Sam Bankman-Fried, the controversial founder and former CEO of the collapsed crypto empire FTX, is once again the center of a new report made by the current leadership of the bankrupt firm, as it revealed the kingpin’s conflicting sides and his previous declaration that Alameda Research, the crypto hedge fund he founded, was “unauditable.”
Details about the accounting failure of once one of the most trusted brands in the cryptocurrency space, FTX, whose collapse triggered the shutdown of multiple crypto businesses, were included in a new 45-page report filed in a U.S. bankruptcy court in Delaware on Sunday.
While the new FTX CEO John Ray III shared details of the failures in control at the crypto exchange platform since he assumed his post in the later part of November last year following the exchange’s collapse, the report highlighted the conflicting sides of Bankman-Fried.
For instance, the crypto kingpin once talked about the importance of using two-factor authentication in one of his previous tweets and reminded everyone, “Daily reminder: use 2FA! 90% of crypto security is making sure you’ve done the basics.”
However, based on Ray’s new report, FTX does not use two-factor authentication, particularly in its crucial corporate services, including 1Password and Google Workspace.
The new FTX administration also disclosed that the former team took a lot of security risks, including storing private keys and seed phrases to multiple wallets, with hundreds of millions of dollars worth of crypto assets without encryption and in plain text on an FTX group server.
Bankman-Fried also assured the public in the past that FTX used a “best practice hot wallet and cold wallet standard solution for the custody of virtual assets,” when in reality, the exchange held the majority of its crypto assets in hot wallets at all times.
Daily reminder: use 2FA! 90% of crypto security is making sure you’ve done the basics.
Ideally you should:
a) use the 6-digit 2FA codes, NOT SMS
b) use withdrawal passwords or IP-whitelisting for withdrawals etc.
c) don’t re-use passwords from hacked accounts— SBF (@SBF_FTX) September 12, 2019
Aside from that, the report underlined Bankman-Fried’s previous statements to his employees, who, at the time, declared that Alameda Research is “unauditable.”
“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 was quoted as saying.
Furthermore, the report revealed that checks at FTX were “collected like junk mail” and reconstructing the company’s balance sheet has been an “ongoing, bottom-up exercise that continues to require significant effort by professionals” due to the inability of the previous leadership to regularly keep track of accounts.
Bankman-Fried, who was extradited from the Bahamas last year, is currently on house arrest at his parents’ home in Palo Alto and is waiting for his first criminal trial set for Oct. 2.
