FTX collapse story, failures in corporate governance

FTX collapse story, failures in corporate governance

SINGAPORE: The consensus view was that everything was fine with the FTX exchange, with former CEO Sam Bankman-Fried a star of the corporate world until the moment that FTX started collapsing.

It was a chain of events that culminated on November 11 when FTX began to file for bankruptcy proceedings in the United States. FTX's 50 biggest creditors owe nearly US $3.1 billion S $4.28 billion. Never in my career has anyone seen such a complete failure of corporate controls and a lack of trustworthy financial information as occurred in the firm's bankruptcy, said John Ray, new FTX CEO who was hired to oversee the firm's bankruptcy after Mr Bankman-Fried's resignation.

This situation is unprecedented, from compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals. Supervisors using emojis to approve payments, executive decisions on messaging apps set to auto-delete after a short time, and company funds were used to buy homes in the Bahamas for employees and advisers, are some of the issues that have emerged since the firm collapsed.

In January FTX was valued at $32 billion and backed by prominent investors like Singapore's state investment firm Temasek, venture capital firm Sequoia Capital and the world's largest asset manager BlackRock.

The US $275 million investment was written down by Temasek, which conducted extensive due diligence on FTX over the eight months, including reviewing FTX's audited financial statement that showed it to be profitable. State holding firm said it looked at regulatory risks, particularly in compliance and cybersecurity, and interviewed people familiar with FTX, including employees, industry participants and other investors.

It is apparent from this investment that perhaps our belief in the actions, judgment and leadership of Sam Bankman-Fried, formed from our interactions with him and the views expressed in our discussions with others, would appear to have been misplaced, said Temasek.

After FTX filed for bankruptcy, Sequoia wrote down its US $214 million investment and told investors it had been misled by FTX and would improve its due diligence processes, according to the Wall Street Journal.