Highlights of FTX’s new CEO congressional testimony

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existpre-published testimonyIn addition to the basic introduction of the current leadership team and the content of expressing determination to the supervisory level, Ray mainly detailedThe eight major mistakes of the former management of FTX, and introduced the five major goals and difficulties of the team todaysecondary title

eight mistakes

1. Flaws in system administration, where senior management had access to storage systems for customer assets, and there were no security mechanisms in place to prevent them from transferring those assets.

2. There are flaws in asset management, and the private keys that store hundreds of millions of dollars in encrypted assets have not been effectively controlled or encrypted.

3. Alameda may lend funds from FTX.com to trade without any effective restrictions.

4. Assets are confused.

5. Nearly 500 of FTX's investments lack complete transaction documents.

6. There are no audited and reliable financial statements.

7. The lack of dedicated financial and risk management staff is basically standard in any company close to FTX's size.

8. Subsidiaries under the entire FTX Group lack independent management.

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five goals

1. The first goal is to control the situation as soon as possible, which is already advancing in an orderly manner. The focus of this work includes setting up accounting, auditing, cash management, cybersecurity, human resources, risk management, and other systems that were imperfect or non-existent before I took office.

2. The second objective is asset protection and recovery, which is also a top priority. We are working around the clock to track and secure assets of all kinds, but a large proportion of them may have been lost, misappropriated, or difficult to trace due to lack of proper records, we are working with Nardello & Company, Chainalysis, BitGo, Alvarez & Marsal and the network Security companies collaborate on these recovery efforts. To date, we have secured over $1 billion in digital funds.

3. The third objective is transparency investigation. We are working with Sullivan & Cromwell's cybersecurity team on this process, and they are gathering evidence to help us understand what caused this crash.

4. The fourth objective is efficiency and coordination, which requires cooperation and coordination with insolvency proceedings of subsidiaries in other jurisdictions.

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five difficulties

1. FTX.com's client assets are commingled with those of the Alameda trading platform.

2. Alameda used customer funds to engage in leveraged transactions, resulting in huge losses to customer funds.

3. FTX had a spending spree from the end of 2021 to 2022, spending about $5 billion on acquisitions or investments during this period, and the value of many of these businesses and investments has plummeted.

4. Loans and other payments to insiders exceeded $1 billion.

5. Alameda’s business model as a market maker requires the deployment of funds to various third-party exchanges, which are inherently insecure and further exacerbated by the protections afforded by certain overseas jurisdictions.