- April 10, 2023
- Posted by: admin
- Category: BitCoin, Blockchain, Cryptocurrency, Investments
FTX, the bankrupt cryptocurrency exchange, allegedly stored the private keys to its cryptocurrency wallets on Amazon Web Services (AWS).
The information was revealed in the first interim report of the current CEO, John J. Ray III, detailing control failures at the exchange and sent to independent directors.
The recent revelations about FTX
The report paints a negative image of the exchange, which faced a significant downfall and led to several regulatory measures. It outlines the problems faced by the debtors in the following manner.
“The Debtors have had to overcome unusual obstacles due to the FTX Group’s lack of appropriate record keeping and controls in critical areas, including, among others, management and governance, finance and accounting, as well as digital asset management, information security and cybersecurity. Normally…a business that handles customer and investor funds, there are readily identifiable records, data sources, and processes that can be used to identify and safeguard assets of the estate. Not so with the FTX Group.”
John J. Ray III shed light on the exchange’s use of Amazon Web Services (AWS) to store private keys to its crypto wallets.
Per the revelation, the exchange’s assets were stored ” disorganizedly,” with billions of dollars worth of crypto being inadequately secured on AWS Secrets Manager.
The report further accuses FTX executives of lying about the security and storage of the exchange’s assets.
“The FTX Group undoubtedly recognized how a prudent crypto exchange should operate, because when asked by third parties to describe the extent to which it used cold storage, it lied” the report read.
Account management and use of QuickBooks
The report reveals that the exchange used QuickBooks and Microsoft Excel to manage accounting across multiple entities. While these tools are commonly used for accounting, the report suggests that FTX’s usage lacked organization and was prone to errors.
The report claims that as many as 35 FTX entities used QuickBooks for various financial processes such as general ledgers, financial statements, and tax returns. Additionally, Excel and Google Drive were employed for document management.
However, the report suggests that FTX’s usage of these tools was inadequate and contributed to the company’s disorganization.
Transfers approval through Emojis
Using emojis to approve transfers on the Slack channel is a particularly concerning revelation. The report explains that the FTX submitted expenses and invoices through the same channel. Yet, the executives relied solely on emojis to approve them, calling the approval process informal and brief.
In addition, the report notes that the exchange’s record-keeping system was inadequate and without proper oversight. Furthermore, the exchange used Signal and Telegram for communication, with disappeared messages mechanisms, further complicating the record-keeping process.
These findings could have profound implications for Sam Bankman-Fried, who recently faced 12 new charges related to his leadership of the crypto exchange.
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