That unvarnished take is from John Ray, the new chief executive of FTX, in a filing to the U.S. Bankruptcy Court for the District of Delaware.
Ray, it should be emphasized, has more than 40 years of legal and restructuring experience, including presiding over the collapsed energy company Enron in 2001.
The filing underlines the haphazard management of Sam Bankman-Fried, the former CEO. According to Ray, there wasn’t an accurate list of bank accounts and account signatories, much less attention to the creditworthiness of banking partners. The current estimate is that FTX has $564 million in cash.
“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,” said Ray.
Ray said software was used to conceal the misuse of customer funds, and that there was a secret exemption of Alameda, the hedge-fund arm, from its auto-liquidation protocol.
Ray dryly notes the auditor of FTX.com, the non-U.S. exchange arm, was Prager Metis, “a firm with which I am not familiar and whose website indicates that they are the ‘first-ever CPA firm to officially open its Metaverse headquarters in the metaverse platform Decentraland.’” He said he has “substantial concerns” on that audit.
Alameda, the hedge-fund arm, doesn’t have any audited financial statements at all. Nor do FTX’s venture capital investments have that information.
Ray further stated that there aren’t good enough human-resource records to even establish who worked there.
The filing also states that Bankman-Fried is in the Bahamas. The former executive in several media interviews, as well as social-media posts, has declined to identify where he was located. Ray said Bankman-Fried’s comments were both “erratic and misleading.”