- A congressman likened collapsed exchange FTX's corporate governance to a college fraternity.
- Staff used messaging app Slack to file company expenses, according to FTX's new CEO.
FTX was once a $32 billion crypto empire, attracting top backers like Sequoia Capital and BlackRock. It was the third-largest cryptocurrency exchange, founded by Sam Bankman-Fried, the self-proclaimed effective altruist who said he was on a mission to lobby for better crypto regulation.
In reality, the company was more like a college fraternity, congressman Ritchie Torres says, with haphazard and reckless bookkeeping practices. FTX staff used messaging app Slack for filing employee expense reports.
"FTX had the corporate governance of a fraternity," Torres, a member of the House Financial Services Committee, told Coindesk TV on Wednesday. "It would be laughable were it not so serious."
The now-bankrupt exchange used QuickBooks, an accounting software generally used by smaller businesses, not multi-billion dollar companies. FTX insiders were reportedly using a secret group chat called "Wire Fraud" as well, according to the Financial Review. (Bankman-Fried tweeted that he is "quite sure it's just false" in response to the story's claims.)
FTX's new CEO John Ray, who oversaw Enron's restructuring process, echoed similar sentiments to Torres in his testimony to the House Financial Services Committee on Tuesday.
"[I've] never seen an utter lack of record keeping," Ray added. "Absolutely no internal controls whatsoever."
FTX filed for bankruptcy protection last month amid a severe liquidity crunch. Bankman-Fried was arrested in the Bahamas on Monday night on charges including conspiracy to commit money laundering, violating campaign finance laws, and wire fraud.
In written remarks ahead of the Tuesday committee, Ray blamed the company's downfall on Bankman-Fried and his inner circle, referring to them as "a very small group of grossly inexperienced and unsophisticated individuals."
Fraternity chapters, however, aren't managing billions of dollars or in the crosshairs of regulators. The US Securities and Exchange Commission is accusing Bankman-Fried of defrauding investors in a years-long scheme.
"We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto," SEC Chair Gary Gensler said in a statement on Tuesday.