Following the dramatic FTX meltdown, Aleksandra Huk revealed that recent bankruptcy documents showed that the company once valued at $32 billion, did not have an accountant.
BREAKING: Recent bankruptcy documents reveal, that the company once valued at $32 billion, didn’t have an accountant ☠️
— Aleksandra Huk (@HukAleksandra) November 17, 2022
On Thursday, November 17, 2022. Johnny.eth put out a post on Twitter summarizing his readings from the 30 page FTX Bankruptcy court filing, showing a lot more interest in the FTX’s Chapter 11 First Day Affidavit
I just read FTX's Chapter 11 First Day Affidavit.
In it, the appointed restructuring CEO John Jay Ray III, who oversaw Enron's bankruptcy proceedings, calls FTX's case the worst of his career.
Its contents are shocking.
Here are the highlights:
— jonwu.eth (@jonwu_) November 17, 2022
How bad were FTX’s internal controls?
The appointed restructuring CEO John Jay Ray III, one of the most experienced restructuring executives in the world who oversaw Enron’s bankruptcy proceedings, calls FTX’s case the worst of his career,
He states, “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here”.
In sections 46 and 50 there seemed to be no corporate governance, “The FTX Group did not maintain centralized control of its cash” and apparently, they didn’t even keep a running list of all their bank accounts.
FTX did not have the type of disbursement controls appropriate for a business enterprise. For example, employees submitted payment requests through an on-line ‘chat’ platform where a group of supervisors approved disbursements by responding with personalized emojis.
One of their most pervasive failures is particularly the absence of lasting records of decision-making. Mr. Bankman-Fried often communicated by using applications that were set to auto-delete after a short period of time and encouraged employees to do the same.
Corporate funds were used to purchase homes and personal items for employees and advisors which there was little to no documentation or account. FTX did not keep acceptable records, or security controls, regarding its digital assets.
Mr. Bankman-Friedman and Mr. Wang controlled access to the digital assets of the main businesses. Which leaves a couple of questions. Why did $372 million in unauthorized transfers happen on the date of the FTX “hack”? These balances exclude cryptocurrency.
In summary, this could be the most disastrous financial fraud in history. Very well worse than Enron.
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