Axios Pro: Fintech Deals

November 17, 2022

Axios Pro Exclusive Content

Good morning, readers.

Situational awareness: Binance US is reportedly interested in launching a bid for Voyager, the bankrupt lender left in the lurch after FTX's bankruptcy.

1 big thing: Not knowing FTX's assets from its elbow

Illustration of a pitchfork spearing a digital coin with pieces falling away

Illustration: Sarah Grillo/Axios

"Never in my career have I seen such a complete failure of corporate controls," John Ray III, the new FTX CEO and chief restructuring officer, wrote in a Thursday bankruptcy filing.

Why it matters: That career spans 40 years, including his work with Enron. Ray's remarks highlight the complex task ahead of figuring out where all of FTX's leftover assets are actually housed, Lucinda reports.

Details: According to Ray, FTX failed to maintain an accurate list of bank accounts and account signatories. It has also failed to keep "appropriate books and records" of its digital assets.

  • "I do not have confidence in it, and the information therein may not be correct as of the date stated," Ray wrote several times about FTX's various financial statements.
  • Notably, Alameda Research made three loans to FTX executives: a $1 billion loan to former FTX CEO Sam Bankman-Fried, a $543 million loan to co-founder Nishad Singh, and a $55 million loan to FTX Digital Markets Co-CEO Ryan Salame.

Of note: The filing also points to unacceptable management practices in the SBF-era, including using software to conceal the misuse of customer funds, and the secret exemption of Alameda — FTX's sister company — from parts of FTX.com’s auto-liquidation protocol.

Bottom line: Ray is trying to distance FTX now from Bankman-Fried and that tumultuous era when its bookkeeping was shoddy and corporate controls were absent.

  • "Finally, and critically, the Debtors have made clear to employees and the public that Mr. Bankman-Fried is not employed by the Debtors and does not speak for them."

Meanwhile: Our Axios colleagues Kate Marino and Brady Dale point to a few other notable (in their words, "scary") items in the filing:

  • There was no accounting department.
  • There was no HR department.
  • SBF preferred to communicate through applications that auto-deleted, urging employees to do the same.
  • There was no appropriate disbursement process; payment requests were approved via emoji(!) over chat.

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