Mr. Bankman-Fried’s crypto hedge fund Alameda Research often had difficulty understanding what its positions were, let alone hedging or accounting for them, the report said.
“In some cases we have lost $50m in assets; Such is life,” said Mr.
He described Alameda as “hilariously beyond the limits of any auditor who can get even partially through an audit”.
Mr. A spokeswoman for Bankman-Fried declined to comment.
At FTX Group, expenses and invoices are submitted in Slack and are approved by emoji. These informal, ephemeral messaging systems were used to authorize transfers of millions of dollars, leaving only informal records of such transfers or no records at all.
FTX and Alameda Research collapsed last year after the exchange offered billions of dollars worth of client assets to fund Alameda’s riskier bets. Before its demise, FTX had shown itself to be more technologically sophisticated than its competitors and had attracted about $2 billion from venture capitalists.
Most of the decision making is done by Mr. The report reiterates that sitting with Bankman-Fried; Nishad Singh, who was Director of Engineering at FTX; and Gary Wang, the company’s former chief technology officer. If Messrs. Singh or Wang were hit by a bus, “the whole company would be over,” noted one executive.
Mr. Wang’s lawyer declined to comment. Mr. Singh’s attorney did not respond to a request for comment.
The report said that the crypto exchange and its related companies do not have proper controls to keep crypto assets safe. Private keys, like passwords that allow crypto assets to move, are sometimes stored in plain text files and unencrypted on an FTX team server. The bankruptcy panel found millions of dollars worth of private keys in crypto assets that lacked proper descriptions, some titled “use this” or “don’t use this.”
In September 2019 Tweet, Mr. Bankman-Fried reminded crypto followers to use two-factor authentication, saying, “90% of crypto security is making sure you’ve done the basics.” But privately, his companies have not implemented the use of multifactor authentication for its Google Accounts and password management provider.
In response to a user’s question in the same tweet, Mr. Bankman-Fried said his crypto exchange distributed user funds across a mix of crypto accounts, some of which were connected to the Internet and some of which were not. The latter – so-called cold wallets – are less vulnerable to hacking.
In practice, FTX and its affiliates hold almost all crypto assets in hot wallets, the report said. Companies don’t need multiple people to authorize crypto transactions, a common practice in crypto that funds aren’t easily moved by illegal actors.
When employees sought to clarify organizational responsibilities, they faced backlash, the report said. The former chairman of FTX.US resigned following disputes over power and key hiring at the company’s US operations. After raising issues, his bonus was drastically reduced.
A company attorney was fired after Alameda raised concerns about a lack of corporate controls and risk management.
“While FTX Group’s failure has had an unprecedented impact on a fledgling industry, many of its root causes are well-known: shame, incompetence and greed,” said FTX Chief Executive John J. Ray III said. Report.
— Caitlin McCabe contributed to this article.
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