Emoji for expenses, penthouses and slipshod accounting: The most damning details from new FTX CEO’s report

Published

2 years ago

November 18, 2022

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Earlier Thursday, FTX CEO John Ray III filed a declaration with the United States Bankruptcy Court for Delaware, the latest in the implosion of one of the world’s largest cryptocurrency exchanges.

Ray, who helped shepherd Enron through its own bankruptcy, minced no words about the state of the company or the behavior of the former executive team, describing it as one of the worst examples of corporate controls he’d ever encountered. It was a damning remark from someone who has 40 years of legal and restructuring experience.

Here are some of the most significant revelations from Ray’s filing:

1. A total lack of financial and corporate controls

“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”

Ray opened his filing torching former management, including former CEO Sam Bankman-Fried, for the failure by leadership to catch and address a stunning, multibillion-dollar hole in the Alameda Research-FTX balance sheets. The losses for investors may reach as high as $8 billion. But with nonexistent or deficient accounting, auditing and disbursement systems, it will take Ray and his forensic investigators “some time” to uncover the truth.

2. Slipshod accounting will require forensic analysis.

“I do not believe it appropriate for stakeholders or the Court to rely on the audited financial statements as a reliable indication of the financial circumstances of these [companies].”

FTX’s new chief said he had “substantial” concerns about the financial positions he was presenting to the court. FTX’s implosion revealed a massive hole in the company balance sheets, but until blockchain analysis and forensic accounting are completed, Ray said it was not “appropriate for stakeholders or the Court to rely” on the numbers presented.

Accurate financials are a key metric for valuing and investing in a company. Venture capital firms poured billions into poster child Bankman-Fried and his companies, valuing them in the tens of billions of dollars.

A standard aspect of any venture capital investment is a due diligence period, where books are opened and audited financials are shown to prospective investors. Ray’s assertion that the financial statements for many of FTX’s subsidiaries are unreliable raises fresh questions about the diligence performed by some of the world’s biggest venture firms.

3. Penthouses, perks and personal items

“In the Bahamas, I understand that corporate funds of the FTX Group were used to purchase homes and other personal items for employees and advisors. I understand that there does not appear to be documentation for certain of these transactions as loans, and that certain real estate was recorded in the personal name of these employees and advisors on the records of the Bahamas.”

Other reports have detailed lavish perks allegedly given to FTX employees in the Bahamas. Ray’s filing indicated that corporate funds were used to purchase homes for employees and advisors, sometimes in their name. Loans were not recorded from FTX to those individuals — as is typical with similar arrangements at other companies. Instead, individuals were given the deeds to these properties, according to Ray, free and clear, in their own names.

Notably, Bankman-Fried’s $40 million penthouse briefly hit the market in the aftermath of the bankruptcy. It has since been removed from public listing.

4. Emoji for expenses

“The Debtors did not have the type of disbursement controls that I believe are appropriate for a business enterprise. For example, employees of the FTX Group submitted payment requests through an online ‘chat’ platform where a disparate group of supervisors approved disbursements by responding with personalized emojis.”

Despite an entire industry devoted to expense controls and reimbursements, Bankman-Fried’s team used internal messaging to release corporate funds into the hands of employees around the world. It isn’t immediately clear what platform FTX used, although the company is known to have used Slack for internal communications.

5. An advantage for Alameda

Unacceptable management practices included the use of an unsecured group email […] to access confidential private keys and critically sensitive data […] the absence of daily reconciliation of positions on the blockchain, the use of software to conceal the misuse of customer funds, the secret exemption of Alameda from certain aspects of FTX.com‘s auto-liquidation protocol, and the absence of independent governance […]”

Alameda Research, the secretive trading firm at the heart of Bankman-Fried’s empire, executed trades on FTX alongside other institutional and individual traders. The two firms were closer than publicly acknowledged, however, in light of Ray’s declaration that Alameda was secretly exempted from “certain aspects” of FTX’s auto-liquidation protocol.

It isn’t immediately clear what aspects Ray meant. In crypto trading, liquidation is most analogous to a margin call, where a levered position is closed out by an exchange due to a dramatic shift in an underlying asset’s price.

CNBC has made multiple requests for comment from Bankman-Fried.

Technology

Amazon’s ad business grew 19% in first quarter, topping estimates

Published

7 hours ago

May 2, 2025

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Amazon’s ad business grew 19% in first quarter, topping estimates

A woman cleans the store window of the Amazon house after activists sprayed paint on its logo during a protest on the opening day of the 55th annual meeting of the World Economic Forum in Davos, Switzerland, on Jan. 20, 2025.

Yves Herman | Reuters

Amazon reported a 19% increase in online ad revenue in the first quarter, beating analysts’ estimates.

Ad sales climbed to $13.92 billion, while analysts on average were expecting $13.74 billion, according to StreetAccount.

The numbers were contained in Amazon’s first-quarter earnings report. The company reported total first-quarter sales of $155.67 billion, compared to Wall Street projections of $155.04 billion.

Although Amazon’s online ad business represents a fraction of overall sales, it has emerged in recent years to become the third-biggest platform in the global digital advertising market, behind only Alphabet and Meta.

Online advertising is a particular area of focus for investors due to economic uncertainty and increasing tensions between the U.S. and China over trade. While President Donald Trump’s China tariffs will likely affect Amazon’s core retail business, the company’s online ad unit could also feel some pain.

So far, tech companies with online ad businesses have reported solid first-quarter earnings, but warned of potentially tougher times later in the year.

Meta reported stronger-than-expected first-quarter earnings this week, but said ad sales in the Asia-Pacific region came in at $8.22 billion for the quarter, trailing analysts’ estimates of $8.42 billion.

The company’s finance chief Susan Li said during an earnings call that “Asia-based e-commerce exporters” have slowed their online ad spending likely due to the de minimis trade loophole ending this Friday.

When Alphabet reported first-quarter earnings last Thursday, it revealed that ad sales grew 8.5% year over year to $66.89 billion and YouTube ad revenue increased 10% to $8.93 billion. But Alphabet executives told analysts that it expects headwinds to its Asia-Pacific-focused advertising business.

Snap on Tuesday said it had “experienced headwinds to start the current quarter,” which resulted in the company saying it would not provide guidance.

Last week, Microsoft reported its latest quarterly earnings and said search and news advertising sales, minus payments to its affiliates, grew 15% year over year to $449 million.

Reddit also reported first-quarter earnings on Thursday that beat on sales and guidance. The company’s first-quarter sales soared 61% year over year to $392 million.

Although Reddit’s second-quarter guidance topped analysts’ projections, CEO Steve Huffman said there is some economic shakiness.

“Ever-shifting macro environments like these create both challenges and opportunities,” Huffman wrote in a letter to shareholders. “We’ve grown through challenging times before — people need connection and information just as much in uncertain times.”

Pinterest reports earnings on May 8.

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Technology

Apple has managed tariffs so far, but Cook says it’s tough to predict beyond June

Published

7 hours ago

May 1, 2025

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Apple has managed tariffs so far, but Cook says it's tough to predict beyond June

Apple CEO Tim Cook, after nearly a month of anticipation from investors, on Thursday finally revealed how Apple was navigating the Trump administration’s tariffs.

The company only saw a “limited impact” on tariffs between January and the end of March, Cook told investors on an earnings call for the company’s second quarter results.

For the current quarter which ends in June, Apple is predicting about $900 million in additional costs for those tariffs — assuming nothing changes, Cook said. That surprised analysts who said on the call that they expected the costs to be higher.

The vast majority of Apple’s products are “currently not subject” to Trump’s reciprocal tariffs, Cook said. But beyond June, he didn’t say much.

“I don’t want to predict the future because I’m not sure what will happen with tariffs,” said Cook, adding that “it’s very difficult to predict beyond beyond June.”

Apple doesn’t usually give a lot of details or guidance beyond the current quarter, but investors didn’t like Thursday’s lack of clarity. Apple shares fell as much as 4% in extended trading on Thursday despite the company reporting results that beat Wall Street expectations for revenue and showed strong sales growth for iPads and Mac computers.

“As we look ahead, we remain confident,” Cook said.

Apple’s uncertainty highlights how even a company with a reputation for world-class operations can get whacked by the unpredictability of the Trump administration’s shifting tariff rates and dates.

Cook, who built his reputation in Silicon Valley as Apple’s operations guru, discussed how the company has dealt with the tariffs to minimize their impact so far on Thursday. He praised his old division on a call with analysts.

“‘l’ll just say that the operational team has done an incredible job around optimizing the the supply chain and the inventory,” he said.

Apple is currently sourcing American-bound products from India and Vietnam, Cook said. Those countries currently have 10% tariffs on them, and the company is sourcing Apple computers for rest of the world from China, which the Trump administration has hit with a 145% tariff rate.

Cook also said that Apple had built up inventory ahead of the tariffs, which would be reported as manufacturing purchase obligations in the company’s filings with the Securities and Exchange Commission. Cook said there was no “obvious evidence” that consumers were buying more Apple products ahead of tariffs.

“We do expect the majority of iPhones sold in the U.S. will have India as their country of origin,” Cook said. “Vietnam will be the country of origin for almost all iPad, Mac, Apple Watch and AirPods products sold in the U.S.”

Apple will still pay higher 145% tariffs on some Chinese imports for AppleCare, its extended warranty program, and accessories, Cook said.

One issue for forecasting tariffs going forward is that both Vietnam and India are in line to get hit with hefty tariffs on imported goods as soon as July.

Trump previously targeted both countries under his “reciprocal tariffs” on April 2, but a week later, he paused the tariffs for 90 days. Apple expanded its supply chain to those countries in recent years as a hedge for its business, but the Vietnam and India strategy won’t work if Trump’s tariffs ultimately take effect.

Cook also mentioned the possibility that technology products such as semiconductors might receive additional tariffs under a process called a Section 232 Investigation.

Apple is not the only big tech company to get rattled by the Trump administration’s tariffs.

Amazon finance chief Brian Olsavsky said Thursday that Amazon would offer a wider range of guidance because of tariff uncertainty, and he also alluded to the possibility of weakening consumer demand. Microsoft raised Xbox prices on Thursday, despite tariffs coming up just once on the company’s Wednesday earnings call.

Apple didn’t offer guidance for its profitable Services division on Thursday, but offered the same kind of top-line forecast that it has in previous quarters. Apple expects overall revenue to grow “low to mid-single digits” on an annual basis during the current quarter. Apple reported $85.78 billion in sales during the June quarter last year.

And at least during that quarter, Apple investors will know what to expect.

WATCH: Deepwater’s Gene Munster digs into Apple post-earnings

Technology

Nvidia CEO Jensen Huang gets first salary raise in a decade

Published

8 hours ago

May 1, 2025

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Nvidia CEO Jensen Huang gets first salary raise in a decade

Nvidia’s CEO Jensen Huang delivers his keystone speech ahead of Computex 2024 in Taipei on June 2, 2024.

Sam Yeh | AFP | Getty Images

Nvidia CEO Jensen Huang has made tens of billions of dollars in recent years from his stake in the chipmaker, but he’s getting his first salary increase in a decade.

Huang’s base salary rose to $1.5 million, a 49% increase from 2024, according to a proxy filing with the SEC on Thursday. His variable cash also went up by $1 million, or 50%, from the 2024 fiscal year. Stock awards grew to $38.8 million, bringing total pay to $49.9 million.

The compensation committee “believed this was appropriate in consideration of internal pay equity with the base salaries” of other top executives, the filing said, and “it represented Mr. Huang’s first base salary increase in 10 years.”

Nvidia is in the midst of a boom that’s turned it into one of the most valuable companies in the world, thanks to its graphics processing units (GPUs) that power the most powerful artificial intelligence models and workloads. Revenue in the 2025 fiscal year jumped 114% to $130.5 billion, the company reported in February.

The company’s stock price increased more than ninefold between the end of 2022 and the end of last year. Huang’s roughly 3.5% stake is currently worth about $94 billion.

Huang’s 2025 pay also included $3.5 million in residential security and consultation fees and driver services, the company said in the filing. In the previous year, residential security and consultation fees for Huang totaled $2.2 million.

Google in a recent filing said it paid $8.27 million for CEO Sundar Pichai’s personal security and travel, representing a 22% increase from the year prior.

WATCH: Nvidia-Anthropic feud