino LLP is more reliable and is a professionally familiar organization for the new CEO. But he remains very concerned about the information provided in these audited financial statements, especially information related to Dotcom Silo.
He advises that stakeholders and courts should not accept the above statements, "I have no confidence in these statements and the information on them", and the new management team is working to rebuild the balance sheet of the FTX entity "from the bottom up".
and Alameda Research business group, as well as the "Ventures Silo" business group with third-party equity investors, have not found any audited financial statements .
Alameda Trading Company provides former CEO 6 US$500 million loan. FTX Group uses software to conceal customer funds
At the level of Alameda Research, the initiator of the FTX liquidity crisis, the document states that it was established in Delaware, USA, and operates quantitative trading funds specifically for crypto assets. The strategies include arbitrage, market making , digital currency lending interest (yield farming) and transaction volatility. It also provides over-the-counter trading services, and initiates and manages other debt and equity investments. The
file defines it as a "cryptographic hedge fund", which is owned by Sam Bankman-Fried 290% stake, and another co-founder Zixiao "Gary" Wang holds 10% stake, engaged in diversified businesses such as digital asset trading, speculation and related loans and securities for the accounts of the two owners. Alameda's consolidated financial statements are unaudited, with total assets as of September 30 this year of $13.46 billion, but there should be a problem of "asset value being severely overvalued" under the control of the founder, "so I have no confidence in it."
Alameda Research There are three suspicious loans on the books, one of which is a $500 million loan to Sam Bankman-Fried, and also a $543 million loan to Nishad Singh, another co-founder of FTX Group. Some analysts said this "seem to confirm some kind of backdoor relationship between Alameda and the FTX exchange."
FTX Group's digital asset custody has also failed completely:
"FTX Group does not retain appropriate books and records or security controls for its digital assets. Bankman-Fried and Wang control access to digital assets for the Group's main business (except LedgerX, regulated by the CFTC and certain regulated and/or licensed subsidiaries).
unacceptable management practices include: using an unsafe group email account as the root user to access the confidential private keys and key sensitive data of the global FTX group company; positions on the blockchain are not checked daily; and uses software to conceal misuse of customer funds.
Alameda Research is also secretly exempted from certain aspects of the FTX.com automatic liquidation agreement, and lacks an independent governance model between Alameda, which is owned by Bankman-Fried and Wang, and the Dotcom business group, which introduces third-party external investors and is the main business of the FTX Exchange. "
file says that the "WRS Silo" business group and "Dotcom mentioned above" Silo's business group has third-party equity investors, including investment fund , campus endowment fund, sovereign wealth fund and family office . But except for several co-founders of FTX Group, no outside investor owns more than 2% of shares in any business group.
New CEO accused: Former CEO hiding in the Bahamas, please do not make capricious and misleading statements.
file also describes the dramatic events that occurred on the day FTX Group filed for bankruptcy protection last Friday, November 11, and the Wall Street News is briefly described as follows:
FTX Group is facing a serious liquidity crisis and must file for bankruptcy protection on November 11. A few days before the filing was initiated, Bankman-Fried and its FTX Group executives outside of their core circles learned more. People questioned his leadership and his handling of a series of complex assets and businesses among the group's subsidiaries.
In the early morning of November 11, some senior FTX Group members initiated negotiations with Bankman-Fried to resign and file for company bankruptcy. Bankman-Fried consulted numerous lawyers, including his father, Stanford Law professor Joseph Bankman. At around 4:30 am ET, he finally agreed to resign.
FTX Group's new CEO also directly criticized the former CEO by name. Sam Bankman-Fried:
"Lastly, and crucially, creditors have made it clear to FTX employees and the public that Bankman-Fried is not employed by creditors and does not speak on their behalf.
Bankman-Fried, currently in the Bahamas, continues to make capricious and misleading public statements on social media, and I still don't know his personal connections and financial assets in the Bahamas. "
FTX founder Sam Bankman-Fried's apartment in the Bahamas was just listed for sale for $40 million. He publicly admitted in April this year that digital currency lending was " Ponzi scheme ".
FTX Latest management is also competing with the Bahamas regulator for control of bankruptcy proceedings. When FTX Group filed for bankruptcy in the United States, the Bahamas securities regulator sought to control the liquidation procedures of the group's subsidiaries in the country. The latest documents also expressed dissatisfaction:
"The creditors have reliable evidence that the Bahamas government has directed unauthorized access to the creditor's system to obtain the creditor's digital assets, which occurred after the filing of the US bankruptcy filing. "
FTX platform original token FTT fell by more than 5% on Thursday, trading at $1.56, and trading at $24 before the crash storm broke out on November 6.
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