Thursday, November 17, 2022

Screwing Each Other While Screwing Everyone

 Was FTX merely a playpen for children to play with other people's money?  Newly-annointed FTX CEO John Ray, III filed a rather damning report with the bankruptcy court in Delaware this morning.  The report makes clear the FTX companies were nothing more than piggy banks for SBF and his favored few.  Some highlights are: 


Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here. From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.

FTX US was founded in January 2020. FTX US is available to U.S. users and, according to statements by Mr. Bankman-Fried, had approximately one million users as of August 2022.

18. I have been provided with an unaudited consolidated balance sheet for the WRS Silo as of September 30, 2022, which is the latest balance sheet available. The balance sheet shows $1.36 billion in total assets as of that date. However, because this balance sheet was produced while the Debtors were controlled by Mr. Bankman-Fried, I do not have confidence in it, and the information therein may not be correct as of the date stated.

23. Alameda Research LLC prepared consolidated financial statements on a quarterly basis. To my knowledge, none of these financial statements have been audited. The September 30, 2022 balance sheet for the Alameda Silo shows $13.46 billion in total assets as of its date. However, because this balance sheet was unaudited and produced while the Debtors were controlled by Mr. Bankman-Fried, I do not have confidence in it and the information therein may not be correct as of the date stated.

46. Many of the companies in the FTX Group, especially those organized in Antigua and the Bahamas, did not have appropriate corporate governance. I understand that many entities, for example, never had board meetings.

50. The FTX Group did not maintain centralized control of its cash. Cash management procedural failures included the absence of an accurate list of bank accounts and account signatories, as well as insufficient attention to the creditworthiness of banking partners

56. I have substantial concerns as to the information presented in these audited financial statements, especially with respect to the Dotcom Silo. As a practical matter, I do not believe it appropriate for stakeholders or the Court to rely on the audited financial statements as a reliable indication of the financial circumstances of these Silos.

57. The Debtors have not yet been able to locate any audited financial statements with respect to the Alameda Silo or the Ventures Silo.

58. The Debtors are locating and securing all available financial records but expect it will be some time before reliable historical financial statements can be prepared for the FTX Group with which I am comfortable as Chief Executive Officer. The Debtors do not have an accounting department and outsource this function.

the Debtors have been unable to prepare a complete list of who worked for the FTX Group as of the Petition Date, or the terms of their employment. Repeated attempts to locate certain presumed employees to confirm their status have been unsuccessful to date.

For example, employees of the FTX Group submitted payment requests through an on-line ‘chat’ platform where a disparate group of supervisors approved disbursements by responding with personalized emojis.

63. In the Bahamas, I understand that corporate funds of the FTX Group were used to purchase homes and other personal items for employees and advisors. I understand that there does not appear to be documentation for certain of these transactions as loans, and that certain real estate was recorded in the personal name of these employees and advisors on the records of the Bahamas.

65. The FTX Group did not keep appropriate books and records, or security controls, with respect to its digital assets. Mr. Bankman-Fried and Mr. Wang controlled access to digital assets of the main businesses in the FTX Group (with the exception of LedgerX, regulated by the CFTC, and certain other regulated and/or licensed subsidiaries). Unacceptable management practices included the use of an unsecured group email account as the root user to access confidential private keys and critically sensitive data for the FTX Group companies around the world, the absence of daily reconciliation of positions on the blockchain, the use of software to conceal the misuse of customer funds...

71. One of the most pervasive failures of the business in particular is the absence of lasting records of decision-making. Mr. Bankman-Fried often communicated by using applications that were set to auto-delete after a short period of time, and encouraged employees to do the same.

Mr. Bankman-Fried, currently in the Bahamas, continues to make erratic and misleading public statements. Mr. Bankman-Fried, whose connections and financial holdings in the Bahamas remain unclear to me, recently stated to a reporter on Twitter: “F*** regulators they make everything worse” and suggested the next step for him was to “win a jurisdictional battle vs. Delaware”

SBF should be rather familiar with the F word as that is what he and his crew were doing on the beach down in the Bahamas as they burned through other people's money.   




Anonymous said...

Who could have known that “crypto currency” was nothing but a Ponzi scheme from the jump?

Anonymous said...

There's a sucker born every minute!

Anonymous said...

If you're playing a poker game and you look around the table and and can't tell who the sucker is, it's you.

Paul Newman

If you get an invite to a crytpo exchange investment opportunity where everyone at the table thinks they are smarter than everyone not at the table...they all might not be as smart as they think they are!

The report claims the 2018 Alameda deck included investment opportunities with a 15% annualized fixed rate loan, including higher rates available to investors willing to put down more with the firm. 

The deck reads: 

These loans have no downside — we guarantee full payment the principal and interest, enforceable under U.S. law and established by all parties’ legal counsel. We are extremely confident we will pay this amount. In the unlikely case where we lose more than 2% over a month we will give all investors the opportunity to recall their funds.

Oh. No risk and a 15% guaranteed return? Bernie Madoff would be running for the hills!

Protip: "Opportunity to recall their funds" doesn't mean you get the funds back if the funds are already recalled by the other 'investors'!

Anonymous said...

Crypto is the new tulip. Some very big wig “creditors” involved in this one.

Anonymous said...

HAHAHAHAHAHAHAHA. Who would have thought?

Anonymous said...

The real story is that FTX CEO gave boat loads of money strictly to the democrats.
1. Joe Biden
2. SEC Chairman
3. other democratic leaders

Anonymous said...

Were they all microdosing on speed while the cooked the books?

" Caroline
nothing like regular amphetamine use to make you appreciate how dumb a lot of normal, non-medicated human experience is

Anonymous said...

“They were careless people, Tom and Daisy- they smashed up things and creatures and then retreated back into their money or their vast carelessness or whatever it was that kept them together, and let other people clean up the mess they had made.”

― F. Scott Fitzgerald, The Great Gatsby

Anonymous said...

Why hasn't SBF been arrested yet? Too close to the Donkeycrats?

Anonymous said...

Libertarian currency in action.

Anonymous said...

Can't arrest him. He's hiding in the Bahamas.

Anonymous said...

Nothing wrong with crypto, just a lot of morons out there that are too easily exploited. Could be with anything.

Anonymous said...

“Why hasn't SBF been arrested yet? Too close to the Donkeycrats?”

Are you suggesting sending seal team 6 to the Bahamas to extract him? Investigations take time. Don’t be a putz.

Anonymous said...

Of course JJ is full of crypto experts.

LTR ESQ MB AMA said...

Obviously I'm not smart enough to understand all the abbreviations and/or acronyms. Thank you, Kingfish, for yet another vague and confusing thread.

Krusatyr said...

Is crypto the back channel route to get Biden's Mexican Cartel amigos' 10% fees to Biden Cartel?

Anonymous said...

wrote a lil song about it, like to hear it? Here it go!

Anonymous said...

I tried to explain crypto to my wife, she responded: "Kryptonite".

wise_guy said...

The last sentence of this paragraph from the new CEO made me laugh out loud:

The FTX Group received audit opinions on consolidated financial statements for two of the Silos – the WRS Silo and the Dotcom Silo – for the period ended December 31, 2021. The audit firm for the WRS Silo, Armanino LLP, was a firm with which I am professionally familiar. The audit firm for the Dotcom Silo was Prager Metis, a firm with which I am not familiar and whose website indicates that they are the “first-ever CPA firm to officially open its Metaverse headquarters in the metaverse platform Decentraland.

Anonymous said...

Biden gives money (our money) to Ukraine - Ukraine gives money to FTX - FTX Gives money to Biden.

Anonymous said...

Following up on 10:10 p.m. - nothing like amphetamines to make people feel smarter and more powerful then they actually are, as well as arrogant and aggressive

Anonymous said...

Sounds like a bunch of thieves stealing from other thieves.
Haven't these people heard of that old saying, there is no honor between thieves?

Anonymous said...

Have you notice that CNBC bragged on FTX like it was the next Microsoft.
Now you don't hear a peep about it on CNBC.

Crab, Gotta love it! "Castaway"

Anonymous said...

10:20 - You meant to say 'among'.

Anonymous said...

Joe Biden is the penultimate isn’t he?

He’s retarded one day and the next? He’s a master mind genius who exploits foreign governments and takes their cash to his hidden lair.

Anonymous said...

Crashed and burned like a Tesla on full send with no one in the driver's seat!

Anonymous said...

He’s retarded one day and the next? He’s a master mind genius who exploits foreign governments and takes their cash to his hidden lair.

Depends whether the meme merchants think to fools need to have an "up" day or a "down" day.

Anonymous said...

Who is, or ever was, foolish enough to believe that the private central banking cartel that has a monopoly on the creation of money (created as debt) was ever going to allow another form of "money" to exist that they did not control? What you ARE going to get is Central Bank Digital Currency (CBDC), ie, no more anonymous transactions in cash. You're behavior will be controlled! Misbehave and you'll go hungry! (See Book of Revelation)

Anonymous said...

The stupidest think about these Bitcoin scams is that, if you happen to make money(highly unlikely), the profit will eventually be “clawed back.”

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