- Sam Bankman-Fried ran FTX like a "personal fiefdom", a bankruptcy lawyer said Tuesday.
- "Substantial amounts of money were spent on things not related to the business," James Bromley said.
FTX spent around $300 million buying houses in the Bahamas for senior executives, according to a bankruptcy lawyer.
Sullivan & Cromwell restructuring partner James Bromley, a lawyer on FTX's bankruptcy team, told a US court that founder Sam Bankman-Fried ran the crypto exchange like his own "personal fiefdom" and that "substantial amounts of money were spent on things not related to the business," a recording of the Tuesday hearing reviewed by Insider showed.
During the hearing, the first day of FTX's bankruptcy trial, Bromley said that one of the US arms of the company "purchased almost $300 million worth of real estate in the Bahamas."
"Based on preliminary investigations, most of those real estate purchases related to homes and vacation properties that were used by senior executives of the company," Bromley said.
New CEO John J. Ray III had previously said in a scathing legal filing that he believed the FTX Group used corporate funds "to purchase homes and other personal items for employees and advisors."
At Tuesday's hearing, FTX's attorneys outlined the dire state of the business and the events leading to its bankruptcy. The Wall Street Journal reported that FTX had lent Alameda around $10 billion in customers' deposits.
"We have witnessed one of the most abrupt and difficult collapses in the history of corporate America," Bromley said.
Bromley said that the company had been run by "a small group of inexperienced and unsophisticated individuals." He added that the companies across the FTX network had "unreliable books and records."
"What we have is a worldwide organization, but an organization that was run effectively as a personal fiefdom of Sam Bankman-Fried," he said. "Effectively what we had was a lack of corporate controls at a level that none of us in the profession that have looked at it so far have ever seen."
Bromley said that since the exchange collapsed in early November, there had been "resignations throughout the ranks." Bankman-Fried resigned as CEO of FTX on November 11 and told Vox that CTO Gary Wang and director of engineering Nishad Singh had left the company.
The FTX Group had 520 employees as of the end of October, including 330 employees across the globe registered at the US company, Bromley said. The latter has since fallen to around 260, he said.
"We are working day and night to bring order to disorder," Bromley said.
Since FTX collapsed earlier this month, reports have revealed the full extent of Bankman-Fried's lavish lifestyle, including splashing out money on the company's staff. This is despite Bankman-Fried touting himself as a believer in effective altruism, saying he was building up his fortune with the plan to give almost all of it away.
Ongoing bankruptcy proceedings have "allowed everyone for the first time to see under the covers and recognise the emperor had no clothes," Bromley said Tuesday.
FTX filed for bankruptcy last week after rival exchange Binance plunged it into a solvency crisis by liquidating its holdings of native token FTT. Since early November, the value of FTT has fallen by nearly 95%.
Ray slammed Bankman-Fried and other senior executives in a Chapter 11 filing, where he said that FTX held just $659,000 worth of crypto and was audited by an accounting firm with an office in the metaverse.
A team of lawyers are now working to track down FTX's assets to start repaying the firm's creditors. Ray said Tuesday that the company would reorganize or sell FTX's assets around the world and had already received interest from potential buyers.