(Forkast) - Former executives of the bankrupt cryptocurrency exchange FTX failed to install appropriate financial controls in the company, which is complicating the asset recovery process, the restructuring team of the failed exchange said in a court filing dated on Sunday.
Fast facts
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In the report filed with the bankruptcy court in Delaware, the representatives of FTX Trading Ltd. said the previous management team, which included its founder Sam Bankman-Fried, failed to implement appropriate control measures and “placed its crypto assets and funds at risk from the outset.”
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FTX did not have personnel who were knowledgeable enough to account accurately for assets and liabilities, nor did it run dedicated financial risk, audit or treasury departments, the restructuring team said in the report after interviewing 19 former FTX employees and reviewing “over one million” documents and financial records.
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FTX and its affiliates, which filed for Chapter 11 bankruptcy in the U.S. in November, have so far recovered and secured in cold storage over US$1.4 billion in digital assets, with an additional US$1.7 billion in digital assets in the process of recovery, according to the report.
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“FTX Group was tightly controlled by a small group of individuals who falsely claimed to manage FTX Group responsibly, but in fact showed little interest in instituting oversight or implementing an appropriate control framework,” John J. Ray III, chief executive officer and chief restructuring officer of the FTX Debtors, said in a Sunday statement following the release of the report.
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In January, liquidators said that they had recovered at least US$5 billion of liquid assets, including cryptocurrencies and securities, in an attempt to repay over nine million FTX users and creditors, who lost an estimated US$8 billion worth of digital assets.
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Bankman-Fried in January pleaded not guilty to eight charges related to the failure of FTX. He is out of detention on a US$250 million bail, one of the largest in U.S. history, as he awaits a court trial scheduled in October.
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In December, Caroline Ellison, the former chief of Alameda Research, the trading arm of FTX, and former FTX chief technology officer Gary Wang pleaded guilty to several charges related to operations at the company. Nishad Singh, former engineering chief of FTX, pleaded guilty to fraud and several other criminal charges in late February.
By Timmy Shen
