Here is the report of the 6 most damning claims of debtors

  • Sam Bankman-Fried threatened FTX employees who raised concerns about his business practices.
  • FTX, a $32 billion crypto empire, required employees to report business expenses via Slack.
  • Insider has compiled the six most shocking claims about the failed crypto exchange from its accounts receivable report.

FTX’s debtors report was released on Sunday, the first detailed account of wrongdoing against the failed crypto exchange and its affiliates since CEO John J. Ray III took over last year.

The claims range from egregious accounting errors that cost the company a fortune, to threats against employees who spoke out about alleged wrongdoing, and several others. The 45-page report compiled interviews with 19 former FTX employees and “received substantial information through an attorney” for five others.

“At its peak, the FTX Group operated in 250 jurisdictions, controlled tens of billions of dollars in assets across its various companies, performed up to 26 million transactions per day, and had millions of users,” the report said. . “Despite these asset levels and trading volumes, FTX Group lacked fundamental financial and accounting controls.”

FTX filed for Chapter 11 bankruptcy in November after losing at least $8 billion in client funds. Prosecutors referred to the catastrophic turn of events as one of the “the biggest financial frauds in American history”.

Insider has compiled a list of the six most damning claims against FTX from the recently released court document.

1) SBF threatened FTX executives

Several FTX executives have been threatened after raising concerns about the company’s business practices.

Brett Harrison, the former president of FTX.US, has reportedly resigned after a “protracted disagreement” with founder Sam Bankman-Fried and former FTX CTO Nishad Singh “over the lack of proper delegation of authority, formal management and key hiring” at the American subsidiary.

After Harrison resolved these issues, his bonus was “significantly reduced” and “senior in-house counsel asked him to apologize to Bankman-Fried for raising the concerns, which he declined to do.” .

Harrison previously confirmed via Twitter that he resigned for similar reasons, adding that he had been “threatened [Bankman-Fried’s] name that I would be fired and Sam would destroy my professional reputation,” he wrote.

“I was asked to officially retract what I wrote and issue an apology to Sam that was written for me.”

Just three months later, an FTX lawyer was fired after raising concerns about Alameda Research’s inadequate corporate controls and lack of risk management practices.

2) FTX.US was in talks about an IPO, but efforts were abandoned

FTX Group management had previously considered taking its U.S. subsidiary public on the Nasdaq in December 2020. FTX.US, however, was to be audited, a process that would include reviewing company policies and various workflow procedures.

As a result, the report states, “Senior staff at FTX Group worked hard to concoct purported policies that could be shown to auditors. informed that because the listeners [would] spend time understanding and reviewing [FTX] internal processes, internal controls should be documented. FTX Group management asked employees “well versed in” “parts of the [work]flow’ to provide first drafts of policies and procedures in just 24 hours.”

3) An Alameda executive asked employees to falsify the numbers

An anonymous senior Alameda insider asked staff to “propose numbers? Idk” in response to requests to mark fund positions for certain tokens.

Although Alameda was once considered one of the best in the industry, behind the scenes the trading boutique couldn’t follow its own investment strategies.

In fact, Bankman-Fried previously described Alameda as “hilarious beyond any threshold allowing any auditor to even partially pass an audit,” adding, “Alameda is not auditable. the company will have reservations about its audit; I mean that in the sense of “we can only estimate its balances, not to mention something like a full transaction history”.

He added via internal messaging: “Sometimes we find $50 [million] assets lying around that we have lost track of; that’s life.”

4) Employee expenses have been approved with emojis

FTX Group also asked employees to file business expenses and invoices through Slack. These were later endorsed by emoji, according to the report.

5) FTX had 80,000 trades tagged as “Ask My Accountant”

Transactions for FTX were often tracked through QuickBooks, an accounting software commonly used by small and medium-sized businesses. The company used generic phrases such as “cryptocurrency investments,” according to the report.

“About 80,000 transactions were simply left as unprocessed accounting entries in catch-all QuickBooks accounts titled ‘Ask My Accountant,'” the accounts receivable report read.

6) There was too much power between a small handful of frames

According to the report, major decisions regarding FTX were in the hands of Bankman-Fried, Singh and co-founder Gary Wang, leaving many employees in the dark about their individual responsibilities.

A former executive described Singh and Wang’s surveillance of the FTX group as follows: “If Nishad [and Gary] hit by a bus, the whole company would be ruined.”

“These individuals have stifled dissent, mixed and embezzled company and customer funds, lied to third parties about their business, internally joked about their tendency to lose track of millions of dollars in assets, and thus caused the FTX Group to collapse as rapidly as it had grown,” the report read.

“In this respect, while the failure of FTX Group is novel in the unprecedented scale of damage it has wreaked on a fledgling industry, many of its root causes are familiar: hubris, incompetence and greed.

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