Sam Bankman-Fried’s Written Testimony Notes Dec 12, 2022, is part of
This is part 4 of 11.
Feature Image: HackerNoon’s Midjourney AI, prompt “historical accounting quirks”
What went wrong
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Alameda Research became insolvent when the economic environment changed (see here)
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Failures of FTX’s internal controls
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FTX’s Dashboard:
- FTX’s dashboard for user positions did not display Alameda’s full position size on the platform, because of a historical accounting quirk. I now believe that Alameda’s position was over twice as large as what was displayed. My periodic assessments of the riskiness of our positions were often based on the dashboard’s numbers.
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Financials:
- FTX had annual audited GAAP financial statements, which to my knowledge were generally correct
- However, those were merely for FTX’s corporate financial state, not an audit of customer risk.
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Risk management:
- While FTX International had a team dedicated to financials, and to many other areas of the business, it did not have a team dedicated to risk management, or to user position monitoring
- I, as CEO, did not put adequate effort into monitoring risk on FTX
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