“Complete failure of controls”: Inside the fall of FTX

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The rapid downfall of the one-time white knight of the crypto industry is a stunning reversal of fortunes. With his billion-dollar fortune having evaporated in under a week, SBF is now the subject of numerous Securities and Exchange Commission and Department of Justice investigations, while thousands of FTX users have taken to social media, demanding the return of their frozen assets.

Ray spoke frankly of the dire situation FTX was in when he took over. “In my 40 years of legal and restructuring experience,” Ray said, “I have never seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.” From missing and hacked assets to “the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals”, it is becoming increasingly clear that FTX lacked even the most basic corporate governance and regulatory compliance standardsthat could have prevented its eventual and catastrophic collapse.

Investigators are now revealing that FTX’s practices included practices such as unsecured group email accounts to access classified private keys and sensitive data, the deployment of software to hide misuse of customer funds, and the complete lack of daily reconciliation of financial positions on the blockchain.