It should be noted that experts have previously reported serious problems with the FTX crypto-exchange. In particular, in March it became known about a $11.6 billion hole in the cryptocurrency company’s budget.

The latter may have arisen due to the company’s management’s approach to money management. Specifically, a so-called backdoor existed in the cryptocurrency exchange system, which allowed users to withdraw money to the accounts of a nearby trading company, Alameda. The funds then ended up in the hands of FTX founder Sam Bankman-Fried and other managers within the organisation, who took out loans to do so.

New details have made it clear that the real management situation at FTX was even worse.

Why the FTX crypto-exchange went bankrupt

In a petition filed with the Delaware bankruptcy court, John Ray III first provided a detailed account of the management flaws within the former FTX and Alameda “crypto empire” created by Sam Bunkman-Fried. The fact that there are problems in all of this is not news, as Ray has previously complained about what is going on. That said, it is only now that he has compiled a detailed report.

Ray said that his restructuring team had “identified extensive weaknesses in FTX Group’s control system”, including a lack of proper financial and accounting reporting. In addition, an inadequate team management structure and record keeping process were noted.

According to the document, FTX employees relied “on a hodgepodge of Google Docs, Slack messages, shared drives and spreadsheets” to manage their assets and liabilities. According to Cointelegraph’s sources, the exchange also used QuickBooks accounting software, which itself is designed for “small and medium-sized businesses”. Accordingly, such software is simply not suitable for a large company in terms of the scale of its operations.

Ray pointed out that FTX co-founders Sam Bankman-Fried and Gary Wang, along with former engineering director Nishad Singh, had a “decisive voice in all important decisions” within the company. And that’s too bad, because they had almost no management experience. Here is a pertinent quote about what is going on.

These three men, who had not long graduated from college and had no experience in risk management or running a business, controlled virtually every important aspect of FTX Group’s operations.


Note that the day before, Nishad Singh had faced the aftermath of FTX's collapse. It turned out that in October 2022 he bought a country house in the San Juan Islands for $3.7 million, that is, just two weeks before the bankruptcy of the trading platform.

In March 2023 the US government confiscated the property because Singh had used his own account at FTX to purchase it. Given this fact, prosecutors admit that the money could be linked to Nishad's crimes. Singh himself pleaded guilty to criminal charges in early spring and agreed to cooperate with prosecutors.


In internal correspondence, among other members of the company’s management were aware of this fact. Moreover, this approach to running the exchange was considered far from the best even among its employees. One of these people, whose name has not been disclosed, claimed that “if Singh or Wang were suddenly hit by a bus”, it could lead to the collapse of the entire company.

???? YOU CAN FIND MORE INTERESTING STUFF ON OUR YANDEX.ZEN!

FTX Group’s human resources policy is also mired in confusion. The company was unable to provide a complete list of its employees at the time of its bankruptcy filing in November. There was a similar situation with financial reporting – the exchange rarely filed relevant documents with regulators on time.

FTX.US president Brett Harrison raised his concerns with Bankman-Fried and Singh about the “lack of proper delegation, formal management structure and key employees at FTX.US”. In response, Harrison’s bonus was significantly reduced. He was also ordered to apologise personally to Sam, which Harrison refused to do. A little later he resigned from his position.

John Ray III had previously stated that he had not yet encountered this degree of irresponsibility in company management in his practice, although in his time he had managed the liquidation of debts of large corporations. Given the new details, FTX's longevity as a major player on the crypto market could be called a "miracle", as it is strange that the company lasted so long at the top until its bankruptcy.

Due to problems in the exchange’s documentation, Ray had also previously rejected the involvement of an independent auditor in the process. According to him, this could only lead to an accumulation of errors in the identification of all FTX debts. It is hoped that the new exchange’s management team will be able to get their act together and return compensation to FTX Group’s customers and creditors as quickly as possible.


The FTX cryptocurrency platform seems to have been doomed to failure from the start. Firstly, its management had pre-emptively used its own users' money - including to conduct trading transactions, well that would have been discovered sooner or later in a massive withdrawal of assets from the platform. Secondly, the company's founders had inadequate experience, hence the "genius" idea of using messengers for accountability.

Be that as it may, the collapse of FTX in November 2022 can be considered a relatively positive development. Had it happened later, the scale of the collapse and financial losses for platform users could have been much greater.


Follow developments in our cryptochat. There we will talk about other important topics that affect the decentralised asset niche in one way or another.