"A Total and Absolute Corruption of the Corporate Controls"
The situation for the former CEO of FTX, Sam Bankman-Fried, and his co-conspirators continues to deteriorate rapidly.

A bankruptcy petition submitted on Thursday by the new CEO of FTX, John J. Ray III, has given further light on the criminal actions that were taking place at the now-defunct cryptocurrency exchange while its former CEO, Sam Bankman-Fried, was in charge. Ray has been working in the field of bankruptcy and restructuring for the past four decades, and his portfolio includes the supervision of the collapse of Enron in 2001.

Ray exposes multiple instances of poor record-keeping, fraud, and malpractice at FTX in the thirty-page document that he has provided. In his opening statement, he made some uncompromising remarks about the overall state of the company. He said things like, "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." This was part of his comment on the overall state of the company.

After FTX and its connected firms voluntarily filed for Chapter 11 bankruptcy protection on November 11, Ray succeeded Bankman-Fried as CEO of the company. Ray made it quite evident that, despite his years of expertise, he had never before witnessed a firm in such a precarious state as FTX. He wrote that "from compromised system 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. "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

The paper contains a number of shocking disclosures, but one of the most incriminating involves loans that were made out to Bankman-Fried as well as senior FTX employees Nishad Singh and Ryan Salame. According to Ray, the trading business Alameda research, which is associated with FTX, distributed a total of $3.3 billion to Bankman-Fried and his front company, Paper Bird Inc., in addition to $543 million to Singh and $55 million to Salame.

FTX's sloppy approach to bookkeeping is another surprise that was disclosed throughout the investigation. The document asserts that FTX failed to keep appropriate account records and security procedures for digital asset holdings, which ultimately led to the user deposits on the exchange being hacked for a total of $372 million shortly after it declared bankruptcy. The theft occurred shortly after the company had announced its intention to file for bankruptcy.

The disparity in the value of FTX's crypto holdings is another important factor to consider. An story published by the Financial Times on November 12 indicated that a stolen balance sheet from FTX estimated the worth of the company's cryptocurrency assets at about $5.5 billion. On the other hand, Ray estimated that the "fair worth" of the organization's cryptocurrency assets was just $659,000. Utilizing a group email account that was not secure in order to gain access to secret private keys and highly sensitive data is another example of a management practice that is inappropriate.

Ray further disclosed that FTX did not have a comprehensive list of all of the personnel who worked for FTX and its subsidiaries and affiliates. He also disclosed that one of the reasons the company had such poor record-keeping was because the majority of personal communications were carried out on applications that were programmed to automatically delete messages after a short period of time. This was reportedly a practice that Bankman-Fried encouraged.

Elsewhere, Ray reported that corporate funds of the FTX Group were frequently used to purchase homes and other personal items for employees and advisors and that FTX secretly exempted Alameda Research from being liquidated on FTX well past the point where a normal user would have their position closed. Ray also reported that the FTX Group frequently used corporate funds to purchase homes and other personal items for employees and advisors. This blatant disdain for risk management may help explain, at least in part, why Alameda lost such a significant amount of money through its trading techniques.

The bankruptcy petition that was filed today has brought to light a number of examples of unethical behavior within FTX, but it is probable that this list is not complete. As the proceedings of FTX's bankruptcy case continue, further details on the company's shady dealings are expected to become public knowledge. In addition, given that Ray has requested a "full, transparent, and deliberate examination into accusations against Mr. Samuel Bankman-Fried," the previous CEO of FTX may soon find himself embroiled in a legal dispute of his own, especially in light of Ray's request for said probe.