The FTX Debtors team release its first report discussing the “control failures by FTX Group’s previous management team,” with respect to the shocking FTX collapse.
The Debtors noted, “The Report is based on the Debtors’ review of terabytes of electronic data and communications, more than one million documents, and interviews conducted with 19 former FTX Group employees, among other information.”
When the Debtors took over the FTX Group, they discovered a general lack of records and other proof regarding where or how fiat currency and digital assets might be located or accessed.
The Debtors often had difficulty to even determining the estate’s assets and liabilities, let alone safeguarding and reclaiming the assets in order to increase the worth of the estate.
This problem was made more difficult by the fact that the Debtors assumed control in the midst of a significant cyberattack, which was a result of the FTX Group’s lax controls and which at the time of the bankruptcy depleted assets worth $432 million.
The Debtors claimed, “In this regard, while the FTX Group’s failure is novel in the unprecedented scale of harm it caused in a nascent industry, many of its root causes are familiar: hubris, incompetence, and greed.”
A few individuals who showed little interest in establishing an effective structure for oversight exercised tight control over the FTX Group, says the Debtors.
The FTX’s previous management reportedly lacked the proper organizational structure, management, and governance, and as a result, the Debtors’ main goal has been to establish a suitable governance framework from the beginning of the bankruptcy.
The report added “The management and governance of the FTX Group was largely limited to Bankman-Fried, Singh, and Wang. Among them, Bankman-Fried was viewed as having the final voice in all significant decisions, and Singh and Wang largely deferred to him.”
John J. Ray III, CEO, and Chief Restructuring Officer of the FTX Debtors stated: “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. We are continuing our efforts to review the events that factored into the fall of FTX and to identify and recover as much value as possible for creditors.”