Former FTX US President Reportedly Quit After ‘Protracted Disagreement’ With Bankman-Fried – According to a recent report by FTX’s current leadership, Brett Harrison, the former President of FTX US, stepped down in September of last year due to a “protracted disagreement” with CEO Sam Bankman-Fried and members of his inner circle. FTX CEO John J. Ray III has submitted a comprehensive report to the U.S. bankruptcy court in Delaware, outlining the exchange’s management lapses since he assumed control following its dramatic collapse in November of last year.
This report, which was filed on Sunday, marks the first time that Ray has provided a detailed account of the exchange’s control failures. As per the report, Harrison had significant apprehensions regarding the management of FTX US, specifically citing issues such as the absence of appropriate delegation of authority, formal management structure, and crucial appointments.
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The report states that when Harrison raised these concerns with Bankman-Fried and Nishad Singh, former director of engineering, his bonus was significantly decreased, and he was advised by the company’s lawyers to apologize to Bankman-Fried. However, Harrison declined to comply with this instruction. The claims align with Harrison’s previous assertions on Twitter that he had been threatened after filing a written complaint in April 2022.
He alleged that he was warned of being fired and that his professional reputation would be ruined by Bankman-Fried unless he withdrew the complaint and offered an apology. As per the statement made on Sunday, Harrison acknowledged the report’s contents but chose not to provide any additional comments. According to the report, another employee in the exchange’s legal department was “summarily terminated after expressing concerns about Alameda’s lack of corporate controls, capable leadership and risk management.”
Ray’s report, spanning more than 45 pages, depicts FTX and its affiliated entities as a disorganized network of companies overseen by Bankman-Fried and his associates, who displayed scant regard for structure or internal regulations. Reconstructing FTX’s balance sheets has been “an ongoing, bottom-up exercise that continues to require significant effort by professionals,” partly because FTX’s leadership regularly lost track of accounts and didn’t bother to cash checks, which “collected like junk mail,” according to the report.
Alameda wasn’t even clear on what its own positions were, “let alone hedging or accounting for them,” the document reads. A June 2022 portfolio summary, which was supposed to show Alameda’s makeup of crypto positions, was reportedly fabricated after employees were allegedly instructed by an unnamed higher-up to “come up with some numbers?”
At one point, according to the report, Bankman-Fried told employees: “Alameda is unauditable. I don’t mean this in the sense of ‘a major accounting firm would 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.” Bankman-Fried’s private statements to his employees frequently clashed with his public remarks, which were either conveyed through Twitter or to the media.
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According to Ray’s report, FTX held the vast majority of its crypto assets in hot wallets at all times, despite Bankman-Fried’s public reassurances that the exchange used a “best practice hot wallet and cold wallet standard solution for the custody of virtual assets.” Ray stated that the absence of security measures allowed an unidentified hacker to seize control of cryptocurrency worth $432 million from different wallets controlled by FTX, on the night when the exchange filed for bankruptcy.