FTX's bankruptcy filings show that the situation is much worse than previously thought.  From a million creditors to a staggering lack of oversight, here are the craziest details.

FTX’s bankruptcy filings show that the situation is much worse than previously thought. From a million creditors to a staggering lack of oversight, here are the craziest details.

  • The fall of crypto exchange FTX led to a bankruptcy filing full of crazy details.
  • Documents filed in court this week reveal much deeper issues than anyone would have thought.
  • From billion-dollar loans to metaverse accountants, these are the craziest details of FTX’s bankruptcy filing.

FTX’s bankruptcy filings have shed new light on how crypto exchange FTX, once worth $32 billion, lost it all. To say the least, it’s a doozy.

Anyone who watched a few weeks ago Sam Bankman-Fried, the CEO of the third-largest crypto exchange, battle insolvency rumors on Twitter only to file for bankruptcy a few days later probably thought, “Well, that looks bad. “. To say it got worse would be an understatement.

Among those watching in awe at the scale of the disaster was FTX’s new CEO, John Ray III, who oversaw the liquidation of Enron in 2001. “Never in my career have I seen such failure comprehensive corporate controls and a lack of trustworthy financial information, as happened here.”

From the guy who presided over the cleanup of the worst financial scandal of his time, that’s saying something.

FTX’s rapid collapse has sent shockwaves throughout the industry and could leave countless creditors – up to a million – holding the bag, including countless customers who had funds on the table. exchange, many of whom were retail customers.

Losses to the company’s investors and customers are expected to be well over ten billion dollars, and the fallout should be lasting even as former FTX CEO Sam Bankman-Fried continues to tweet about potential next steps.

Here are the craziest details of Chapter 11 bankruptcy filings this week.

FTX’s balance sheet was a nightmare

Following the FTX implosion, Bankman-Fried claimed on Twitter that FTX held approximately $5.5 billion in “less liquid” crypto tokens.

In fact, according to the bankruptcy filing, FTX’s crypto holdings have a fair value of just $659,000 as of September 30. This number could also be lower given the volatility that has plagued the market since then.

Clues showed the internal numbers were going to be dire, given that FTX founder Sam Bankman-Fried warned several tweet storms about FTX’s finances as “rough” and “to my knowledge” and “treating all those rough numbers.”

Bankman-Fried and Co. received $3.3 billion in loans from Alameda Research

FTX’s bankruptcy filing revealed that Alameda Research, FTX’s crypto hedge fund sister company, had directly loaned $1 billion to Sam Bankman-Fried. Additionally, Alameda loaned an additional $2.3 billion to Paper Bird Inc., in which Bankman-Fried owns a majority stake.

Other FTX employees also received loans from Alameda, including $543 million to engineering chief Nishad Singh and $55 million to FTX digital markets chief Ryan Salame. It seems unlikely that these loans will be repaid anytime soon.

FTX had no accounting department

Ray said in the bankruptcy filing that FTX had compromised internal systems, faulty regulatory oversight, and inexperienced and unsophisticated people in charge of the company’s finances. This includes the fact that the company has no accountant in charge of its finances, which is surprising for a company once valued at $32 billion.

“The debtors are locating and securing all available documents, but expect it will take some time before reliable historical financial statements can be prepared for FTX Group which I am comfortable with as CEO “, said Ray. “Debtors do not have an accounting department and outsource this function.” Ray added that no prior financial statement could be relied upon.

Corporate Finance Audit was a company with offices in the Metaverse.

FTX could have over a million creditors

FTX initially warned that it had over 100,000 creditors it owed money following the implosion of the crypto exchange. For a more precise figure, try multiplying this number by 10.

“In fact, there could be over a million creditors in these Chapter 11 cases,” the bankruptcy filing says.

FTX may have used corporate funds to buy homes for its employees

“In the Bahamas, I understand FTX Group corporate funds were used to purchase homes and other personal items for employees and advisors,” Ray said in the bankruptcy filing.

Worse still, there does not appear to be proper documentation for some of these transactions, and some real estate assets were registered in the personal names of FTX employees and advisors in Bahamian records, even though they were purchased with money from FTX.

SBF’s biggest regret is filing for bankruptcy in the first place

To top it off, Bankman-Fried’s biggest “mistake” amid the FTX implosion, he says, is the fact that he filed for Chapter 11 bankruptcy in the first place.

Bankman-Fried said in direct Twitter messages to a Vox reporter that current FTX officials were “trying to burn everything to ashes.”

“You know what was maybe my biggest bullshit?” says Bankman-Fried. “The one thing *everyone* told me to do.” He later said he was referring to Chapter 11.

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