Inside FTX: Jokes about misplaced funds, diabolical IT, poor oversight, and worse

2023-04-10 21:43

The liquidators picking over the remains of FTX have released their first formal report into Sam Bankman-Fried's imploded empire - and it somehow appears things are worse than feared.

FTX lacked any real form of management or governance oversight, the report claims, stating that SBF, former FTX engineering lead Nishad Singh, and FTX cofounder and CTO Gary Wang were the only ones with any governance capabilities.

"Board oversight was effectively nonexistent," the report states, adding that FTX didn't have any internal audit functions or employees with experience in finance, accounting, human resources, or cybersecurity in place to serve as a check to the SBF-Singh-Wang leadership triad. To make matters worse, the report claims that when high-ranking officials in the company attempted to impose oversight structures or rules for delegation of authority, some were rebuffed and others fired outright.

Things were so bad that "At the time of the bankruptcy filing, the FTX Group did not even have current and complete lists of who its employees were," the report concluded.

The report said FTX's debtors identified a number of "Extensive deficiencies in the FTX Group's controls with respect to digital asset management, information security, and cybersecurity" that ultimately led to it exposing customer crypto funds to "a grave risk of loss, misuse and compromise," not unlike the November 2022 security breach that, or so it's claimed, saw someone skim hundreds of millions in crypto from the company's accounts.

All of its compounding management failures, the debtors said, placed customer assets and funds at risk "From the outset." The report states that FTX's liquidators have recovered and secured approximately $1.4 billion of crypto-assets and have identified an additional $1.7 billion they are still working to recover.

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