New FTX exec calls mess at firm ‘unprecedented’
Man who oversaw Enron after its implosion slams collapsed crypto exchange
NEW YORK — The man who had to clean up the mess at Enron after the energy company’s implosion in 2001 says the situation at FTX is even worse, describing what he calls a “complete failure” of corporate control.
The filing by John Ray, the new CEO of the collapsed cryptocurrency firm, lays out a damning description of its operations under founder Sam Bankman-Fried, from a lack of security controls to business funds being used to buy employees homes and luxuries, and that the real estate was recorded in the names of these employees.
“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. “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.”
Ray was appointed CEO on Nov. 11, after the company was near collapse and its previous management sought legal counsel on what to do next. Bankman-Fried was persuaded to give up control of the company by his lawyers as well as his father, Joseph Bankman, a professor at Stanford Law School, according to Thursday’s filing.
Since his resignation, Bankman-Fried has sought out news outlets for interviews and has been active on Twitter trying to explain himself and the firm’s failure.
In an interview with the online news outlet Vox, Bankman-Fried admitted that his previous calls for regulation of cryptocurrencies were mostly for public relations.
“Regulators, they make everything worse,” Bankman-Fried said, using an expletive for emphasis.
In a terse statement, Ray said that Bankman-Fried’s statements have been “erratic and misleading” and “Bankman-Fried is not employed by the Debtors and does not speak for them.”
Ray noted that many of the companies in the FTX Group, particularly those in Antigua and the Bahamas, didn’t have appropriate corporate governance and many had never held a board meeting.
So far, debtors have found and secured “only a fraction” of the group’s digital assets that they hope to recover, with about $740 million of cryptocurrency secured in new cold wallets, which is a way of holding cryptocurrency tokens offline, said Ray.
The embattled cryptocurrency exchange, short billions of dollars, sought bankruptcy protection after the exchange experienced the crypto equivalent of a bank run.
In its bankruptcy filing, FTX listed more than 130 affiliated companies around the globe. The company valued its assets between $10 billion to $50 billion, with a similar estimate for its liabilities.
The collapse has jeopardized the savings of hundreds of thousands of customers who deposited their crypto holdings on the FTX platform. FTX had a wide reach across cryptocurrency companies, and its collapse has sent shock waves through the industry.