Failed crypto exchange FTX Trading Ltd. lacked a control framework, and collapsed due to “hubris, incompetence, and greed,” according to a new review of FTX, which mentioned that the previous management “stifled dissent” and “joked internally about their tendency to lose track of millions of dollars in assets.”
The review was published as an interim report on Sunday by the new FTX CEO John J. Ray III and a list of more than a hundred debtors, FTX-affiliated or related companies, such as Alameda Research Ltd. and FTX Europe AG.
The report discusses control failures by the previous management in areas such as “management and governance, finance and accounting, digital asset management, information security and cybersecurity.”
It says that “despite the public image it sought to create of a responsible business, the FTX Group was tightly controlled by a small group of individuals who showed little interest in instituting an appropriate oversight or control framework.
“These individuals stifled dissent, commingled and misused corporate and customer funds, lied to third parties about their business, joked internally about their tendency to lose track of millions of dollars in assets, and thereby caused the FTX Group to collapse as swiftly as it had grown.”
According to a press release from FTX, the debtors, with the help of teams of legal and cybersecurity experts, conducted extensive research on “terabytes of electronic data and communications, more than one million documents, and interviews conducted with 19 former FTX Group employees, among other information.”
The new FTX CEO John Ray said: “FTX Group was tightly controlled by a small group of individuals who falsely claimed to manage FTX Group responsibly, but in fact showed little interest in instituting oversight or implementing an appropriate control framework. We are continuing our efforts to review the events that factored into the fall of FTX and to identify and recover as much value as possible for creditors.”
The review of the data is continuing.
FTX filed for bankruptcy protection in November, stating that it was unable to completely repay customers who had deposited funds on its exchange. CEO John Ray has said his top priority was recovering assets to repay FTX customers.
Prosecutors have charged former FTX chief Sam Bankman-Fried, 31, with stealing billions of dollars in FTX customer funds to plug losses at Alameda Research, and making tens of millions of dollars in illegal political donations to buy influence in Washington, D.C.
He denies wrongdoing and is fighting to stay out of jail pending his fraud trial scheduled for Oct. 2.
