Finance Legal Business Technology
Aditya Shah
Aditya Shah

@AdityaD_Shah

18 tweets 2 reads Dec 06, 2022
X
FTX-
One of the largest crypto exchanges filed for Bankruptcy
The Bankruptcy lawyer handling FTX said-
"Have handled big bankruptcies like Enron
Never have I seen such failure of corporate control"
A thread🧡on the functioning of FTX that led to the Bankruptcy
Lets goπŸ‘‡
(1/18)
FTX- One of the largest crypto exchanges filed for Bankruptcy The Bankruptcy lawyer handling FTX sa...
What did the FTX Bankruptcy lawyer say?
Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.
(2/18)
From compromised systems integrity and faulty regulatory oversight abroad, to the concentration
of control in the hands of a very small group of inexperienced, unsophisticated and potentially
compromised individuals, this situation is unprecedented.
(3/18)
Complex financial Structure:-
The entire FTX group was broken up into different groups named "Silos"
Nobody actually understood the company dealings as the whole structure was so complex
The Organisation chart hereπŸ‘‡
(4/18)
Complex financial Structure:- The entire FTX group was broken up into different groups named "Silos...
FTX had with 4 companies called Silos
1. WRD Silos
2.Almeda Silos
3. Ventures Silos
4. Dotcom Silos
(5/18)
WRS Silo was a major entity for FTX:-
It never recorded balances of customer
crypto assets deposited were not recorded as assets on the balance sheet and are not presented.
What crypto assets does WRS Silo hold remains unknown
(6/18)
WRS Silo was a major entity for FTX:- It never recorded balances of customer crypto assets deposite...
Almeda Silos:-
This basically was a crypto hedge fund
Strategies included arbitrage, market making, yield farming and trading volatility
Balance Sheet left out intercompany accounts receivable, accounts payable, loans payable, and loans receivable are not presented.
(7/18)
Almeda Silos:- This basically was a crypto hedge fund Strategies included arbitrage, market making,...
Dotcom Silos:-
The Dotcom Silo offered off-exchange portal that enabled users to connect and request quotes for spot digital assets and trade directly
The company claimed to have $2.25 Billion in Assets.
The balance sheet remains unaudited and the assets remain unknown
(8/18)
Dotcom Silos:- The Dotcom Silo offered off-exchange portal that enabled users to connect and reques...
Lack of Cash Management controls:-
FTX failed to create a centralized cash management system.
Management had no idea how much cash was on hand at any given time, or even where all their cash was.
(9/18)
Lack of Cash Management controls:- FTX failed to create a centralized cash management system. Mana...
Improper Financial Statements:-
FTX had audited statements for only 2 of its Silos.
The Bankruptcy lawyer cast a doubt on all audited as well as unaudited numbers and did not trust some of the auditors
(10/18)
Improper Financial Statements:- FTX had audited statements for only 2 of its Silos. The Bankruptcy...
The company did not maintain proper records of its employees.
Many of its employees could not be located.
(11/18)
The company did not maintain proper records of its employees. Many of its employees could not be lo...
Employees submitted expenses over Chats
The expenses were approved thru emojis!
(12/18)
Employees submitted expenses over Chats The expenses were approved thru emojis! (12/18) https://t....
In the Bahamas,Employees used company funds to buy real estate on a personal name.
(13/18)
In the Bahamas,Employees used company funds to buy real estate on a personal name. (13/18) https://...
Unsecured loans given by the company:-
Alameda Research (FTX's hedge fund) gave Sam Bankman-Fried a $1 billion personal loan
They also loaned Director of Engineering Nishad Singh $543 million
(14/18)
Unsecured loans given by the company:- Alameda Research (FTX's hedge fund) gave Sam Bankman-Fried a...
No records:-
The boss communicated using applications that had auto-delete.
He encouraged employees to do so.
This meant that there is no record of the decision making
(15/18)
No records:- The boss communicated using applications that had auto-delete. He encouraged employee...
FTX group which was once valued in Billions never had board meetings
(16/18)
FTX group which was once valued in Billions never had board meetings (16/18) https://t.co/2k3VcoSVg...
The whereabouts of the crypto assets is not known.
Debtors have only recovered only a fraction of the assets
(17/18)
The whereabouts of the crypto assets is not known. Debtors have only recovered only a fraction of t...
Conclusion
FTX seems to be a case of-
1. Going big to make it big on a trend like Crypto
2. One Man ran the show with disregard for the law
3. Basic checks such as cash balance checks+crypto asset balances were not maintained
4.The company was run as if it was a circus
(18/18)

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