FTX financial controls were a ‘hodgepodge’ of apps, court documents say

By Posted on

[ad_1]

According to FTX CEO John Ray III, FTX was run by three inexperienced people “shortly out of college” who relied on “a hodgepodge” of documents and communications shared online over a series of different apps to manage the multi-billion dollar empire.

In a court of April 9 deposit in a Delaware bankruptcy court, John J. Ray III gave its first detailed account of control failures to FTX.

Ray said his restructuring team had “identified significant deficiencies in FTX Group’s controls”, ranging from a lack of proper financial and accounting controls to an inadequate group management structure and record keeping process.

FTX apparently “relyed on a hodgepodge of Google Docs, Slack communications, shared drives and Excel spreadsheets” to manage its assets and liabilities.

FTX used accounting software QuickBooks, which Ray said was designed for “small and medium-sized businesses” and not for a company that operates on “multiple continents and platforms” like FTX.

Related: Non-US FTX Usernames Requested by Mainstream Media

FTX’s accounting was reportedly overlooked, as approximately 80,000 transactions were left as unprocessed accounting entries in “catch-all QuickBooks accounts labeled ‘Ask My Accountant’.”

Ray pointed out that co-founders Sam Bankman-Fried and Gary Wang, as well as former engineering director Nishad Singh have the “final voice in all major decisions”, despite having very limited experience.

“These three people, with little college education and no experience in risk management or business management, controlled nearly every important aspect of the FTX Group.”

Wang and Singh’s significant control over FTX was noted by an unnamed FTX executive who stated that “if Nishad [Singh] hit by a bus, the whole company would be ruined. Same problem with Gary [Wang].”

See also  Johnson & Johnson Reports Better Than Expected Q2 2023 Results, JNJ Shares Slightly

It was noted that the company was unable to provide a complete list of its employees at the time of bankruptcy filing in November 2022.

FTX did not file its financial statements on time at the end of financial reporting periods and did not perform due diligence to identify and correct material errors.

Brett Harrison, the president of FTX.US, raised concerns with Bankman-Fried and Singh about “the lack of proper delegation of authority, formal management structure, and key hires at FTX.US.”

In response, Harrison’s bonus was significantly reduced and he was instructed to apologize to Bankman-Fried by the company’s in-house attorney, which he refused to do. It was reported that Harrison quit over the disagreement.

Ray said in a February 6 court filing that when he took over FTX in November 2022, there was “not a single list of anything” related to bank accounts, income, insurance or personnel, causing a “massive rush for information”.

He rejected the request to assign an independent examiner to the bankruptcy case for fear that “unintentional errors” could lead to the destruction of “hundreds of millions of dollars of value”.

Magazine: US and China try to smash Binance, SBF’s $40M bribe claim : Asia Express