1. Employees submitted expense reimbursements over chat
A random manager would accept or reject those reimbursements with an EMOJI
2. Related party loans:
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
3. Very few records were kept.
Most decisions were made over chat, with the messages automatically deleted after a certain time.
4. FTX, a company valued at $32 billion, never had board meetings. Neither did most of the subsidiaries.
5. FTX had no cash management system.
Management had no idea how much cash was on hand at any given time, or even where all their cash was.
6. FTX didn't keep proper records of who they employed. Employees and contractors co-mingled throughout the different companies without proper documentation of how they spent their time.
Certain employees can't be located: Which could mean that some employees were fake.
7. Corporate funds were used to purchase personal use real estate. And employees & executives put their names on homes purchased with company funds.
8. Crypto deposited by customers weren't even recorded on the balance sheet. Presumably, all crypto assets just went into one central slush fund used for whatever.
9. The filing makes clear that Sam Bankman-Fried does not speak for the company, and that his erratic and misleading public statements should not be disregarded.
Then the world’s second-largest exchange collapsed. Now, the contagion is spreading. The structural weaknesses in the crypto system are threatening its very existence.
2023 might be the year of the crypto apocalypse.
Time for a 🧵
2/ For anyone who needs a refresher, here’s what happened:
A bunch of twenty-somethings who were all sleeping with each other went to the Bahamas and set up crypto exchange FTX and trading house Alameda, which were valued at $32 billion.
Then everything fell apart.
3/ It turns out that Alameda was overexposed to FTX’s own token, FTT.
Then the snowball effect took hold.
Binance CEO “CZ” sold his FTT, triggering a selloff. FTT prices fell, Alameda’s balance sheet tanked, investors lost trust in FTX, driving FTT ever further down.
He deleted this tweet from November 7th, the day before FTX collapsed:
4) I'd love it, @cz_binance, if we could work together for the ecosystem.”
He also deleted this tweet, which was from the same thread as the above tweet:
“3) It's heavily regulated, even when that slows us down. We have GAAP audits, with $1b excess cash. We have a long history of safeguarding client assets, and that remains true today.”