The new CEO of doomed crypto exchange FTX on Thursday issued a scathing rebuke of his predecessor, Sam Bankman-Fried, accusing the former boss of allowing “a complete failure of corporate controls.” John Ray III was named CEO of FTX last week, shortly before the company filed for Chapter 11 bankruptcy and Bankman-Fried stepped down. The lawyer – who previously oversaw the $23 billion bankruptcy of energy company Enron – is now tasked with investigating FTX’s rapid and stunning decline. “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of reliable financial information as occurred here,” Ray said in a filing in U.S. Bankruptcy Court for the District of Delaware. “From the compromised integrity of systems and flawed regulatory oversight overseas, to the concentration of control in the hands of a very small group of inexperienced, unskilled and potentially compromised individuals, this situation is unprecedented.” INSIDE THE FTX CRYPTO EXCHANGE CRASH: EVERYTHING YOU NEED TO KNOW Sam Bankman-Fried, founder and CEO of FTX Cryptocurrency Derivatives Exchange, speaks during the annual meeting of members of the Institute of International Finance in Washington, DC on October 13, 2022. (Ting Shen/Bloomberg via Getty Images / Getty Images ) In the filing, Ray said he had “no confidence” in the accuracy of the balance sheets of FTX and its affiliated trading firm, Alamedia Research. The companies, he wrote, were “uncontrolled and derivative while the Debtors [FTX] controlled by Mr. Bankman-Fried.’ A “significant portion” of the assets held by FTX may be “missing or stolen,” Ray said in the filing. The newly appointed executive also noted that many of the FTX Group companies did not have proper corporate governance, nor did they hold board meetings. In addition, he suggested that workers use company funds to pay for houses and other items. WHO IS REALLY TO BLAME FOR THE FTX CRYPTO CRASH? “In the Bahamas, I understand that FTX Group’s corporate funds were used to purchase residences and other personal items for employees and consultants. I understand that there does not appear to be documentation of some of these transactions as loans, and that some real property was recorded in personal name of these officers and advisers in the Bahamian records,” he said. FTX, once the world’s third-largest exchange with a valuation close to $32 billion, shocked the crypto world on Friday when it announced it was filing for bankruptcy, along with Alameda Research and other related companies. A few days earlier, industry rival Binance backed out of a deal to buy its troubled rival after taking a look at the books and learning that FTX had “cleaned client funds.” Bankman-Fried, the company’s founder and CEO, announced his resignation when bankruptcy papers were filed in Delaware on Friday. FTX was once the third largest exchange in the world with a valuation close to $32 billion. (OLIVIER DOULIERY/AFP via Getty Images/Getty Images) Both the firm and Bankman-Fried are under investigation in the US and other countries for possible securities violations amid allegations that FTX used $10 billion in client funds to prop up Alameda Research, its affiliated trading firm. The sudden crash, which threatened to upend futures markets, has been likened to the crypto industry’s ‘Lehman Brothers’ moment – a reference to the 2008 collapse of the global financial services firm that helped trigger the global financial meltdown. It has raised major concerns for an industry that has remained largely unregulated. GET THE FOX BUSINESS ON THE GO BY CLICKING HERE Panels on both Senate and Parliament plan to hold FTX collapse hearings next month. The House Financial Services and Senate Banking committees are planning hearings in December to examine the sudden collapse of FTX under the leadership of Bankman-Fried, a Democratic mega-donor.
