FTX’s new bankruptcy boss slams ‘complete failure of corporate controls’
The new chief of collapsed crypto exchange FTX has slammed a “complete failure of corporate controls” and “absence of trustworthy financial information” at the firm, in court filings published today.
John Ray III, who oversaw the winding up of fraudulent energy firm Enron in the early 2000s, was parachuted in to take over from ousted founder Sam Bankman-Fried to oversee the winding up of the firm, after it collapsed amid a liquidity crisis last week.
“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,” he said.
“From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.”
FTX is facing an $8bn hole in its finances after using customer funds to fuel bets at its sister trading firm Alameda Research. Bankman-Fried and some of the firm’s remaining employees have been scrambling to raise emergency cash to pay back out-of-pocket customers.
Ray has form in helping the customers of collapsed firms recoup some of their losses, having recently worked on failed mortgage lender Residential Capital, in which he helped recover $1.8bn for creditors by suing mortgage originators.
As chief of Enron during its years-long bankruptcy, Ray struck settlements with lenders accused of helping it deceive investors, including a $1.66bn settlement with Citigroup in 2008.