With the FTX crypto exchange’s collapse, many events erupted in the crypto space. As a result, more of FTX’s investors and partners record massive losses with no potential recovery system.
FTX filed for bankruptcy last week, but shocking revelations are now creeping out following its bankruptcy filing. A deeper examination of the crypto exchange disclosed that FTX operations have more than the eye could see with many coatings.
FTX Inappropriate Governance Structures
An examination of the FTX’s 30-page filing report indicates that the crypto exchange has inappropriate governance structures. A majority of the entities under the FTX Group, especially those in the Bahamas and Antigua, lack the right organizational lines in operation. For example, most of the branches do not have board members. Hence, they never held any board meetings.
Also, the company has no comprehensive and proper record of its staff. There were no apparent records of the working period and responsibility for its contractors and employees. All attempts to compile a list of all the staff were futile since some couldn’t be contacted or located.
No Proper Record for Customers’ Deposits
Further discovery from FTX’s filing is that firm has no records of its users’ deposited tokens on its balance sheet. Hence, upon its insolvency, there’s no presentation of a balance for the deposited assets on the platform.
Additionally, FTX Group firms use an unsecured group email account to store private keys to customers’ assets. The company has been using software to mask the inappropriate use of customers’ funds.
Also, the firm’s digital assets have been under the control of the founders, Sam Bankman-Fried (SBF) and Gary Wang.
Approves Expenses Using Online Chats
Further examination indicated that FTX has no proper disbursement control system. Instead, the firm’s staff uses online chats to submit expense requests and the managers and supervisors approve such using personalized emojis.
Lots of the organizational decisions were conveyed through chats. Also, SBF, co-founder and former CEO of the company, encouraged the staff to communicate with apps where messages were auto-deleted after a while. So, the firm has no permanent records of all decisions made.
Also, the crypto exchange has no cash management system. As a result, it is impossible to ascertain the amount of cash at hand at any point in time. FTX has no accurate record of its bank accounts and signatories without a centralised cash control system. As a result, the firm felt less concerned over the creditworthiness of its banking partners.
Cryptocurrency market to recover above $2 trillion | Source: Crypto Total Market Cap on TradingView.com
Some top employees have been taking loans from the sister Alameda Research. A report indicated that SBF, his co-CEO Ryan Salame and FTX’s executive Nishad Singh got $1 billion, $55 million, and $543 million, respectively.
FTX Executives Misused Customers’ Funds
Part of the shocking discovery on FTX is that the executives have been misappropriating customers’ funds. They acquired homes and other personal properties for top executives without proper documentation. They made the purchases of such properties under the employees’ names.
Featured image from Pixabay, chart from TradingView.com