A lack of appropriate record-keeping and control failures as well as “greed” led to the collapse of cryptocurrency exchange FTX Group, a new report has found.
Despite the public image it sought to create of a responsible business, the FTX Group was tightly controlled by a small group of people who showed little interest in instituting an appropriate oversight or control framework, the report by the new management of FTX said on Sunday.
They stifled dissent 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, and thereby caused the FTX Group to collapse as swiftly as it had grown, the report added.
“In this regard, while the FTX Group’s failure is novel in the unprecedented scale of harm it caused in a nascent industry, many of its root causes are familiar: hubris, incompetence and greed,” the new management said.
Sam Bankman-Fried — in pictures
FTX collapsed last November after a wave of withdrawals and consequently declared bankruptcy on November 11.
Its founder Sam Bankman-Fried, 30, was arrested in the Bahamas on December 12 after federal prosecutors in the US charged him with eight criminal counts — including conspiracy, wire fraud and money laundering — for allegedly misusing billions of dollars in customer funds before the $9 billion collapse of FTX and Alameda Research.
“FTX Group was tightly controlled by a small group of individuals who falsely claimed to manage FTX Group responsibly, but in fact showed little interest in instituting oversight or implementing an appropriate control framework,” John Ray, chief executive and chief restructuring officer of the FTX Debtors, said.
“We are continuing our efforts to review the events that factored into the fall of FTX and to identify and recover as much value as possible for creditors.”
Although the FTX Group consisted of many separate entities, transfers of funds among those entities were not properly documented, rendering tracing of funds extremely challenging, the report said.
Slack, Signal and other informal methods of communication were frequently used to document approvals. Signal and Telegram were at times used in communications with both internal and external parties with “disappearing messages” enabled, rendering any historical review impossible, the research revealed.
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,” according to the report.
The management and governance of the FTX Group was largely limited to Mr Bankman-Fried, former director of engineering Nishad Singh and co-founder Gary Wang.
Among them, Mr Bankman-Fried was viewed as having the final say in all significant decisions.
“These three individuals, not long out of college and with no experience in risk management or running a business, controlled nearly every significant aspect of the FTX Group,” the new management said.
With isolated exceptions, the FTX Group lacked independent or experienced finance, accounting, human resources, information security, or cyber security personnel or leadership, and lacked any internal audit function. Board supervision was also effectively non-existent, the report said.
Efforts to clarify corporate responsibilities and enhance compliance were not welcome and resulted in backlash.
The FTX Group also lacked an appropriate organisational structure.
“Rather than having an ultimate parent company able to serve as a central point for decision-making that could also direct and control its subsidiaries, the FTX Group was organised as a web of parallel corporate chains with various owners and interests, all under the ultimate control of Mr Bankman-Fried.”
At its peak, the FTX Group operated in 250 jurisdictions, controlled tens of billions of dollars of assets across its various companies, engaged in 26 million transactions per day and had millions of users.
Despite these asset levels and transaction volumes, the FTX Group lacked fundamental financial and accounting controls, the new management said.
“The group did not have personnel who were experienced and knowledgeable enough to account accurately for assets and liabilities, understand and hedge against risk, or compile and validate financial reports.”
Fifty-six entities within the FTX Group did not produce financial statements at all. Thirty-five FTX Group entities relied on a hodgepodge of Google documents, Slack communications, shared drives, and Excel spreadsheets to manage their assets and liabilities, the report found.
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Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
KILLING OF QASSEM SULEIMANI
The specs
Engine: 4.0-litre V8 twin-turbocharged and three electric motors
Power: Combined output 920hp
Torque: 730Nm at 4,000-7,000rpm
Transmission: 8-speed dual-clutch automatic
Fuel consumption: 11.2L/100km
On sale: Now, deliveries expected later in 2025
Price: expected to start at Dh1,432,000
Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
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UAE currency: the story behind the money in your pockets
About Krews
Founder: Ahmed Al Qubaisi
Based: Abu Dhabi
Founded: January 2019
Number of employees: 10
Sector: Technology/Social media
Funding to date: Estimated $300,000 from Hub71 in-kind support
UAE squad
Men's draw: Victor Scvortov and Khalifa Al Hosani, (both 73 kilograms), Sergiu Toma and Mihail Marchitan (90kg), Ivan Remarenco (100kg), Ahmed Al Naqbi (60kg), Musabah Al Shamsi and Ahmed Al Hosani (66kg)
Women’s draw: Maitha Al Neyadi (57kg)
Results
4pm: Al Bastakiya Listed US$300,000 (Dirt) 1,900m; Winner: Emblem Storm, Oisin Murphy (jockey), Satish Seemar (trainer).
4.35pm: Mahab Al Shimaal Group 3 $350,000 (D) 1,200m; Winner: Wafy, Tadhg O’Shea, Satish Seemar.
5.10pm: Nad Al Sheba Turf Group 3 $350,000 (Turf) 1,200m; Winner: Wildman Jack, Fernando Jara, Doug O’Neill.
5.45pm: Burj Nahaar Group 3 $350,000 (D) 1,600m; Winner: Salute The Soldier, Adrie de Vries, Fawzi Nass.
6.20pm: Jebel Hatta Group 1 $400,000 (T) 1,800m; Winner: Barney Roy, William Buick, Charlie Appleby.
6.55pm: Al Maktoum Challenge Round-3 Group 1 $600,000 (D) 2,000m; Winner: Matterhorn, Mickael Barzalona, Salem bin Ghadayer.
7.30pm: Dubai City Of Gold Group 2 $350,000 (T) 2,410m; Winner: Loxley, Mickael Barzalona, Charlie Appleby.
The specs
Engine: 5.2-litre V10
Power: 640hp at 8,000rpm
Torque: 565Nm at 6,500rpm
Transmission: 7-speed dual-clutch auto
Price: From Dh1 million
On sale: Q3 or Q4 2022
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Desert Warrior
Starring: Anthony Mackie, Aiysha Hart, Ben Kingsley
Director: Rupert Wyatt
Rating: 3/5
Retail gloom
Online grocer Ocado revealed retail sales fell 5.7 per cen in its first quarter as customers switched back to pre-pandemic shopping patterns.
It was a tough comparison from a year earlier, when the UK was in lockdown, but on a two-year basis its retail division, a joint venture with Marks&Spencer, rose 31.7 per cent over the quarter.
The group added that a 15 per cent drop in customer basket size offset an 11.6. per cent rise in the number of customer transactions.
What went into the film
25 visual effects (VFX) studios
2,150 VFX shots in a film with 2,500 shots
1,000 VFX artists
3,000 technicians
10 Concept artists, 25 3D designers
New sound technology, named 4D SRL
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Three ways to boost your credit score
Marwan Lutfi says the core fundamentals that drive better payment behaviour and can improve your credit score are:
1. Make sure you make your payments on time;
2. Limit the number of products you borrow on: the more loans and credit cards you have, the more it will affect your credit score;
3. Don't max out all your debts: how much you maximise those credit facilities will have an impact. If you have five credit cards and utilise 90 per cent of that credit, it will negatively affect your score.
Profile
Company: Justmop.com
Date started: December 2015
Founders: Kerem Kuyucu and Cagatay Ozcan
Sector: Technology and home services
Based: Jumeirah Lake Towers, Dubai
Size: 55 employees and 100,000 cleaning requests a month
Funding: The company’s investors include Collective Spark, Faith Capital Holding, Oak Capital, VentureFriends, and 500 Startups.
HOW TO WATCH
Facebook: TheNationalNews
Twitter: @thenationalnews
Instagram: @thenationalnews.com
TikTok: @thenationalnews
West Indies v England ODI series:
West Indies squad: Jason Holder (c), Fabian Allen, Devendra Bishoo, Darren Bravo, Chris Gayle, Shimron Hetmyer, Shai Hope, Evin Lewis, Ashley Nurse, Keemo Paul, Nicholas Pooran, Rovman Powell, Kemar Roach, Oshane Thomas.
Fixtures:
1st ODI - February 20, Bridgetown
2nd ODI - February 22, Bridgetown
3rd ODI - February 25, St George's
4th ODI - February 27, St George's
5th ODI - March 2, Gros Islet
Groom and Two Brides
Director: Elie Semaan
Starring: Abdullah Boushehri, Laila Abdallah, Lulwa Almulla
Rating: 3/5
