FTX financial controls were a ‘hodgepodge’ of apps, says court filings

According to FTX CEO John Ray III, FTX was run by three inexperienced individuals “fresh out of college.”

In court on April 9th filing In Delaware Bankruptcy Court, John J Ray III gave his first detailed explanation of the control failures at FTX.

Ray said his restructuring team “identified a wide range of deficiencies in FTX Group’s management,” from lack of proper financial and accounting controls to inadequate group management structures and record keeping processes.

FTX apparently “relied on a jumble of Google Docs, Slack communications, shared drives and Excel spreadsheets” to manage its assets and liabilities.

FTX used accounting software QuickBooks, which was designed for “small businesses” rather than for companies operating on “multiple continents and platforms” like FTX.

Related: Names of non-US FTX users requested by major media

FTX’s bookkeeping was reportedly neglected as approximately 80,000 transactions were left as outstanding accounting entries in a “QuickBooks account titled ‘Ask My Accountant'”.

Ray believes that co-founders Sam Bankman-Fried and Gary Wang and former engineering director Nishad Singh, despite their very limited experience, have the “final say in all important decisions.” emphasized that there are

“Fresh out of college with no experience in risk management or business operations, these three managed almost every significant aspect of the FTX Group.”

Wang and Singh have significant control over FTX, noted an anonymous FTX executive, stating: [Singh] If you get run over by a bus, it’s the whole company.Same problem as Gary [Wang]”

Note that the company was unable to provide a complete list of employees when it filed for bankruptcy in November 2022.

FTX failed to timely submit financial reports at the end of the financial reporting period and did not perform back-end checks to identify and correct material errors.

FTX.US President Brett Harrison has expressed concern with Bankman-Fried and Singh regarding the “lack of proper delegation of authority, formal management structures and key employment at FTX.US.”

In response, Harrison’s bonus was significantly reduced and he was instructed by the company’s internal lawyer to apologize to Bankman-Fried, which Harrison refused. It was reported that he had resigned.

I’ve written and publicly spoken about the circumstances of my resignation from FTX US many times since January, so I’m not sure how “new” this is. https://t.co/b3apaHoOzT

— Brett Harrison (@BrettHarrison88) April 9, 2023

In a February 6 court filing, Ray said that when he took control of FTX in November 2022, he would not have a “single list” related to bank accounts, income, insurance, or personnel, and would have “a large It has caused a fierce information war.”

He opposed a motion to assign an independent examiner to bankruptcy cases out of fear that an “inadvertent error” could result in “hundreds of millions of dollars lost in value.”

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