‘Just gone crazy’: FTX’s lavish spending highlights lack of oversight

When cryptocurrency exchange FTX moved its headquarters from Hong Kong to the Bahamas last year, employees discovered that Amazon wasn’t delivering to the island. They quickly found an alternative by privately contracting with an air carrier to fly their orders from their Miami depot.

FTX’s airmail program, described in interviews with former employees, shows the lavish perks Sam Bankman-Fried’s cryptocurrency exchange gave its employees before it filed for bankruptcy this month.

The free-spending is at odds with the public image portrayed by the once-billionaire Bankman-Fried, known in the crypto industry simply as “SBF”. Bankman-Fried said his goal in turning FTX into $32 billion in digital assets is to maximize the amount he can give to charity during his lifetime.

Yet behind the big promises was an environment where workers’ every need was catered for and senior executives in their late twenties and early thirties splashed out millions of dollars on everything from travel to sports sponsorship deals and luxury homes.

The lack of internal controls typical of large financial firms means FTX’s spending has gone largely unchecked, according to former employees and filings in the group’s Delaware bankruptcy filing.

“[It was] kids leading kids,” said one former employee. “The whole operation was stupidly inefficient, but fascinating all the same.”

A $135 million deal to secure the naming rights to Miami’s national basketball stadium highlighted the group’s culture of extravagance.

Some employees questioned the Miami deal in company Slack messages, asking if it would actually bring in new customers and provide value for money. “They were never in control. . . how much revenue we were actually making. “Once we got the deal, nobody was really concerned with ‘what’s next,'” said one former marketing employee, referring to senior management.

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

“It’s just been crazy,” the employee said. “If Sam said okay, it would be good to go. Regardless of the amount.”

FTX’s new CEO, John Ray, said he had never seen “such a complete failure of corporate control” as he led the exchange through bankruptcy.

“The [company] didn’t have the kind of payment controls that I believe are appropriate for a business enterprise,” he said, adding that company money was spent on housing and personal items for FTX employees and consultants.

“It seems that these operations do not have certain documents. . . and certain real estate was registered in the personal name of these employees and consultants,” Ray added.

FTX has spent at least $300 million on real estate in the Bahamas, the company’s lawyers told a US bankruptcy court last week. “Most of these purchases are related to homes and vacation properties used by senior executives,” they said.

According to records seen by the Financial Times, the property portfolio includes at least six multimillion-dollar residences in the luxurious and exclusive Albany complex in the Bahamas, including the penthouse where Bankman-Fried lives with his entourage. Bankman-Fried declined to comment on the company’s costs.

Perks for employees at the now-defunct exchange include all-day dining at the Bahamas office “in addition to free groceries, barbers and two-week massages,” according to one employee.

FTX also provided Bahamian workers with “cars and gas for all workers [and] Unlimited, fully-expense-covered visits to any office globally,” the employee added. Employees of FTX US, a 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, owes $55,319 to Margaritaville Beach Resort in Nassau, founded by US musician Jimmy Buffett, according to bankruptcy filings this week. At one of the resort’s bars, a “Who’s to Blame” margarita costs $13.

Bankruptcy filings describe a system of incidental expenses. “FTX Group employees submitted payment requests through an online ‘chat’ platform, where a separate panel of supervisors approved payments by responding with personalized emojis,” said Ray.

Bankman-Fried’s companies also made loans to executives, bankruptcy filings show. His trading firm, Alameda Research, loaned $1 billion to Bankman-Fried itself, $543 million to its head of engineering, Nishad Singh, and $55 million to Ryan Salame, CEO of FTX Digital Markets, an entity in the Bahamas.

In addition to his role at FTX, Salame has purchased four local restaurants, including Olde Heritage Tavern and Sweet Dreams Bakery in Lenox, Massachusetts, near where he grew up.

Recent graduates of Bankman-Fried’s cryptocurrency shops also talked about big purchases before the group’s bankruptcy. Sam Trabucco, former CEO of Alameda, bought a boat shortly before he stepped down in August, just months before the trading firm collapsed. He named the boat “Wet My Decks”.

Inside FTX: inner circle

Sam Bankman-Fried

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

Former employees describe “SBF” as an object of cult-like loyalty within the company: “Everyone who worked at FTX was obsessed, and I thought it made sense. The kid was young, the principles were revolutionary, the ideas were golden. He was 29-30 old man was the richest man in the world. Who was I to object to that?”

Gary Wang

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

A former employee said they “have their own language”. Wang was an isolated figure, but a prolific coder. “Gary definitely had deep access to everything,” said one former employee, adding, “Gary started most of the new projects himself. . . . He didn’t manage anything.”

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 oversaw much of the company’s code. In a blog post, Bankman-Fried said she met Singh because the young coder was a high school friend of her brother. He was “super productive and coded all the time. Very sociable and friendly, everyone loved him,” said a former employee.

Caroline Ellison

Ellison, a Stanford graduate, met Bankman-Fried on Jane Street before joining Alameda. In April, its chief executive Sam Trabucco said Ellison was responsible for managing the trading firm’s systems while leading its trading strategy. Former employees said Ellison and Bankman-Fried had been romantically involved for the past eight months.

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