FTX stored private keys to its crypto wallets on AWS, highlighting the disorganized storage of billions of dollars worth of crypto assets.
Bankrupt crypto exchange FTX reportedly stored the private keys to its crypto wallets on Amazon Web Services (AWS), according to a court document published on April 9. The document is the first interim report of current CEO John J. Ray III, sent to the independent directors on control failures at the exchange.
Revelations From the Court Filings
The report offers a damning picture of the exchange, which went down spectacularly and sparked a wave of regulatory actions. The report describes the issues with the debtors as follows,
“…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.
One of the report’s most significant highlights is that FTX stored private keys to its crypto on AWS-leased servers. It calls out the “disorganized fashion” with which assets were stored and that the billions of dollars worth of crypto stored on AWS Secrets Manager were inadequately secure.
The report calls out FTX executives for lying about the security and storage of the assets.
It stated that,
“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.”
FTX Entities Used QuickBooks and Excel for Accounting
The report also states FTX used both QuickBooks and Microsoft Excel to manage the accounting, with multiple FTX entities using these tools. Both QuickBooks and Excel are popular for accounting purposes.
The filing reveals that as many as 35 FTX entities used QuickBooks for general ledgers, financial statements, and tax returns, among other processes. Excel and Google Drive were used for documents.
Transfers Approved via Emojis on Slack
The fact that transfers were approved with emojis on Slack is perhaps even more damning. The FTX Group submitted expenses and invoices on the Slack channel. The report describes the approval process as ephemeral and informal because they approved it with an emoji.
The report also highlights that the record-keeping was inadequate and lacked thoroughness. The exchange used both Signal and Telegram in communication channels, with disappearing messages enabled. These revelations will not aid Sam Bankman-Fried, who recently faced 12 new charges.
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