Sam Bankman-Fried, the founder of the FTX exchange and Alameda Research, a cryptocurrency trading platform, seems to have confused the bank and his companies.
Bankman-Fried received a $1 billion personal loan from Alameda, according to John Ray, the new CEO in charge of restructuring his empire, which went bankrupt on Nov. 11.
He is not alone: the company that is a type of cryptocurrency hedge fundalso made a $543 million personal loan to Nishad Singh, an associate of Bankman-Friend, and $55 million to Ryan Salameh, co-CEO of FTX Digital Markets, one of FTX’s affiliates.
Those loans appear in Alameda’s white paper given by the Bankman-Fried teams to Ray when the latter took over as CEO on November 11. This restructuring veteran is supposed to be handling the liquidation of FTX and its affiliates, which imploded overnight without cash.
In a 30-page document filed in the United States Bankruptcy Court for the District of Delaware. the new CEO painted an unprecedented situation in the former trader’s empire. According to Ray, the Bankman-Fried empire is in chaos: lack of control, no board meetings, non-existent records in some cases, employees using company funds to buy houses in their names, management communicating by automatically deleting messages application, software to hide misuse of customers’ money, etc. This is a list of everything not to do in a business.
“Never in my career have I seen such a complete failure of corporate control and such a complete lack of reliable financial information as occurred here,” Wray wrote. “From compromised systems integrity and flawed regulatory oversight overseas, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.”
The new CEO also claimed that FTX had software that allowed management to hide the misuse of customers’ money.
“The unacceptable management practices included the use of an unsecured group email account as the root user to access confidential private keys and critically sensitive data for FTX Group companies worldwide,” the seasoned restructuring veteran fumed in a 30-page document filed in bankruptcy court of the United States for the District of Delaware.
He went on to say there was “the use of software to conceal the misuse of customer funds”.
Ray did not provide further details. But his statement thus undermines Backman-Fried’s denials that there was a backdoor allowing him to alter records without third parties, including auditors and investors, noticing.
Reuters reported last week that FTX’s financials showed there was a “backdoor” in the books created with “special software.” This was described as a way for Bankman-Fried to cook the books without causing any alarm.