•FTX Group companies stored private keys to customer assets in an unsecured group email account and approved expenses through online chats.
• A part of the 30-page-long filing revealed that FTX Group did not have an appropriate disbursement control system. Employees submitted expense requests through online chats while supervisors and managers approved them with personalized emojis.
• In addition, crypto assets deposited by customers were not recorded on the balance sheet, and at bankruptcy, the balance of such assets was not presented.
Cryptocurrency trading company FTX Group filed for bankruptcy late last month, and a part of the 30-page-long filing has revealed that private keys to customer assets were left unsecured and expenses were approved through online chats.
Employees submitted expense requests through online chats with supervisors and managers approving them with personalized emojis, while crypto assets deposited by customers were not recorded on the balance sheet. At bankruptcy, the balance of such assets was not presented.
FTX Group’s Bankruptcy Filing: The Details
FTX Group’s filing reveals a number of troubling financial practices, chief among them being the fact that customer assets were left unsecured. Private keys to crypto assets deposited by customers were not recorded on the balance sheet, meaning that at the time of bankruptcy, there was no way to know how much these assets were worth. Similarly, expenses were approved through online chats with no paper trail, making it difficult to track where money was being spent.
FTX Group, a cryptocurrency derivatives exchange, has been accused of lax financial controls by the Commodity Futures Trading Commission (CFTC). A part of the 30-page-long filing revealed that FTX Group did not have an appropriate disbursement control system. Employees submitted expense requests through the aforementioned online chats while supervisors and managers approved them with personalized emojis.
This lack of control allowed FTX employees to misuse company funds for personal expenses, including travel, entertainment, and gifts. The CFTC is seeking a fine of $150,000 from FTX Group as well as restitution for any customers who were harmed by the company’s lax financial controls. This case highlights the importance of proper financial controls within businesses, especially those handling large sums of money. Without adequate controls in place, companies are at risk of misuse of funds and potential legal action.
The lack of transparency around customer assets and expenses is particularly concerning given the volatile nature of the cryptocurrency market. Had FTX Group kept better records, it might have been able to avoid bankruptcy altogether. As it stands, the company’s reckless financial practices have cost its customers dearly.
The FTX Group bankruptcy filing reveals a number of troubling financial practices, chief among them being the fact that customer assets were left unsecured and expenses were approved through online chats with no paper trail. The lack of transparency around customer assets and expenses is particularly concerning given the volatile nature of the cryptocurrency market. Had FTX Group kept better records, it might have been able to avoid bankruptcy altogether. As it stands, the company’s reckless financial practices have cost its customers dearly.
