Ornella Hernandez

FTX’s granting of a peculiar withdrawal window for Bahamian accounts while the rest of the world was locked out has attracted the attention of the US Congress.



Veteran insolvency expert John Ray, who took over as CEO to handle the exchange’s restructuring, testified during a Congressional committee meeting on Tuesday on FTX’s absence of record keeping and the status of the recovery of funds.&nbsp;



Ray revealed that FTX’s restructuring team has so far <a href="https://blockworks.co/news/ftx-managed-critical-accounting-via-slack-new-ceo-testifies" target="_blank" rel="noreferrer noopener">secured more than $1 billion in assets</a>. However, when US Rep. William Timmons asked about money withdrawn from the exchange by Bahamian citizens, Ray didn’t offer as many details. 



But Timmons revealed that Congress has a list of 1,500 Bahamians who took advantage of a window of about 25 hours between Nov. 10 and 11 to pull funds. FTX is headquartered in the Bahamas, where many key employees lived, including Bankman-Fried and Alameda Research CEO Caroline Ellison.



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Source from the hearing <a href="https://t.co/Md04L6nnQr">pic.twitter.com/Md04L6nnQr</a>&mdash; mo (@mochains) <a href="https://twitter.com/mochains/status/1602745059572682756?ref_src=twsrc%5Etfw">December 13, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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FTX.com had <a href="https://blockworks.co/news/ftx-re-enables-withdrawals-but-only-in-bahamas" target="_blank" rel="noreferrer noopener">paused withdrawals</a> for the rest of the world at the time, a move Bankman-Fried claimed local regulators had requested (they later denied that was the case).



Some non-Bahamian residents, desperate to retrieve their frozen assets, ended up finding a <a href="https://blockworks.co/news/ftx-nfts-provided-loophole-for-non-bahamas-residents-wanting-to-withdraw-funds" target="_blank" rel="noreferrer noopener">loophole to do so via FTX’s NFT platform</a>, which was left online. Bahamian residents were said to be listing very expensive — but otherwise unremarkable — NFTs, which stranded users would buy with their full balances. 



This allowed local accounts to withdraw the cash in full on their behalf. Blockworks reported at the time that the NFTs that sold for inflated prices added up $50 million in volume on the marketplace using this scheme.



The total amount allegedly taken out from Bahamian accounts is $100 million, according to Timmons, who asked Ray, “You plan on going after that money, correct?”



“We’ll investigate every potential course of action,” Ray answered. It’s still unclear how much of the funds were withdrawn by actual Bahamian residents.



When pressed on the matter again, Ray said that they will “certainly pursue every course of action to recover” the funds.



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FTX May Need To Claw Back $100M From 1,500 Bahamian FTX Accounts

Casey Wagner

The Securities Commission of the Bahamas has accused new FTX CEO John Ray of making “misstatements” in order to “advance questionable agendas” related to the exchange’s restructuring.&nbsp;



Liquidation veteran Ray has intentionally made misrepresentations relating to Sam Bankman-Fried’s relationship with the Bahamas regulatory authorities, the Commission alleged in a <a href="https://www.scb.gov.bs/wp-content/uploads/2022/12/SCB-Addresses-Misstatment-in-FTX-Delaware-Filing-13Dec22Final.pdf">statement</a> released Tuesday.&nbsp;



Ray released <a href="https://t.co/fM3zHyTFJu">redacted emails</a> between Bankman-Fried and Bahamian officials as part of the exchange’s bankruptcy filings. In the correspondence, Bankman-Fried tells officials that the exchange has “segregated” funds belonging to Bahamian customers and offered to open withdrawals for these clients only.&nbsp;



“Those redactions were designed to create a false impression of communications between Mr. Bankman-Fried and the Commission,” the Securities Commission of the Bahamas wrote in Tuesday’s statement. “These redactions are disturbing as Mr. Ray is aware that the full email reveals Mr. Bankman-Fried’s acknowledgement that he had ‘not briefed the Securities Commission.’”&nbsp;



The Commission’s statement comes less than 24 hours after <a href="https://blockworks.co/news/sam-bankman-fried-arrested-in-bahamas">Bankman-Fried was arrested in the Bahamas</a>. Bahamian officials cooperated with the US in detaining the disgraced founder, who faces charges of <a href="https://blockworks.co/news/sec-charges-sam-bankman-fried-with-defrauding-investors">money laundering and wire fraud</a> in the US.&nbsp;



The letter came as Ray <a href="https://blockworks.co/news/ftx-managed-critical-accounting-via-slack-new-ceo-testifies">appeared on Capitol Hill</a> Tuesday to address lawmakers and provide insight into how the exchange failed.&nbsp;



Ray made several accusations in his prepared testimony regarding the exchange’s business operations. He said the restructuring team has discovered FTX was commingling funds and inappropriately stored certain private keys “to access hundreds of millions of dollars in crypto assets without effective security controls or encryption,” according to his opening <a href="https://financialservices.house.gov/uploadedfiles/hhrg-117-ba00-wstate-rayj-20221213.pdf">statement</a>.



As of Tuesday, Ray has not responded to the Bahamian regulator, officials added in the statement.



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Bahamian Regulator Accuses John Ray of ‘Misstatements’ Regarding FTX

Now-bankrupt FTX may have experienced financial trouble for years before the public became aware, the exchange’s new CEO testified Tuesday.&nbsp;



John Ray, who <a href="https://blockworks.co/news/new-ftx-ceo-says-exchange-commingled-assets" target="_blank" rel="noreferrer noopener">took over</a> to handle the exchange’s restructuring, appeared before lawmakers for the first of several expected hearings to discuss the fraud and what’s next for customers. 



“What was first disclosed to the public happened around Nov. 2, But when this began was months, if not earlier, years,” Ray <a href="https://www.youtube.com/watch?v=rWAnrigAO3I" target="_blank" rel="noreferrer noopener">said</a>. “Investigation is continuing…but this is not something that happened overnight.” 



Bankman-Fried, who was expected to appear virtually before he was <a href="https://blockworks.co/news/bankman-fried-arrest-day-before-congress-testimony-raises-eyebrows" target="_blank" rel="noreferrer noopener">arrested</a> in the Bahamas Monday evening, likely knew far more than he has let on in recent interviews, Ray added. 



The 30-year-old founder faces several <a href="https://blockworks.co/news/sec-charges-sam-bankman-fried-with-defrauding-investors" target="_blank" rel="noreferrer noopener">charges</a> in the US, including wire fraud, conspiracy, securities fraud conspiracy and money laundering. 



FTX’s restructuring team has secured more than $1 billion in assets so far, Ray said, which are now being held in cold storage for security. The team anticipates it will take additional “weeks, if not months” to recover additional assets.



The majority of FTX’s creditors were clients of FTX.com — Bankman-Fried’s flagship global exchange headquartered in the Bahamas — and not based in the US, Ray added.&nbsp;



FTX’s collapse and associated fraud is “worse than Enron,” the veteran insolvency expert said, primarily because FTX’s management system was so inappropriately structured. Ray oversaw liquidation of the commodity and services giant in 2007.



“This one is unusual and unusual in the sense that literally, there&#8217;s no record keeping whatsoever,” Ray said of FTX.&nbsp;



“In the absence of record keeping, employees would communicate invoicing and expenses on Slack, which is essentially a way of communicating in chat rooms.”&nbsp;



The exchange also used online accounting platform QuickBooks, a product more appropriate for mid-sized companies than multibillion-dollar corporations, Ray said. 



“There was no sophistication whatsoever,” Ray said. “There was an absence of any.”&nbsp;



<h3 class="wp-block-heading">Sam Bankman-Fried crypto bill still in play</h3>



In Tuesday’s Congressional session, lawmakers were primarily concerned with getting to the bottom of exactly how FTX ended up in this situation.



Still, some used the opportunity to express greater concerns about the digital asset industry as a whole.&nbsp;



“For five years I&#8217;ve been trying to ban American investments in crypto,” Rep. Brad Sherman, D-Cali., said. “I&#8217;m the only member of the House to get an F from the only crypto promoting organization that rates members of Congress.”&nbsp;



Members of Congress and the Securities and Exchange Commission failed to protect investors by neglecting to investigate the exchange and its founder, Sherman said.&nbsp;



“Don&#8217;t trash Sam Bankman-Fried and then pass his bill,” Rep. Sherman urged, referring to the <a href="https://blockworks.co/news/crypto-regulation-cftc-sec-tag-team" target="_blank" rel="noreferrer noopener">Digital Commodities Consumer Protection Act</a>, which <a href="https://blockworks.co/news/sbf-cftc-crypto-bill" target="_blank" rel="noreferrer noopener">Bankman-Fried</a> advocated for prior to the exchange’s public collapse. 



As of Tuesday morning, Bankman-Fried is the only person associated with FTX who faces criminal charges.&nbsp;



When asked if Bankman-Fried’s right-hand associates, namely Ryan Salame, co-CEO of FTX, and Caroline Ellison, Alameda Research’s CEO, would face prosecution, Ray only said his team would turn over any relevant information found.



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FTX Managed Critical Accounting Via Slack, New CEO Testifies

FTX’s newly appointed CEO John Ray acknowledges the exchange commingled assets in Congressional testimony set to be delivered Tuesday.&nbsp;



“Some of the unacceptable management practices at the FTX Group identified so far include…the commingling of assets,” Ray wrote in his prepared <a href="https://financialservices.house.gov/uploadedfiles/hhrg-117-ba00-wstate-rayj-20221213.pdf" target="_blank" rel="noreferrer noopener">testimony</a>, released Monday.&nbsp;



FTX also inappropriately stored certain private keys “to access hundreds of millions of dollars in crypto assets without effective security controls or encryption,” Ray claimed in his statement. There was also no record of proper financial statements or transaction documentation, the insolvency professional added.&nbsp;



Ray also clarified that FTX US, the exchange’s American subsidiary, was included in the Chapter 11 “because FTX US was not operated independently of FTX.com.” The filing helped to prevent a run on FTX US and protect current assets, Ray added.&nbsp;



The House Financial Services Committee is slated to hear from Ray and former CEO Sam Bankman-Fried during its “<a href="https://financialservices.house.gov/events/eventsingle.aspx?EventID=410002" target="_blank" rel="noreferrer noopener">Investigating FTX Hearing</a>” Tuesday morning.&nbsp;



Bankman-Fried previously went <a href="https://blockworks.co/news/maxine-waters-subpoena-sam-bankman-fried" target="_blank" rel="noreferrer noopener">back and forth with Rep. Maxine Waters</a>, the committee’s chair, over <a href="https://twitter.com/RepMaxineWaters/status/1599858166359068676?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1599858166359068676%7Ctwgr%5E164cbf465be428f4fb1beb1e1b5707bacd2cac06%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fblockworks.co%2Fnews%2Fmaxine-waters-subpoena-sam-bankman-fried" target="_blank" rel="noreferrer noopener">Twitter</a> about whether or not he would appear. Waters said she would issue a subpoena if necessary.&nbsp;



As of Friday, Dec. 9, Bankman-Fried is expected to attend the hearing, although he noted that he still does not have access to “much” of his data, but he “will try to be helpful during the hearing,” he <a href="https://twitter.com/SBF_FTX/status/1601186246990401537?s=20&amp;t=niz1AiRl9grGDy3rfQgZqg" target="_blank" rel="noreferrer noopener">said</a>. It is expected that he will appear virtually, rather than in person.



The hearing will be the disgraced founder’s <a href="https://blockworks.co/news/sbf-new-york-times" target="_blank" rel="noreferrer noopener">latest</a> in a stint of public appearances following the exchange’s collapse.&nbsp;



“I didn’t knowingly <a href="https://blockworks.co/news/bankman-fried-underestimated-collapse" target="_blank" rel="noreferrer noopener">commingle funds</a>,” Bankman-Fried told the New York Times in November. “I wasn’t trying to commingle funds.”



The restructuring team is currently focused on “implementing controls,” Ray said, including conducting audits and handling cash management. It also considers asset recovery and protection and maximizing value for stakeholders top priorities, according to the testimony.



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New FTX CEO Says Exchange Commingled Assets in Congressional Testimony 

More and more details of the now-insolvent crypto exchange FTX surface every day, and the spillover effects are ever more unfortunate.&nbsp;



The timeline below tracks major events <a href="https://blockworks.co/news/ftx-bankrupt-hacked-investigated-a-timeline-of-events" target="_blank" rel="noreferrer noopener">since</a> the Bahamian police began investigating FTX on Nov. 13 up to the revelations from the latest bankruptcy filings that Sam Bankman-Fried and other executives received personal loans totaling $1.5 billion.



<h3 class="wp-block-heading">Nov. 14 — Monday: Time out</h3>



The sports partnerships continued falling. The Golden State Warriors, the San Francisco-based NBA team, <a href="https://blockworks.co/news/golden-state-warriors-and-miami-heat-axe-ftx-deals" target="_blank" rel="noreferrer noopener">paused all FTX-related promotional deals</a>. Warriors point guard Stephen Curry was a global ambassador for FTX, and FTX US and its NFT marketplace were the Warriors’ official cryptocurrency platform. All these deals ceased to exist.&nbsp;



This move followed the Miami Heat NBA team ending its naming rights deal with FTX for its home stadium — FTX Arena. Additional partnerships with Major League Baseball to place the FTX logo on the uniforms of umpires and with the Mercedes-AMG Petronas F1 Team to add the FTX logo to the cars and uniforms of drivers were terminated.



<h3 class="wp-block-heading">Nov. 15 — Tuesday: Another FTX casualty&nbsp;</h3>



Bankman-Fried <a href="https://twitter.com/SBF_FTX/status/1592710177152995328?s=20&amp;t=afXyF7_qOhKdnJNbGdcKLA" target="_blank" rel="noreferrer noopener">tweeted</a> on this day that he was going to try “raise liquidity, make customers whole, and restart” as part of a days-long thread. Despite FTX’s Chapter 11 bankruptcy filing, he was reportedly in talks with <a href="https://blockworks.co/news/sbf-attempts-to-find-ftx-investors" target="_blank" rel="noreferrer noopener">investors who might help fund the $8 billion</a> that the company owes its traders and institutional clients — but the writing was on the wall.&nbsp;



Cryptocurrency lender, <a href="https://blockworks.co/news/blockfi-eyes-bankruptcy-as-ftx-fallout-continues-report" target="_blank" rel="noreferrer noopener">BlockFi announced it was likely to file for bankruptcy</a> on this day. The firm had earlier begun preventing withdrawals and it disclosed &#8220;significant exposure&#8221; to FTX the previous day. At one point in July, FTX had planned to acquire BlockFi outright for up to $240 million.



<h3 class="wp-block-heading">Nov. 16 — Wednesday: Class action lawsuit filed against SBF</h3>



The first <a href="https://blockworks.co/news/what-do-tom-brady-steph-curry-and-naomi-osaka-have-in-common-an-ftx-lawsuit" target="_blank" rel="noreferrer noopener">class action lawsuit against Bankman-Fried</a> was filed on this day, claiming that the insolvent crypto exchange violated Florida law and demanding $11 billion in damages on behalf of its customers. A number of its high-profile backers were named in the lawsuit, including Tom Brady, Gisele Bundchen, Stephen Curry, Shaquille O’Neal, David Ortiz, Naomi Osaka, Larry David and Kevin O’Leary, among others.



Using “the largest and most well-known marketers and celebrities was the only way that this massive fraud could have been successful,” one of the lawyers behind the case told Blockworks.



Also on Nov. 16, crypto lender Genesis, a subsidiary of Digital Currency Group, <a href="https://blockworks.co/news/genesis-halts-lending" target="_blank" rel="noreferrer noopener">halted withdrawals</a> to customer redemptions and new loan originations. This move caused the exchange, Gemini, to cease processing redemptions for clients using the Gemini Earn program in partnership with Genesis. Gemini said regular crypto withdrawals, however, are unaffected.



Additionally, Vox published an interview with Bankman-Fried, in which he blamed an ex-employee for malware on a device owned by an ex-employee for the hacking. He also <a href="https://blockworks.co/news/as-sbf-disses-regulators-ftx-disowns-sbf" target="_blank" rel="noreferrer noopener">criticized regulators and expressed regrets</a> about filing for bankruptcy.



FTX’s new CEO John J. Ray, III tweeted in response that, “Mr. Bankman-Fried has no ongoing role at [FTX], FTX US, or Alameda Research Ltd. and does not speak on their behalf.”&nbsp;



<h3 class="wp-block-heading">Nov. 17 — Thursday: ‘A complete failure of corporate controls’</h3>



Ray, who was brought in as a liquidator, stated in a sworn declaration submitted in bankruptcy court that according to FTX&#8217;s records, its subsidiary Alameda Research had made personal loans totaling $1 billion to Bankman-Fried and more than $500 million to FTX co-founder Nishad Singh.&nbsp;



Ray <a href="https://blockworks.co/news/worse-than-enron-sbfs-ftx-has-a-complete-absence-of-trustworthy-information" target="_blank" rel="noreferrer noopener">added</a> some harsh words. Despite having been involved in the bankruptcies of Enron: “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.”



Additional insight into the case confirmed that <a href="https://blockworks.co/news/5-highlights-ftx-bankruptcy" target="_blank" rel="noreferrer noopener">FTX did not comply with security controls</a> with respect to digital assets, misused customer funds, had unaudited financials and almost nonexistent employee management.&nbsp;&nbsp;



FTX’s local Bahamas arm, <a href="https://blockworks.co/news/ftx-bahamas-unit-filed-bankruptcy" target="_blank" rel="noreferrer noopener">FTX Digital Markets, filed for bankruptcy</a> protection in New York on this day. It opted for Chapter 15 bankruptcy, while FTX and 134 affiliate companies opted for Chapter 11 protection.&nbsp;



Another Digital Currency Group subsidiary, Grayscale, saw the value of its publicly traded <a href="https://blockworks.co/news/sec-grayscale-exploring-bitcoin-trust-options" target="_blank" rel="noreferrer noopener">Grayscale Bitcoin Trust (GBTC) decline by 20%</a> on Nov. 17.&nbsp; (GBTC) has persistently traded at a wide discount to the price of the spot bitcoins it holds, with its net asset value (NAV) hovering around 40% below the value of its Bitcoin.



<h3 class="wp-block-heading">Nov. 18 — Friday: Bahamas regulators custody FTX assets</h3>



Securities regulators in the Bahamas confirmed that they’re holding some of FTX’s assets in a press statement released on Nov. 18. They acknowledged transferring assets from of FTX Digital Markets into their custody after an emergency filing from FTX’s U.S. attorneys accused them of having directed former CEO Sam Bankman-Fried to do so. They added that they did not believe that FTX’s Bahamas subsidiary was subject to the US’ Chapter 11 bankruptcy proceedings.



The value of the assets was not confirmed, and it was unclear just how much of the cryptoasset movements could be attributed to actions by Bahamian regulators.



<h3 class="wp-block-heading">Nov. 19, 20 — Saturday and Sunday: Following the hacking trail</h3>



Over this weekend, on-chain analysts observed the FTX hacker, dubbed “FTX Accounts Drainer,” dumping ether for bitcoin. This caused the price of the ether to start dipping.&nbsp;



The <a href="https://twitter.com/kamikaz_ETH/status/1594293500451106816?s=20&amp;t=katw78Z4qb1jshgVJT0DmQ" target="_blank" rel="noreferrer noopener">hacker moved ether in different lots</a> — $186 million were moved into crypto cold storage, while $477 million was transferred to ether and stablecoin DAI.&nbsp;



On Nov. 20, the attacker transferred 50,000 ETH to a separate wallet and then converted it to BTC via renBTC — the Ren protocol bridge.



As the crypto community was monitoring hacked FTX funds, FTX <a href="https://twitter.com/FTX_Official/status/1594354846370758657?s=20&amp;t=ESxOHHGQRNgWxkiZ8fbvwA" target="_blank" rel="noreferrer noopener">urged</a> exchanges to cooperate by halting funds and returning them to “the bankruptcy estate.”



<h3 class="wp-block-heading">Nov. 21 — Monday: Pls-help</h3>



Etherscan data showed that the attacker moved a total of 180,000 Ether ($199.3 million) on Nov. 21 across 12 wallets. Each newly created wallet received 15,000 ETH.&nbsp;



By subdividing the total amount into smaller amounts, a process known as “peel chaining,” it not only confuses investigators but suggests the attacker could use a mixing service at some point.



Meanwhile, one user registered as ftx-rekt200k-pls-help.eth, sent an encoded message via ether to the hacker, claiming to have lost money from the FTX collapse and asking for a reimbursement. They even <a href="https://etherscan.io/address/0xb937eb52cfed2edc08d9d26bd7d40b4aea9b61b4" target="_blank" rel="noreferrer noopener">sent</a> 20 transactions of 0.000001 ETH to the hacker’s address.



<h3 class="wp-block-heading">Nov. 22 — Tuesday: SBF apologizes again, court hears from bankruptcy lawyers</h3>



A letter that Bankman-Fried <a href="https://twitter.com/lizrhoffman/status/1595183732989779970?s=20&amp;t=afXyF7_qOhKdnJNbGdcKLA" target="_blank" rel="noreferrer noopener">shared</a> with FTX employees was made public on Nov. 22. His opening line states that he feels “deeply sorry about what happened.” Finance journalist Liz Hoffman <a href="https://twitter.com/lizrhoffman/status/1595183732989779970?s=20&amp;t=afXyF7_qOhKdnJNbGdcKLA" target="_blank" rel="noreferrer noopener">tweeted</a> screenshots of the letter.



Along with the apologies and a list of collateral and liabilities under the FTX, Bankman-Fried said that “maybe there still is a chance to save the company.”



He did not, however, address allegations that FTX diverted customer and corporate funds to Alameda Research or that he and other executives took personal loans.



“None of this changes the fact that this all sucks for you guys,” added Bankman-Fried. In <a href="https://blockworks.co/news/ftx-run-by-inexperienced-unsophisticated-traders-court-hears" target="_blank" rel="noreferrer noopener">the first bankruptcy hearing</a> for FTX and its affiliated entities, lawyers told the court that a “substantial amount of assets” held by FTX cannot be accounted for. FTX now has a cash balance of $1.24 billion in total, they said.



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The Last 10 Days in the FTX Saga: A Timeline

Bessie Liu

By now, most in the cryptocurrency community have likely seen the FTX <a href="https://pacer-documents.s3.amazonaws.com/33/188450/042020648197.pdf" target="_blank" rel="noreferrer noopener">bankruptcy filings</a>.



And as FTX’s new CEO John Jay Ray III <a href="https://blockworks.co/news/worse-than-enron-sbfs-ftx-has-a-complete-absence-of-trustworthy-information" target="_blank" rel="noreferrer noopener">put it</a>, the internal management of the company was “a complete failure.”



“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,” he <a href="https://pacer-documents.s3.amazonaws.com/33/188450/042020648197.pdf" target="_blank" rel="noreferrer noopener">said</a>.



Ray III also shared some other insight into how the Bahamas-based cryptocurrency exchange that has fallen from grace operated.



Here are the highlights:



1. Access to confidential private keys 



FTX did not comply with security controls with respect to digital assets. According to the filing, former CEO Sam Bankman-Fried and his co-founder and Chief Technology Officer Gary Wang “controlled access to digital assets of the main businesses in the FTX Group,” and used an unsecured group email account to access confidential private keys and other critically sensitive information.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">&quot;use of an unsecured group email account as the root user to access confidential private keys and critically sensitive data for the FTX Group companies&quot; !!!&mdash; 6529 (@punk6529) <a href="https://twitter.com/punk6529/status/1593251436715917312?ref_src=twsrc%5Etfw">November 17, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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2. Misuse of customer funds



Bankman-Fried’s free roaming days might soon be over after the bankruptcy filings revealed that FTX had used “software to conceal the misuse of customer funds” and ensured that Alameda was exempt from “certain aspects of FTX.com’s auto-liquidation protocol.”



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">It was never “Binance or FTX”. It was always FTX for their misuse of customer funds. And those insiders you think you’re talking to, they’re just crack head burner accounts But go off king 🍻&mdash; Crypto Bitlord 🇦🇺 (@crypto_bitlord7) <a href="https://twitter.com/crypto_bitlord7/status/1593142501095145472?ref_src=twsrc%5Etfw">November 17, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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3. Unaudited financials



The four silos — or groups of businesses — which made up the FTX group all provided quarterly financial statements. But, Ray said, “because this balance sheet was unaudited and produced while the Debtors were controlled by Mr. Bankman-Fried, I do not have confidence in it and the information therein may not be correct.”



4. Loans to themselves



Alameda Research provided loans to, well, themselves. This includes, a $1 billion to Bankman-Fried himself, a $543 million loan to Nishad Singh, who according to his LinkedIn, was the director of engineering at FTX, and a $55 million loan to Ryan Salame, the CEO of FTX Digital Markets.



To make matters worse, it was likely that much of these corporate funds were “used to purchase homes.”&nbsp;



5. No employee management



There was no employee management system, and “debtors have been unable to prepare a complete list of who worked for the FTX Group…or the terms of their employment.”



In fact, employees were paid by submitting “payment requests” on an “online chat platform.” Their supervisors will approve their requests and notify payment “by responding with personalized emojis.”&nbsp;



Further, Bankman-Fried had often communicated on “applications that were set to auto-delete after a short period of time, and encouraged employees to do the same.”



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Imagine running a multi-billion dollar company by storing passwords and root access in a shared group email account and approving large financial transactions in a group chat with personalized emojis. You seriously can&#39;t make this stuff up.&mdash; boredape93 (@boredape93) <a href="https://twitter.com/boredape93/status/1593268215659974657?ref_src=twsrc%5Etfw">November 17, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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5 Key Highlights From FTX Bankruptcy Filings

Jon Rice

The new CEO of failed crypto exchange FTX has some harsh words for his predecessor, Sam Bankman-Fried.



John J Ray III, who previously oversaw restructuring efforts at historic corporate failures such as Enron, explained in a declaration supporting the FTX bankruptcy proceedings that:



“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.”



And while he wasn’t impressed with SBF and his tight-knit team of insiders, he had precious little to celebrate at any level — including failed regulatory systems in his initial assessment of <a href="https://blockworks.co/news/ftx-bankrupt-hacked-investigated-a-timeline-of-events" target="_blank" rel="noreferrer noopener">the situation</a> at FTX:



“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.”



Following what appeared to be a hack shortly after the bankruptcy was filed, Ray noted that “the implementation of accounting, audit, cash management, cybersecurity, human resources, risk management, data protection and other systems that did not exist, or did not exist to an appropriate degree, prior to my appointment” was a priority.



The absence of appropriate cybersecurity measures will be galling to those who lost money in the collapse of FTX.



One of the more startling <a href="https://twitter.com/kadhim/status/1593225579155058690" target="_blank" rel="noreferrer noopener">details</a> of the <a href="https://pacer-documents.s3.amazonaws.com/33/188450/042020648197.pdf" target="_blank" rel="noreferrer noopener">bankruptcy proceedings</a> so far is FTX now declaring the value of its remaining assets at a mere $659,000.



Former CEO Bankman-Fried had previously valued its assets at $5.5 billion.



Bankman-Fried has issued a series of erratic tweets in the days since his crypto empire fell apart, prompting the official FTX Twitter account to note, tersely, that&nbsp;



“As previously announced, Mr. Bankman-Fried resigned on November 11 from @FTX_Official, FTX US, Alameda Research Ltd. and their directly and indirectly owned subsidiaries.



Mr. Bankman-Fried has no ongoing role at @FTX_Official, FTX US, or Alameda Research Ltd. and does not speak on their behalf.”



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