Missing Employees, a Billion-Dollar Loan, and Emoji Payments: The 9 Most Batshit Revelations From FTX’s Bankruptcy Filing

Once upon a time, the cryptocurrency exchange FTX was a jewel of the web3 world. Now, in the span of a week, its reputation has transformed from shooting star to sinking ship. After admitting to mismanaging large amounts of customer money, the exchange’s founder and CEO, Sam Bankman-Fried (also known by his initials “SBF”) ignominiously stepped down, and the company filed for bankruptcy. Now, as the dust settles and the air clears, the adults in the room are trying to pick up the pieces and figure out just how screwed the company and all its investors are.

A recent bankruptcy filing, revealed Thursday by the exchange’s new CEO, John Ray III, may help with that. While the document provides additional context on what’s been happening with the imploding exchange, it also provides some entertainment because, whoo boy, it is totally insane.

The filing reveals the inner workings (or lack thereof) of the exchange, giving a peek into the bizarre financial practices and decision making that went on under SBF’s leadership. For a company that was once considered to be the rising star (and potential savior) of the crypto industry, FTX apparently ran itself like a ship of drunken sailors, foregoing common and established record-keeping practices and engaging in a slew of shady and ill-advised behavior.

“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,” wrote Ray in his filing. “This situation is unprecedented.”

That’s truly saying something, given the fact that Ray presided over the restructuring of Enron, after the financial giant famously caved in on itself from corruption in the mid-2000s.

Keep that in mind—and recall that SBF told Vox he regretted filing for bankruptcy—as you peruse the biggest revelations from FTX’s court filing.

One of the starkest examples of how crazy the financial situation at FTX was is that Ray apparently thinks the FTX books might be…uh, not quite accurate, to put it kindly. Over and over again throughout the filing, Ray gives a brief rundown of what the company claimed to have in assets at one point or another, before ultimately appending a statement like this:

To my knowledge, none of these financial statements have been audited. Because these balance sheets were unaudited…I do not have confidence in them, and the information therein may not be correct as of the date stated.

According to Ray, the company’s financial records just aren’t trustworthy. It’s not clear whether they contain accurate information and whether any of the exchange’s former executives know how much money the company had.

What’s worse than not keeping an accurate record of how much money you have? Having most of your money disappear. That is, according to Ray, most of the money that FTX was supposed to have just hasn’t been located yet. Ray writes that he has “located and secured only a fraction of the digital assets” that were supposed to have been held by the company.

In other words, a whole lot of money is simply missing. In the ether. Poof. Part of this is because the company was hacked right after it declared bankruptcy, allegedly leading to hundreds of millions of dollars in assets being stolen. But FTX was supposedly worth tens of billions of dollars. While it’s still early days, you’d think that all you’d have to do is open up the cold storage and it would be there, right? Instead, we apparently don’t know where most of the digital cash is.

What do you do when you have way too much money? Apparently just start buying properties with company funds. The filing states that FTX employees bought multiple properties using corporate money. Ray writes:

In the Bahamas, I understand that corporate funds of the FTX Group were used to purchase homes and other personal items for employees and advisors. I understand that there does not appear to be documentation for certain of these transactions as loans, and that certain real estate was recorded in the personal name of these employees and advisors on the records of the Bahamas.

Alameda Research, the hedge fund set up by SBF that secretly shared much of the money from FTX, gave out billions of dollars in loans—including to SBF himself. The bankruptcy filing from Thursday notes that many of those loans are now outstanding. In one case, the document notes “one [loan was given] to Mr. Bankman-Fried, of $1 billion.” Another loan of $543 million was given out to the Nishad Singh, the co-founder of FTX.

FTX kept very few records of internal communications, according to the bankruptcy filing. Thus, the paper trail that would’ve helped explain what the company was doing and why is quite thin. Instead, most of the employees appear to have communicated via chat applications that were programmed to auto-delete. Ray writes:

One of the most pervasive failures of the FTX.com business in particular is 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…

Not sketchy at all!

For most companies, a money management system is a pretty typical thing to have. They’re useful for tracking corporate cash flows—helping record the details for everybody the company is paying, how much it’s paying them, when, why—that sort of thing. According to FTX’s bankruptcy filing, however, the company just really did not try to do any of that stuff. I guess when you have an ungodly amount of money the attitude might be, ehhhh, do we really need to write all this down? The bankruptcy filing reads:

The FTX Group did not maintain centralized control of its cash. Cash management procedural failures included the absence of an accurate list of bank accounts and account signatories, as well as insufficient attention to the creditworthiness of banking partners…

Nice!

The filing also shares that, under SBF, the company submitted and fulfilled payment requests through a chat application, and disbursements were approved with personalized emojis. That’s not exactly standard procedure. Ray writes that FTX did not “have the type of disbursement controls that I believe are appropriate for a business enterprise.”

Among a whole bunch of other things that the company didn’t bother to keep track of, FTX apparently did not spend much time keeping track of who was employed with the company. Ray writes that, thus far, the company has been:

“…unable to prepare a complete list of who worked for the FTX Group as of the Petition Date, or the terms of their employment. Repeated attempts to locate certain presumed employees to confirm their status have been unsuccessful to date.”

FTX took in a helluva lot of money from crypto depositors over its run, but apparently it didn’t spend any time keeping track of who deposited what. The bankruptcy filing reveals that “balances of customer crypto assets deposited were not recorded as assets on the balance sheet and are not presented,” which seems to imply that the company has no idea how to account for those deposits. Of this news, financial industry analyst Genevieve Roch-Decter writes: “Crypto deposited by customers weren’t even recorded on the balance sheet. Presumably, all crypto assets just went into one central slush fund used for whatever.”

To top it all off, the filing reveals that FTX also has no idea who its top 50 creditors are. In short, the company doesn’t seem to know much of anything.