The weekend appears to be quite stressful for the entire crypto market mainly due to the FTX crisis. While the global crypto market cap is struggling to recapture the $1 trillion mark, the star cryptocurrency, Bitcoin, is hovering around $16K bringing down the whole market.
As per the documents of new court filings in concern with Sam Bankman-Fried’s FTX, it is being disclosed that the firm was largely mismanaged. It is also said that FTX was a complete failure in terms of corporate controls.
FTX’s present CEO, John J. Ray lll mentioned in a court filing that in his entire career he has never come across a company that has completely failed in corporate controls. He also stated there is no trustworthy financial information given by the company.
FTX Lacked Corporate Controls
The court filings have opened up many dark facts about the company. Firstly, it reveals that FTX never held any board meetings. Also the crypto deposited by customers was never recorded in its balance sheet. Next it claims that Alameda Research, which is FTX’s hedge fund, had lent Bankman-Fried a $1 billion personal loan along with $543 million loan to the Director of Engineering.
Next, the company lacked a proper record of its employers and also corporate funds were used for personal use like buying real estate. Furthermore, the filings also suggest that there was no proper cash management system with no trace of how much cash the company held.
On the other hand, Francine McKenna, a well-known journalist and lecturer in financial accounting at the University of Pennsylvania has also disclosed a few red flags. The first was that FTX hired two audit firms rather than one which suggests that FTX didn’t want anyone to know the complete picture.
Secondly, as mentioned earlier, lack of corporate control and lastly McKenna highlighted that neither FTX Trading nor FTX US paid federal income taxes.
The FTX collapse has turned the tables for the crypto market and made it even more difficult for the crypto market to claim its bull run. However, this doesn’t mean things are over for Crypto, the market will recover soon like always. Nevertheless one thing that FTX collapse has taught us is investors should always remember that any firm’s past success doesn’t guarantee a firm’s success.