FTX founder and former CEO Sam Bankman-Fried, an alleged fraudster facing 11 criminal charges, mocked his company’s laissez-faire trading and accounting practices, according to a report on the lack of financial controls at FTX.
The cryptocurrency exchange and hedge fund’s failures were embedded in “hubris, incompetence and greed,” concluded the report by FTX’s new management team.
“We sometimes find $50m of assets lying around that we lost track of; such is life,” Bankman-Fried wrote in one internal communication.
SBF described Alameda Research, FTX’s crypto hedge fund, as “hilariously beyond any threshold of any auditor being able to even get partially through an audit.”
Most decisions at FTX were left to SBF, Director of Engineering Nishad Singh, and Chief Technology Officer Gary Wang. One executive joked that if the former engineering and technology chiefs were hit by a bus, “the whole company would be done.”
Private keys to permit the movement of cryptocurrency assets were sometimes kept in plain-text Word files without encryption on an FTX group server, many with non-descriptive names such as “use this” or “do not use.”
SBF reminded crypto followers in a 2019 tweet to use two-factor authentication, while his own company failed to use multifactor authentication for its Google accounts and password-management server.
Employees who voiced concern over important hires, the lack of security and controls, and delegation of authority at FTX were punished by being fired or seeing their bonuses drastically reduced, such as the former president of FTX.US, who ultimately resigned.
FTX’s new CEO John J. Ray III wrote in the report, “While the FTX Group’s failure is novel in the unprecedented scale of harm it caused in a nascent industry, many of its root cases are familiar: hubris, incompetence and greed.”
A Bankman-Fried spokesman and a lawyer for Wang declined to comment, while a Singh attorney did not respond to a request for comment.
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