‘It just kinda went crazy’: FTX’s lavish spending highlights lack of controls

‘It just kinda went crazy’: FTX’s lavish spending highlights lack of controls

When crypto exchange FTX moved its headquarters to the Bahamas from Hong Kong last year, employees discovered that Amazon did not deliver to the island. They quickly found an alternative, striking a private deal with an air carrier to fly their orders from a Miami depot.

FTX’s airmail programme, which was described in interviews with former employees, illustrates the lavish perks Sam Bankman-Fried’s crypto exchange bestowed on its staff before it collapsed into bankruptcy this month.

The freewheeling spending clashes with the public image portrayed by Bankman-Fried, the one-time billionaire who is known across the crypto industry as just “SBF”. Bankman-Fried said his motive in building FTX into a $32bn digital assets behemoth was to maximise the amount he could donate to charity over his lifetime.

Yet behind the grand promises was an environment where employees’ every need was catered for, and where a circle of senior executives in their late twenties and early thirties splashed millions of dollars on everything from travel to sport sponsorship deals and luxury homes.

A lack of internal controls that are typical of large financial companies meant FTX’s spending went largely unchecked, according to former employees and filings in the group’s Delaware bankruptcy case.

“[It was] kids leading kids,” said one former employee. “The entire operation was idiotically inefficient, but equally mesmerising,” they added. “I had never witnessed so much money in my life. I don’t think anybody had, including SBF.”

A $135mn deal to secure the naming rights to Miami’s national basketball stadium underscored the group’s spendthrift culture.

Some staff questioned the Miami deal in company Slack messages, asking whether it would really bring in new clients and deliver value for money. “They were never overseeing . . . how much return we were actually getting. No one was really following up with ‘what next’ after you got the deal,” said one former employee involved in marketing, referring to senior management.

Concerns about value for money from employees with marketing experience were brushed off by Bankman-Fried and the company’s top executives, this person said. Bankman-Fried or one of two other executives signed off hundreds of millions in spending on sponsorship deals.

“It just kinda went crazy,” the employee said. “If Sam said OK, it was good to go. Regardless of the amount.”

John Ray, the new FTX chief executive leading the exchange through the bankruptcy, said he had never seen “such a complete failure of corporate controls”.

“The [company] did not have the type of disbursement controls that I believe are appropriate for a business enterprise,” he said in filings, adding that company money was spent on buying homes and personal items for FTX employees and advisers.

“There does not appear to be documentation for certain of these transactions . . . and certain real estate was recorded in the personal name of these employees and advisers,” Ray added.

FTX spent at least $300mn on real estate in the Bahamas, lawyers for the company told the US bankruptcy court last week. “Most of those purchases related to homes and vacation properties used by senior executives,” they said.

The property portfolio included at least six multimillion-dollar residences at the Bahamas’ luxury and exclusive Albany complex, including the penthouse where Bankman-Fried lived with his inner circle of executives, according to records seen by the Financial Times. Bankman-Fried declined to comment on the company’s spending.

The perks enjoyed by employees of the now-collapsed exchange included round-the-clock catering in the Bahamas office, “in addition to the free groceries, barbershop pop-up, and bi-weekly massages”, according to one employee.

FTX also provided Bahamas staff with a “full suite of cars and gas covered for all employees [and] unlimited, full expense covered trips to any office globally”, the employee added. Staff at FTX US, its separate arm for the American market, were allowed $200 a day in DoorDash food delivery credits.

Alameda Research, a crypto hedge fund founded by Bankman-Fried, also owes $55,319 to the Margaritaville Beach Resort in Nassau, which was founded by US musician Jimmy Buffett, according to bankruptcy filings this week. A “Who’s To Blame” margarita at one of the resort’s bars costs $13.

Bankruptcy filings describe a haphazard expenses system. “Employees of the FTX Group submitted payment requests through an online ‘chat’ platform where a disparate group of supervisors approved disbursements by responding with personalised emojis,” Ray said.

Bankman-Fried’s companies also extended loans to executives, bankruptcy filings show. His trading firm Alameda Research loaned $1bn to Bankman-Fried himself, $543mn to head of engineering Nishad Singh and $55mn to Ryan Salame, co-chief executive of FTX Digital Markets, its entity in the Bahamas.

Salame, in addition to his role at FTX, bought four local restaurants in the western Massachusetts town of Lenox, near where he grew up, including the Olde Heritage Tavern and Sweet Dreams bakery.

Recent alumni of Bankman-Fried’s crypto shops also splashed out on big purchases prior to the group’s bankruptcy. Sam Trabucco, former co-chief executive of Alameda, bought a boat shortly before stepping down from his post in August, only months before the trading firm collapsed. He named the boat “Soak my Decks”.

Inside FTX: the inner circle

Sam Bankman-Fried

The son of two Stanford law professors, Bankman-Fried took a job as a Jane Street trader after graduating in physics from MIT. He left Wall Street to work briefly at the Centre for Effective Altruism, a philanthropic initiative. But Bankman-Fried quickly became fascinated by the price gaps on different crypto exchanges in Asia. He made his first millions taking advantage of these inefficiencies through the trading firm he founded, Alameda Research. He later founded FTX.

Former employees describe “SBF” as an object of cult-like loyalty within the company: “Everyone employed at FTX was obsessed, and I supposed it made sense. The kid was young, the principles were revolutionary, the ideas were golden. He was the richest 29-30-year-old on Earth. Who was I to challenge that?”

Gary Wang

FTX’s chief technology officer and second-largest shareholder, Wang and Bankman-Fried first met at maths camp in high school and continued their friendship as roommates at MIT.

A former employee said they “had their own language”. Wang was an isolated figure, but a prolific coder. “Gary definitely had root access to everything tech,” said a former employee, adding: “Gary would start most new projects by himself . . . He did no management.”

Nishad Singh and Caroline Ellison
Nishad Singh and Caroline Ellison © YouTube

Nishad Singh

Singh graduated from the University of California, Berkeley, and worked at Facebook before joining Alameda Research as director of engineering.

He became an important member of Bankman-Fried’s inner circle, with former employees saying he controlled much of the company’s code. In a blog post, Bankman-Fried said he met Singh because the young coder was a high-school friend of his brother. He was “super productive and coded all the time. Very sociable and friendly, everyone loved him,” said a former employee.

Caroline Ellison

A Stanford graduate, Ellison met Bankman-Fried at Jane Street before joining Alameda. Her co-chief executive Sam Trabucco in April said Ellison was in charge of running the trading firm’s systems, while he led trading strategy. Former employees said Ellison and Bankman-Fried had been romantically involved over the past eight months.

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