FTX’s new CEO outlines fund abuses, untrustworthy records

NASSAU: The executive hired to steer FTX Group through bankruptcy offered his first findings of improper fund transfers and poor accounting at the collapsed crypto exchange on Thursday, describing it as a “complete failure” of controls.

John Ray, who was named FTX’s chief executive after the company filed for bankruptcy on November 11, said in a court filing that the lapses in oversight, security and corporate governance he identified were greater than in any other process he has managed in his 40 years as a bankruptcy specialist, including at Enron.

“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 said in the filing, with the District of Delaware bankruptcy court.

FTX collapsed after its founder Sam Bankman-Fried used $10 billion in client funds to prop up his hedge fund Alameda Research, which had suffered losses when its bets on crypto ventures soured, Reuters has previously reported. That left FTX with insufficient funds to cover withdrawals when a plunge in the value of one of its currencies, FTT, triggered a bank run.

While Ray’s filing does not provide a full account of FTX’s demise, it details lapses that contributed to the downfall.

An Alameda entity had lent $2.3 billion to an FTX entity, while Bankman-Fried and FTX co-founders and top executives Nishad Singh and Ryan Salame had collectively borrowed $1.6 billion from Alameda, according to the filing. More such “related party” transactions are listed in the filing, though details are not offered.

Bankman-Fried, Singh and Salame did not respond to requests for comment on Thursday.

FTX funds were also used to buy homes and other personal items for employees and advisors, Ray wrote. Some of this money transfers were not documented as company loans, while the homes were registered under the names of the employees, Ray added. Proper checks and balances were absent, according to the filing. Employees submitted payment requests through an on-line “chat” platform and supervisors approved them with personalized emojis, the filing states.

FTX had 1 million users in the United States and many more across the world, according to the filing. It’s unclear how many will be able to recover their funds through the bankruptcy.