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Sam Bankman-Fried (SBF) has dismissed FTX sister company Alameda Research as being "unauditable" (which isn't even a word).
The crypto villain, who is now under house arrest whilst facing criminal charges, made the comments according to FTX's first interim report under new management.
Published on Sunday, the 45-page report details FTX's dismally poor account keeping and weak cyber security defences.
According to the report, Alameda Research had access to billions of dollars in customers funds stored on FTX. Alameda “often had difficulty understanding what its positions were, let alone hedging or accounting for them,” the reports states.
Read more: FTX's SBF Bribed Chinese Officials With $40M, Gets Charged
SBF described Alameda in internal communications as “hilariously beyond any threshold of any auditor being able to even get partially through an audit,” according to the report.
Revelations of Alameda's uncomfortably close relationship with FTX were the trigger to the exchange's collapse.
“Alameda is unauditable," he reportedly said. "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.”
Elsewhere in the report, it was revealed that most major decision making was controlled by SBF and top executives CTO Gary Wang and engineering director Nishad Singh, who both pleaded guilty to charges.
“If Nishad [Singh] got hit by a bus, the whole company would be done. Same issue with Gary [Wang],” the report stated.
FTX also had “no dedicated personnel” in cybersecurity as Singh and Wang oversaw security issues.
Read more: FTX Adds Half a Billion Dollars to Creditor Asset Pool
John Ray III, who took over from SBF as CEO of FTX after its collapse, said in a statement accompanying today’s report, “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.”
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