Cybersecurity, controls, accounting… according to a first transparency report from creditors from FTXthe crypto exchange accumulated the mistakes. These errors are attributed to “a small group of individuals ” irresponsible.
This is a report with charge. And the first provided by FTX’s debtors in charge of restructuring the failed crypto exchange. Its auditors scrutinized the practices in place to secure and manage digital assets.
“The report is based on the debtors’ review of terabytes of data and electronic communications, more than one million documents and interviews with 19 former FTX Group employees, among other information.”
Management team solely responsible for fiasco
The conclusions are calamitousas the liquidator suggested last November, drawing a parallel with Enron, another historic bankruptcy. John J. Ray pointed to a “complete failure of corporate controls” and a “total absence of reliable financial information.”
This “first report” conducted “in the spirit of transparency” confirms these intuitions about the “control failures of the former management team in critical functions.” But to establish these facts, the Debtors “had to overcome unusual obstacles. “
They point out that the company did not keep records. FTX also lacked appropriate controls in critical areas such as token security. Despite its millions of customers, no cybersecurity team was in place.
Bankman-Fried, Singh, and Wang have moved away from control
The report also points to critical weaknesses in management and governance. As a basis for this judgment, the auditors point out that “records, data sources and processes exist in principle that can be used to identify and protect assets.
“This is not the case with FTX Group. For the liquidator, these faults are attributable to a ” small group of individuals “. These individuals “tightly” controlled the company and “falsely claimed to manage the FTX Group in a responsible manner.
In truth, John J. Ray continued, these officials “showed little interest in establishing oversight or implementing an appropriate control framework. The report points directly to the former CEO, Sam Bankman-Fried.
Virtually unlimited powers for 3 executives
In addition to their mismanagement, this “handful of employees” had “virtually unlimited power,” allowing them, for example, to transfer funds from the exchange and its customers without explanation.
“The management and governance of the FTX Group was largely limited to the following individuals: Bankman-FriedSingh and Wang. Among them, SBF was considered to have the final say in all important decisions .”
The report further notes that these executives, “particularly Bankman-Fried” neglected or rejected advice to improve the FTX group’s control framework, thereby exposing the exchanges to serious harm.
[Les dirigeants] joked internally about their tendency to lose track of millions of dollars in assets,” the report states.
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