- FTX employees met the expenses through chat messages, its new CEO said.
- Random handlers would then endorse the official claims using custom emojis, John Ray added.
- In his damning report, Ray said FTX failed to keep communications, hiring and financial records.
Employees of cryptocurrency exchange FTX submitted expense reports via chat messages and random managers approved requests by responding with emojis, the company’s new CEO said in court.
New CEO John Ray said FTX employees filed payment claims with a “disparate group of supervisors,” who would approve expenses by “responding with custom emojis,” FTX’s bankruptcy filing shows on Thursday.
“Debtors didn’t have the kind of disbursement control that I think is appropriate for a commercial enterprise,” Ray said.
Ray, a lawyer who also oversaw the bankruptcy of energy giant Enron, has been brought in to lead the restructuring of FTX. The exchange filed for bankruptcy on November 11.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of reliable financial information as occurred here,” Ray said.
He blasted FTX executives and former CEO Sam Bankman-Fried, saying they too failed to keep track of their communications when making decisions, among a litany of other mismanagement allegations.
“One of the more pervasive failures of the FTX.com business in particular is the absence of lasting records of the decision making process,” Ray said, according to the filing. “Mr. Bankman-Fried frequently communicated using applications set to automatically delete after a short period of time.”
He added that Bankman-Fried would encourage employees to use the same chat software.
Ray said FTX “never held board meetings” and that the exchange used personal names of employees to buy real estate in the Bahamas with company funds.
It also said that FTX did not keep proper records of who it hired. “Repeated attempts to locate some alleged employees to confirm their status have been unsuccessful to date,” she said, implying that some of these workers may never have existed.
Ray criticized Bankman-Fried in particular, stating that the co-founder of the exchange “continues to make erratic and misleading public statements”. He highlighted a Vox report that Bankman-Fried sent a direct message to reporter Kelsey Piper saying “fucking regulators” and that they “make everything worse.”
Bankman-Fried resigned on Nov. 11, the same day FTX filed for bankruptcy. His trading company, Alameda Research, and about 130 affiliated companies have filed for bankruptcy proceedings.
Before the FTX explosion, rival cryptocurrency exchange Binance was set to acquire the company. But he backed down, citing findings during the due diligence process and concerns of the federal FTX investigation.
FTX and Bankman-Fried did not immediately respond to Insider requests for comment.