The cryptocurrency behemoth FTX came crashing to the ground. The billion-dollar empire deteriorated due to its misappropriation of funds and various other reasons. Sam Bankman-Fried portrayed a truly robust version of FTX to the outside world. This was the primary reason why users and investors trusted their funds with the exchange.
However, as each day passes, new revelations pop up regarding how the company is running. Let us take a look at how FTX was unprofessionally running internal operations.
The FTX bankruptcy filing reveals that employees submitted expense reimbursements over chat. And how did the employee receive a response? The respective managers used to accept or reject the expense request with an emoji.
What’s even more interesting is that Bankman-Fried personally received a $1 billion loan from Alameda Research. Director of Engineering, Nishad Singh, also received $543 million loan.
These important company decisions should be kept safe and compliant with internal processes. However, it was quite the opposite in FTX’s case. FTX lacked in keeping records related to internal decision-making. Fried was communicating with employees using auto-delete apps and asked them to do the same.
FTX had no centralized cash management
The $32 billion empire had no centralized cash control. There was improper cash management and an absence of an accurate list of bank accounts. That is not all, as the company didn’t have proper records of their employees. As per the bankruptcy filing, many employees couldn’t even be located.
What’s more amusing is that corporate funds were utilized to purchase real estates that often ended up in the names of the employees and executives. One of the most shocking findings was that there were no proper records on the balance sheet of the cryptocurrencies deposited by the customers. All the money was pooled into a fund that was used for other activities.
The primary reason for the collapse of FTX that is surfacing is that roughly $10 billion in customer assets were used for his trading firm, Alameda. However, venture capitalists are also scrutinized for failing to conduct due diligence on FTX. Out of the 86 investors, not even one sat on the board to oversee the functioning of the exchange. Many investors have even stated that they are hesitant to become board members due to the legal risks involved.
It also shows the negligence of the investors in overseeing whether the company is running in a healthy manner. Nevertheless, the ripples of FTX’s fall have also affected other firms associated with it, including BlockFi and Genesis. The fall of the cryptocurrency behemoth FTX will go down in history as one of the largest events that affected the cryptocurrency market.