A new bankruptcy filing, first reported by CNBC, shows that FTX’s corporate funds were used to purchase homes in the Bahamas among other personal items. The details arise less than a week after the now infamous crypto exchange filed for bankruptcy — a decision that founder and former CEO Sam Bankman-Fried said he regrets.
FTX’s new CEO, Enron wind-down veteran John J. Ray III, said in the filing that he never in his career had “seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”
“From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented,” Ray said in the filing.
The document states that corporate funds of the FTX group were used to purchase homes and other personal items for employees and advisers. Ray added that “certain real estate” was recorded in the personal names of employees and advisrrs, and “there does not appear to be documentation for certain of these transactions as loans.”
The newly installed chief executive makes it clear that he’s not blaming all FTX employees for the potential mishandling of funds. “Although the investigation has only begun and must run its course, it is my view based on the information obtained to date, that many of the employees of the FTX Group, including some of its senior executives, were not aware of the shortfalls or potential commingling digital assets.” If that possible lack of blame extends to the real estate transactions is not clear.
He adds that current and former employees are some of the people most hurt by FTX, and that “these are many of the same people whose work will be necessary to ensure the maximization of value for all stakeholders going forward.”
FTX’s downfall began last week after Binance backed out of a deal to acquire the crypto exchange as a result of a due diligence process. News reports that FTX was mishandling funds and under investigation soon bloomed into the company filing for bankruptcy.
Bankman-Fried, meanwhile, claims that he is still hoping to raise an $8 billion lifeline for the company.
“Everyone goes around pretending that perception reflects reality, it doesn’t,” Bankman-Fried said in a Twitter conversation with Vox reporter Kelsey Piper earlier this week. “Some of this decade’s greatest heroes will never be known, and some of its most beloved people are basically shams.”
Maybe FTX was the real poster child for 2021’s startup excess
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