FTX, a multi-billion dollar digital currency exchange, has been under intense scrutiny after a bankruptcy filing revealed financial control issues. The exchange duo was founded by three college graduates and quickly gained traction, but a recent court filing has shown that the company lacked appropriate financial and accounting controls. FTX allegedly used a “hodgepodge” of different online tools, from Google documents to Slack conversations, to manage their assets and liabilities, rather than investing in an appropriate system tailored to their, oftentimes, multi-continental platform. QuickBooks, a software designed for small and mid-sized businesses, was reportedly the accounting system of choice, and disorganized bookkeeping led to a reported 80,000 transactions being left unprocessed.

The management structure at FTX was also lacking, as it was revealed that FTX’s two co-founders, Sam Bankman-Fried and Gary Wang, along with former engineering director Nishad Singh had the “final voice in all significant decisions.” However, these three inexperienced individuals ran FTX without ever creating a proper list of employees, or taking into account the lack of back-end checks and controls to identify errors. In his recent court filing, John J. Ray III stated that when he took control of FTX in Nov. 2022, there was “not a single list of anything” related to FTX’s operations.

To add fuel to the fire, criticisms have also been raised against the individual members of the team. Brett Harrison, the president of FTX US at the time, made a stand against the lack of control procedures and pointed out the need for adequate delegation of authority and record-keeping. This generated animosity with Bankman-Fried and Singh, who responded by slashing Harrison’s bonus, and demanding an apology. Harrison refused, leading to his resignation less than a year later.

In light of all of this, FTX is currently facing mounting pressure from US and Chinese regulators, as well as a demand for a $40M bribe from SBF, according to Asia Express Magazine. It's clear from these recent developments that FTX has a lot of work to do if it wants to regain the public's trust and restore its reputation.



Other News from Today