SBF called Alameda “unauditable,” joked about losing track of $50 million
Enlarge / FTX Founder Sam Bankman-Fried arrives at US District Court on March 30, 2023, in New York City after being hit with a new criminal charge for allegedly authorizing a bribe of at least $40 million to one or more Chinese government officials. (credit: Getty Images | Michael Santiago )
Sam Bankman-Fried declared FTX affiliate Alameda Research to be "unauditable" and joked about sometimes losing track of $50 million worth of assets, according to a report issued by FTX's new CEO.
"In an internal communication, Bankman-Fried described Alameda as 'hilariously beyond any threshold of any auditor being able to even get partially through an audit,'" according to the report filed in US Bankruptcy Court in Delaware on Sunday. Bankman-Fried's internal message said:
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.
In a bit of an understatement, the report said that "Bankman-Fried's statements evidence the challenges a competent audit firm would have had to overcome to audit Alameda's business." The new filing is titled "First interim report of John J. Ray III to the independent directors on control failures at the FTX exchanges." It also details security failures such as using plain text to store private keys linked to over $100 million in assets and sloppy accounting practices like approving invoices in Slack with emoji.