How the FTX Crypto Bankruptcy Was Born From a Complete Lack of Accounting Controls

FTX Group, also officially referred to as FTX Trading Ltd., is a cryptocurrency company that is currently in the process of bankruptcy proceedings. In addition to previously operating as a cryptocurrency exchange, it was also a crypto hedge fund.

It was originally founded in 2019 and hit its stride just a few years later in 2021. At one point, it had over a million users and was considered to be the third-largest exchange of its type in existence.

My, what a difference a few years can make.

Over the course of a relatively short period of time, FTX Group went from being worth an estimated $32 billion to filing for bankruptcy. The founder, Sam Bankman-Fried, became one of the wealthiest people on the planet by the age of 30 during this period. Having said that, things have gotten so bad that there has been a negative ripple effect across the entire crypto space.

Not only are more people than ever doubting the validity of crypto, but Congress and the Securities and Exchange Commission (SEC) are currently investigating exactly what happened.

Now, as new information is revealed on a regular basis, we’re getting a better picture of how everything reached this point – and the details certainly aren’t pretty.

FTX Group: The Story So Far

While this isn’t the only reason that FTX Group finds itself in its current position, a major contributing factor seems to be the fact that the organization didn’t have an in-house accounting department of any kind.

Not only is that bad in an over-arching sense, but it makes things particularly tricky once bankruptcy proceedings have begun. Presently, FTX Group is now struggling to obtain accurate financial statements to be used moving forward. Most of what they already have “cannot be trusted,” according to experts.

All of this makes it particularly more distressing that Sam Bankman-Fried and FTX Group misused customer funds. The fact that they lack trustworthy financial statements of any kind makes the mess difficult, if not impossible, to truly untangle.

One professional overseeing the bankruptcy proceedings is a man named John Ray III. He’s been an insolvency professional for decades and he actually oversaw the liquidation of Enron earlier in his career. In a filing with the court, he indicated that the current status of FTX Group is “the worst case of corporate failure” that he had seen in the more than four decades that he had been on the job.