Missing Money, Crypto Houses, and Emoji Payments: Here's the Most Batshit Revelations From FTX's Latest Bankruptcy Filing

The FTX exchange was once a gem of the web3. Its reputation went from shooting star to sinking ship in a single week. After admitting to mismanaging large amounts of customer money, the exchange's founder and CEO, Sam Bankman- Fried, stepped down and the company filed for bankruptcy. The adults in the room are trying to figure out how messed up the company is as the dust settles.

John Ray III, the exchange's new CEO, disclosed a recent bankruptcy filing on Thursday. The document provides context on what has been happening with the imploding exchange, but also provides some entertainment because it is insane.

The filing shows the inner workings of the exchange, giving a glimpse into the strange financial practices that went on under SBF. FTX ran itself like a ship of drunken sailors, foregoing common and established record-keeping practices and engaging in a number of shady and ill-advised behavior.

In his filing, Ray said he had never seen such a complete failure of corporate controls and a complete lack of trustworthy financial information. This is not the norm.

It is true that Ray oversaw the restructuring of Enron after the financial giant caved in on itself from corruption in the mid-2000s.

You should keep that in mind as you read FTX's court filing.

One of the starkest examples of how crazy the financial situation at FTX was is that Ray thinks the books may not be accurate. Over and over again throughout the filing, Ray gives a brief rundown of what the company claimed to have in assets.

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.

It is not clear whether the company's financial records contain accurate information or not.

It's worse if you don't keep an accurate record of how much money you have. Most of your money goes away. According to Ray, most of the money that the company was supposed to have hasn't been found. The company's digital assets were supposed to be secured by Ray, but he only secured a fraction of them.

A large amount of money is missing. Hundreds of millions of dollars in assets were stolen after the company was hacked, and part of that is because of this. FTX was worth a lot of money. You would think that all you have to do is open the cold storage and it would be there. We don't know where most of it is

When you have a lot of money, what do you do? Company funds should be used to buy properties. Employees of FTX used corporate money to buy multiple properties. The writer is Ray.

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.

Billions of dollars in loans were given to SBF by the hedge fund set up by him. Many of the loans are still outstanding, according to the filing. One loan was given to Mr. Bankman- Fried of $1 billion. The co-founder of FTX received a loan of over 500 million dollars.

The paper trail that would have explained what the company was doing and why was very thin. Most of the employees used chat applications that were programmed to auto-delete. The writer is Ray.

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 shady at all.

A money management system is something most companies have. Tracking corporate cash flows is one of the things they help with. FTX did not try to do any of those things according to the recent bankruptcy filing. I wonder if we need to write all this down when we have so much money. There is a filing for bankruptcy.

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...

It was nice.

The company submitted and fulfilled payment requests through a chat application and disbursements were approved with personalization. Ray wrote that FTX did not have the type of disbursement controls that he believes are appropriate for a business enterprise.

FTX spent a lot of time keeping track of who was employed with the company. The company has been written about by Ray.

“...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 lot of money but didn't keep track of who deposited what. The company has no idea how to account for the deposits that weren't recorded on the balance sheet. Of this news, financial industry analyst Genevieve Roch-Decter writes, "Crypto deposited by customers weren't even recorded on the balance sheet..." It's possible that all the assets went into a central slush fund.

FTX doesn't know who its top 50 creditor are. The company doesn't seem to know a lot.