John Ray, who replaced Sam Bankman-Fried as CEO of crypto platform FTX, said in a new court filing that in his decades of experience overseeing some of the biggest bankruptcies ever, he had never seen anything as bad as FTX, including a “complete failure of corporate controls.”
Ray, who once led the infamous energy firm Enron through its bankruptcy proceedings, said in a sworn declaration filed on Nov. 17 with the U.S. Bankruptcy Court for the District of Delaware and obtained by The Epoch Times that what he saw under the hood of FTX was “unprecedented.”
“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 wrote in the declaration, which was filed in support of petitions for FTX’s Chapter 11 bankruptcy.
Citing over 40 years of legal and restructuring experience, including some of the biggest corporate failures in history, Ray elaborated on just how badly he thinks FTX was mismanaged before its collapse.
“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,” he wrote.
Key Corporate Controls ‘Did Not Exist’
Ray, who was named CEO and chief restructuring officer for FTX, in his declaration painted a picture of a tangled web of companies that lacked basic mechanisms of oversight, including around handling of customers’ funds.In his role at the helm of FTX, Ray said one of his core aims is to implement controls and corporate standards including “accounting, audit, cash management, cybersecurity, human resources, risk management, data protection, and other systems that did not exist, or did not exist to an appropriate degree, prior to my appointment.”
Ray also wrote that there are “questions” about Bankman-Fried’s leadership that the Chapter 11 bankruptcy process would scrutinize.
Bankman-Fried, who earlier apologized for his role in the FTX collapse, did not immediately respond to a request for comment from The Epoch Times regarding Ray’s claims.
But in a series of posts on Twitter, Bankman-Fried said that his “one goal” at this stage “is to do right by customers.”
“I’m contributing what I can to doing so. I’m meeting in-person with regulators and working with the teams to do what we can for customers,” he wrote. “And after that, investors. But first, customers.”
‘More Effective Oversight of Cryptocurrency’
Not only has FTX’s collapse sent shockwaves through global crypto markets, it has also drawn the attention of Washington lawmakers.The implosion of FTX has prompted policymakers to put the crypto industry under a magnifying glass, with the potential for a regulatory crackdown.
‘When It Rains, It Pours’
The downfall of FTX started on Nov. 2 when CoinDesk published exclusive balance sheet details from Alameda Research, a trading firm established by Bankman-Fried. The report exposed that a substantial amount of Alameda’s assets were held in FTT, a native token belonging to FTX.“Because, of course, when it rains, it pours,” he said.
Bankman-Fried later scrambled to raise money, even approaching Binance for help.
After Bankman-Fried and Zhao initially announced a tentative deal that Binance would buy FTX’s businesses outside the United States and so toss FTX a lifeline, that later fell through.
Zhao reversed his offer to buy parts of FTX, citing reports of “mishandled customer funds and alleged U.S. agency investigations.”
