A report filed by FTX’s bankruptcy lawyers is beginning to reveal the details of the company’s collapse.
- Founder Sam Bankman-Fried (SBF) resigned from FTX on November 11—the same day the company filed for bankruptcy, after a week of chaos as his company’s liquidity crisis was revealed to the public.
- The company is currently in the hands of restructuring lawyer John J. Ray III, who previously worked on Enron’s liquidation.
- Ray filed a bankruptcy update on Thursday outlining the full available impropriety, calling FTX one of the largest failures of a financial institution he’s ever seen.
- FTX’s lawyers are also accusing SBF of disrupting the bankruptcy process.
Why it’s Important
The full degree of FTX’s internal corruption has yet to be fully determined, but auditors are already struggling to fully catalog its assets, with SBF’s recent behavior clouding the proceedings.
The auditors’ report says the company is struggling to locate any of FTX’s cash due to poor record keeping, that the auditors can’t find a complete list of employees, that there is evidence the company misused and illegally transferred funds, and that employees were allowed to submit payment requests through chat groups, where “supervisors approved disbursements by responding with personalized emojis.”
“Enormous efforts are underway to bring some semblance of order to a chaotic environment. It is critical to the efforts to end the chaos and to ensure that assets can be secured and marshaled in an orderly process,” say FTX lawyers.
SBF is currently attempting to walk back implicating statements he made in a Vox Media interview on Wednesday. FTX’s lawyers are also accusing him of attempting to tie up assets in courts in the Bahamas, away from U.S. courts to undermine the process, Bloomberg reports.
“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. From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated, and potentially compromised individuals, this situation is unprecedented,” says Ray.