The collapsed cryptocurrency exchange’s new management, led by CEO John Ray III, has released its first interim report on control failures.
The 45-page report describes in meticulous detail FTX’s sloppy record-keeping, near-nonexistent cybersecurity defenses, and lack of expertise in critical areas such as finance.
The collapsed cryptocurrency exchange’s new management, led by CEO John Ray III, has released its first interim report on control failures. There is much to process.
The 45-page report, published by FTX Trading Ltd and its affiliated creditors on Sunday afternoon, describes in meticulous detail FTX’s sloppy record-keeping, near-nonexistent cybersecurity defenses, and lack of expertise in critical areas such as finance.
Alameda Research, the trading firm that allegedly had access to billions of dollars in customer funds held with FTX, was one of the most intriguing items. According to the report, Alameda “often struggled to comprehend its positions, let alone hedge or account for them.” According to the report, former CEO Sam Bankman-Fried, who is currently under house arrest and facing a multitude of criminal charges, characterized Alameda in internal communications as “hilariously beyond any threshold for any auditor to even get partially through an audit.”
He continued, “Alameda cannot be audited. I don’t mean this in the sense that a major accounting firm will be hesitant to audit it, but rather that we are only able to estimate its balances and do not have access to a comprehensive transaction history. Sometimes we discover $50 million in assets that we lost track of; such is reality.”
The report also claims that Bankman-Fried and senior executives Gary Wang, CTO, and Nishad Singh, engineering director, tightly controlled the majority of significant decisions. Both men are now cooperating with authorities after pleading guilty to charges. In light of Wang and Singh’s dominance over FTX’s architecture, a former executive remarked, “If Nishad [Singh] got struck by a vehicle, the whole company would be ruined. Same problem with Gary [Wang], according to the report of today.
According to the report, FTX had “no dedicated personnel” in cybersecurity, leaving such matters to Singh and Wang, who lacked the experience and training to manage the company’s complex cybersecurity requirements.
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