Sam Bankman-Fried allegedly joked about his doomed hedge fund Alameda Research losing track of as much as $50 million in assets, telling another executive: “Such is life.”
“Alameda is unauditable” and “hilariously beyond any threshold of any auditor being able to even get partially through an audit,” Bankman-Fried wrote in an email about the now-defunct Alameda that was cited in court papers by FTX.
The crypto exchange imploded after Bankman-Fried scrambled to use customer funds to cover losses incurred by Alameda. US Bankruptcy Court appointed new management over the cryptocurrency platform that went from being worth more than $32 billion to a debtor in Chapter 11 in a spectacular collapse last fall.
New management under CEO John R. Ray compiled an interim report on the control failings at FTX, slamming Bankman-Fried and his top lieutenants — including ex-engineering director Nishad Singh and former chief technology officer Gary Wang — for their “hubris, incompetence, and greed.”
To back up the allegations, they cite a number of damning communications from the 30-year-old Bankman-Fried, who is now living under house arrest in Palo Alto, Calif. at the house of his parents, a pair of law professors at Stanford University.
“I don’t mean this in the sense of a ‘major accounting firm will have reservations about auditing it’,” Bankman-Fried allegedly wrote in an email to a colleague. “I mean this in the sense of ‘we are only able to ballpark what its balances are, let alone something like a comprehensive transaction history’.”
Bankman-Fried allegedly added: “We sometimes find $50m of assets lying around that we lost track of; such is life.”
Executives at failed cryptocurrency platform FTX would joke amongst themselves about their habit of losing track of millions of dollars in assets, according to a report released by the company.
The debtors allege that FTX executives used Slack, Signal, and other “informal methods of communication” to “document approvals.”
“Expenses and invoices of the FTX Group were submitted on Slack and were approved by emoji,” according to the report.
According to a federal bankruptcy court filing in Delaware, FTX was “tightly controlled by a small group of individuals who showed little interest in instituting an appropriate oversight or control framework.”
The executives at FTX “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…,” causing the company “to collapse as swiftly as it had grown.”
Bankman-Fried, who has pleaded not guilty to charges including money laundering, bank fraud, and wire fraud, was cited in the report as having “deprioritized or rejected advice to improve” the company’s “control framework, exposing the exchanges to grave harm from both external bad actors and their own misconduct.”
The debtors fault FTX for not having “personnel who were experienced and knowledgeable enough to account accurately for assets and liabilities, understand and hedge against risk, or compile and validate financial reports.”
The report alleges that FTX executives kept copies of key documentation, including loan agreements, bank and brokerage account statements, and contract and account information, that were “incomplete, inaccurate, contradictory, or missing entirely.”
The lack of proper documentation had made it difficult for debtors to trace funds, according to the report, forcing them to “construct this historical data from scratch and make sense of the numerous resulting discrepancies, anomalies, and undocumented positions.”
The Post has sought comment from Bankman-Fried, Singh, and Wang.
Singh, Wang, and Caroline Ellison, Bankman-Fried’s on-again, off-again girlfriend who ran Alameda Research, have pleaded guilty and are cooperating with federal prosecutors.
[Written in collaboration with other media outlets with information from the following sources]
