​FTX creditors cite “arrogance and greed” as reasons for the collapse of the exchange

What’s new? On April 9, creditors of the bankrupt crypto exchange FTX released its first report, revealing flaws in the previous management team’s controls in critical areas. For example, the platform’s new CEO, John J. Ray, stated that the exchange “was tightly controlled by a small group of individuals who falsely claimed to manage FTX Group responsibly, but in fact showed little interest in instituting oversight or implementing an appropriate control framework.” Other reasons for the collapse include “arrogance, incompetence and greed” by former executives.

FTX’s press release

What else does the press release say? Ray stressed that former FTX executives failed to implement proper controls in areas that were critical to safeguarding cash and crypto assets. He said that the new managers will continue their efforts to analyze the events that led to FTX’s collapse and to identify and recover as much compensation as possible for creditors.

According to the report, FTX lacked fundamental financial and accounting controls, suppressed dissent within the company, and its former executives joked about its propensity to lose millions of dollars in assets. At the heart of FTX’s collapse, according to creditors, was the “arrogance, incompetence and greed” of the exchange’s co-founders Sam Bankman-Fried and Gary Wang, as well as former CTO Nishad Singh.

Wang pleaded guilty to fraud and began cooperating with the investigation late last year, Singh did the same in February, while Bankman-Fried, according to media reports, intends to deny all charges at the upcoming hearing.

Digital assets worth more than $1,4 billion have been recovered and placed in cold storage, the creditors said in a report. They added that another $1,7 billion has been identified and is in the process of being recovered.

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The report is based on the creditors’ review of “terabytes of electronic data and communications, more than one million documents, and interviews conducted with 19 former FTX Group employees, among other information.” The work was done with the help of a team of experts in law, restructuring, forensic accounting, cybersecurity, computer engineering, cryptography, blockchain, and other fields.

FTX Japan resumed withdrawals for local clients in late February. In March, the European division launched a withdrawal application website, at which time lenders reported a possible restart of the exchange.

In addition, crypto broker Voyager, whose assets are being bought by the US arm of the exchange Binance, reserved $445 million to pay FTX Group, which will increase the amount of funds to reimburse creditors.