FTX's first mid-year report is out! Reviewing the cause of FTX's demise, SBF reveals: Alameda's finances are in such disarray that they cannot be audited.

FTX's bankruptcy reorganization team released its first interim report on the 9th. The report reviewed the management failures of the FTX management team, including management, governance, finance, accounting, and digital asset management.

FTX founder SBF even confessed, "Alameda is in such chaos that it cannot be audited."

Footnote: The term "interim report" refers to a report required by bankruptcy law that the bankruptcy trustee must submit to explain the bankruptcy assets and actions taken.

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FTX First Interim Report: Team Failed to Take Management Responsibility

FTX First Interim Report is based on terabytes of electronic data and communications, a review of over a million documents, and interviews with 19 former FTX Group employees. The report was conducted by a team of experts in insolvency restructuring, legal, forensic accounting, cybersecurity, computer engineering, cryptography, blockchain, and other fields, commissioned by the debtor.

Current FTX CEO and Chief Restructuring Officer John J. Ray III stated, "This is the first report since the commencement of Chapter 11 bankruptcy proceedings. We found that FTX Group failed to exercise proper control over protecting cash and crypto assets. FTX Group was severely controlled by a small group of individuals who falsely claimed to be responsibly managing FTX Group. In reality, they did not establish a supervisory and control framework."

"We are working diligently to review the factors that led to the demise of FTX and to identify and recover more value for creditors," he added.

SBF Reveals: Alameda Too Chaotic for Audit

Chief Restructuring Officer John J. Ray III stated in the section on Alameda that Alameda is unclear about its positions, let alone hedging or accounting.

He mentioned that the financial records of most of Alameda's assets are very incomplete, making it difficult to understand the position status.

In the June 2022 Alameda investment portfolio summary, an attempt was made to simulate Alameda's potential crypto positions, but Alameda personnel stated, "Do you remember some numbers? I don't know."

In internal communications, FTX founder SBF described Alameda as a company so chaotic that it surpasses the capabilities of any auditor, to the extent that even partial audits are impossible.

SBF bluntly stated: Alameda is too chaotic for audit

SBF mentioned that it's not just a major accounting firm being cautious about audits. It is only possible to roughly estimate his balance, let alone comprehensive transaction records.

"Sometimes we find that $50 million in assets cannot be located, but that's life."

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