Another bankruptcy filing first reported by CNBC, shows that FTX’s corporate funds were used to buy homes in the Bahamas, among other things. The details emerge less than a week after the now infamous crypto exchange filed for bankruptcy — a decision founder and former CEO Sam Bankman-Fried said he regretted.
FTX’s new CEO, Enron wind-down veteran John J. Ray III, said upon submission that never in his career had he seen “such a complete failure of corporate controls and such a complete absence of reliable financial information as here.”
“From compromised system integrity and deficient regulatory oversight abroad to the concentration of control in the hands of a very small group of inexperienced, inexperienced and potentially compromised individuals, this situation is unprecedented,” Ray said in the filing.
The document states that corporate funds from the FTX group were used to purchase homes and other personal items for employees and advisors. Ray added that “certain real estate” was registered in the personal names of employees and advisors, and “there appears to be no documentation for certain of these transactions as loans.”
The newly installed CEO makes it clear that he is not blaming all FTX employees for potentially mishandling funds. “While the investigation has only just begun and has yet to run its course, I believe from the information obtained to date that many of the FTX Group’s employees, including some of its senior executives, were unaware of the shortcomings or possible mixing of digital assets.” Whether that potential lack of debt extends to the real estate transactions is not clear.
He adds that current and former employees are some of the people most hurt by FTX, and that “these are many of the same people whose work will be needed to ensure maximum value for all stakeholders going forward.”
FTX’s downfall began last week after Binance pulled out of a deal to acquire the crypto exchange as a result of a due diligence process. News reports that FTX mishandled funds and was soon under investigation when the company filed for bankruptcy.
Bankman-Fried, meanwhile, claims he still hopes to raise an $8 billion lifeline for the company.
“Everyone pretends that perception reflects reality, but it doesn’t,” Bankman-Fried said in a Twitter conversation with Vox reporter Kelsey Piper earlier this week. “Some of this decade’s greatest heroes will never be known, and some of the most beloved people are actually shams.”