Worse than Enron: Sam Bankman-Fried used FTX’s customers’ money to fund his lavish lifestyles and employees. Here’s the full text of FTX’s bankruptcy filing
On November 11, the embattled crypto exchange FTX filed for Chapter 11 bankruptcy protection. Immediately after the news, the disgraced FTX founder Sam Bankman-Fried (also known as SBF) resigned as the CEO of the crypto exchange FTX Group and John J. Ray III was appointed the new CEO.
With each passing day, it’s becoming apparent that the FTX disaster is deeper than most people think. According to the court filings (see PDF below), FTX is a complex web of 134 corporate entities around the world, collectively referred to now as FTX Group. All of these 134 companies are now been put into bankruptcy.
During the bankruptcy hearing at the U.S. Bankruptcy Court for the District of Delaware, the newly appointed FTX CEO John Ray III, who also oversaw Enron’s bankruptcy, said that “in his 40 years of legal and restructuring experience,” he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”
In the filing, Ray also disclosed that he did “not have confidence” in the accuracy of the balance sheets for FTX and its sister company Alameda Research, writing that they were “unaudited and produced while the Debtors [FTX] were controlled by Mr. Bankman-Fried.”
Bankman-Fried and FTX “management practices included the use of an unsecured group email account as the root user to access confidential private keys and critically sensitive data for the FTX Group companies around the world, the absence of daily reconciliation of positions on the blockchain, the use of software to conceal the misuse of customer funds.”
Ray also stated in the bankruptcy filing that FTX’s luxurious homes in the Bahamas were purchased “in the personal name of these employees and advisors.”
Only Bankman-Fried’s innermost circle of associates knew about his use of client deposits, Reuters reported, citing three FTX sources. His innermost circle includes his co-founder and chief technology officer, Gary Wang; the head of engineering, Nishad Singh; and Caroline Ellison, chief executive of Alameda. Wang and Singh both worked with Bankman-Fried at Alameda previously.
Bankman-Fried also secretly moved $10 billion to Alameda Research using a “backdoor” he built into FTX software without alerting external auditors. In addition, Alameda Research allegedly used FTX’s client funds and assets to finance risky investments.
According to another report from Reuters, the collapsed crypto exchange FTX had a “backdoor” built into its accounting software developed by Bankman-Fried, which he used to move billions without triggering alerts. The “backdoor” allowed Bankman-Fried to execute commands that could alter the company’s financial records without alerting other people, including external auditors.
It’s against US law to use customer deposit funds without their knowledge. And as New York Magazine reported:
“Dipping into such funds is a cardinal sin (a crime, probably) in the financial industry: Customer deposits are subject to all kinds of careful protections and certainly aren’t available as a slush fund for the CEO to play with.”
In a subsequent examination of FTX’s financials, two people familiar with the inner working of the company told Reuters that FTX legal and finance teams also learned that Bankman-Fried implemented what they described as a “backdoor” in FTX’s book-keeping system, which was built using bespoke software.
The sources told Reuters the “backdoor” allowed Bankman-Fried to execute commands that could alter the company’s financial records without alerting other people, including external auditors. “This setup meant that the movement of the $10 billion in funds to Alameda did not trigger internal compliance or accounting red flags at FTX,” Reuters reported, citing the two sources. However, Bankman-Fried denied implementing a “backdoor” in his text message to Reuters
You can read the full text of FTX’s bankruptcy 23-page filing below.ftx-bankruptcy-filing
Below is a list of the 134 companies affected by the FTX Group bankruptcy.
1. Alameda Aus Pty Ltd
2. Alameda Global Services Ltd.
3. Alameda Research (Bahamas) Ltd
4. Alameda Research Holdings Inc.
5. Alameda Research KK
6. Alameda Research LLC
7. Alameda Research Ltd
8. Alameda Research Pte Ltd
9. Alameda Research Yankari Ltd
10. Alameda TR Ltd
11. Alameda TR Systems S. de R. L.
12. Allston Way Ltd
13. Altalix Ltd
14. Analisya Pte Ltd
15. Atlantis Technology Ltd.
21. Bancroft Way Ltd
28. Bitvo, Inc.
29. Blockfolio Holdings, Inc.
30. Blockfolio, Inc.
31. Blue Ridge Ltd
37. BTLS Limited Tanzania
38. Cardinal Ventures Ltd
39. Cedar Bay Ltd
40. Cedar Grove Technology Services, Ltd
41. Clifton Bay Investments LLC
42. Clifton Bay Investments Ltd
43. CM-Equity AG
44. Corner Stone Staffing
45. Cottonwood Grove Ltd
46. Cottonwood Technologies Ltd.
47. Crypto Bahamas LLC
48. DAAG Trading, DMCC
49. Deck Technologies Holdings LLC
50. Deck Technologies Inc.
51. Deep Creek Ltd
52. Digital Custody Inc.
53. Euclid Way Ltd
60. FTX (Gibraltar) Ltd
61. FTX Canada Inc
62. FTX Certificates GmbH
63. FTX Crypto Services Ltd.
64. FTX Digital Assets LLC
65. FTX Digital Holdings (Singapore) Pte Ltd
66. FTX EMEA Ltd.
67. FTX Equity Record Holdings Ltd
68. FTX Europe AG
69. FTX Exchange FZE
70. FTX Hong Kong Ltd
71. FTX Japan Holdings K.K.
72. FTX Japan K.K.
73. FTX Japan Services KK
74. FTX Lend Inc.
75. FTX Marketplace, Inc.
76. FTX Products (Singapore) Pte Ltd
77. FTX Property Holdings Ltd
78. FTX Services Solutions Ltd.
79. FTX Structured Products AG
80. FTX Switzerland GmbH
81. FTX Trading GmbH
82. FTX Trading Ltd
83. FTX TURKEY TEKNOLOJİ VE TİCARET ANONİM ŞİRKET
84. FTX US Derivatives LLC
85. FTX US Services, Inc.
86. FTX US Trading, Inc
87. FTX Vault Trust Company
88. FTX Ventures Ltd
89. FTX Ventures Partnership
90. FTX Zuma Ltd
91. GG Trading Terminal Ltd
92. Global Compass Dynamics Ltd.
93. Good Luck Games, LLC
94. Goodman Investments Ltd.
95. Hannam Group Inc
96. Hawaii Digital Assets Inc.
97. Hilltop Technology Services LLC
98. Hive Empire Trading Pty Ltd
99. Innovatia Ltd
100. Island Bay Ventures Inc
101. K-DNA Financial Services Ltd
102. Killarney Lake Investments Ltd
103. Ledger Holdings Inc.
104. LedgerPrime Bitcoin Yield Enhancement Fund, LLC
105. LedgerPrime Bitcoin Yield Enhancement Master Fund LP
106. LedgerPrime Digital Asset Opportunities Fund, LLC
107. LedgerPrime Digital Asset Opportunities Master Fund LP
108. Ledger Prime LLC
109. LedgerPrime Ventures, LP
110. Liquid Financial USA Inc.
111. LiquidEX LLC
112. Liquid Securities Singapore Pte Ltd
113. LT Baskets Ltd.
114. Maclaurin Investments Ltd.
115. Mangrove Cay Ltd
116. North Dimension Inc
117. North Dimension Ltd
118. North Wireless Dimension Inc
119. Paper Bird Inc
120. Pioneer Street Inc.
121. Quoine India Pte Ltd
122. Quoine Pte Ltd
123. Quoine Vietnam Co. Ltd
124. SNG INVESTMENTS YATIRIM VE DANIŞMANLIK ANONİM ŞİRKETİ
125. Strategy Ark Collective Ltd.
126. Technology Services Bahamas Limited
127. Tigetwit Ltd
129. Verdant Canyon Capital LLC
130. West Innovative Barista Ltd.
131. West Realm Shires Financial Services Inc.
132. West Realm Shires Services Inc.
133. Western Concord Enterprises Ltd.
134. Zubr Exchange Ltd