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10th April 2023 - FTX.

tl;dr

The fraudulent fiasco at FTX was even worse than it appeared.


Market Snap








Market Wrap

An orderly unwinding of the leveraged children’ shorts removes the risk of a short squeeze higher for now.


Curious Cryptos’ Commentary – Sam Bankman-Fried

The CEO, and founder, of FTX and Alameda Research is going to jail, and will never be allowed out.


The new management of FTX, following the implosion last year, released a 45-page report which is damning in its entirety.


Bankman-Fried is quoted in some internal communications prior to the collapse of FTX:


“… (Alameda) is hilariously beyond any threshold of any auditor being able to even get partially through an audit.”


“Alameda is unauditable. I don’t mean this in the sense of ‘a major accounting firm will have reservations about auditing it’; I mean this in the sense of ‘we are only able to ballpark what its balances are, let alone something like a comprehensive transaction history.’ We sometimes find $50m of assets lying around that we lost track of; such is life.”


“Such is life”? People’s livelihoods and savings were at stake.


IT security and management of private keys was virtually non-existent. The report claims that the keys for $100mm of Ethereum assets were stored on a company server with no encryption – 24 words in plain text.


Other private keys were stored in such a way that numerous employees had access to them, which might explain the millions of assets that disappeared once the troubles at FTX became known. Whoever nicked those cryptos will forever be looking over their shoulder.


John J. Ray III, CEO and Chief Restructuring Office, is not impressed:


"We are releasing the first report in the spirit of transparency that we promised since the beginning of the Chapter 11 process. In this report, we provide details on our findings that FTX Group failed to implement appropriate controls in areas that were critical for safeguarding cash and crypto assets. FTX Group was tightly controlled by a small group of individuals who falsely claimed to manage FTX Group responsibly, but in fact showed little interest in instituting oversight or implementing an appropriate control framework. We are continuing our efforts to review the events that factored into the fall of FTX and to identify and recover as much value as possible for creditors."

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