December 4, 2022

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New FTX boss condemns Bankman-Fried for 'complete failure of company controls'

New FTX boss condemns Bankman-Fried for ‘complete failure of company controls’

The new CEO of collapsing cryptocurrency exchange FTX on Thursday issued a scathing rebuke to his predecessor, Sam Bankman-Fred, accusing the former boss of allowing a “fiasco 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 resigned. The attorney — who previously oversaw the $23 billion bankruptcy of energy company Enron — is now tasked with investigating the rapid and spectacular collapse of FTX.

“Never in my professional life have I seen such a complete failure of corporate controls and such complete absence of trustworthy financial information as here,” Ray said in the filing With the US Bankruptcy Court for the District of Delaware. “From the compromised integrity of systems and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, inexperienced and vulnerable individuals, this situation is unprecedented.”

INSIDE THE BREAKDOWN OF THE CRYPTO EXCHANGE FTX: EVERYTHING YOU NEED TO KNOW

Sam Bankman-Fried, Founder and CEO of FTX Cryptocurrency Derivatives Exchange, speaks during the Institute of International Finance’s annual membership meeting in Washington, D.C., on October 13, 2022. (Ting Xin/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 trading subsidiary, Alamedia Research. He wrote that the companies were “unaudited and productive while debtors [FTX] It was under the control of Mr. Bankman Fred.”

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Ray said in the filing that a “significant portion” of assets held by FTX may be “lost or stolen.”

The newly appointed CEO also noted that many companies in the FTX group did not have proper corporate governance, and did not hold board meetings. Further, he suggested that employees use company funds to pay for homes and other items.

Who is responsible for the collapse of FTX CRYPTO?

“In the Bahamas, I am aware that funds from FTX Group subsidiaries were used to purchase homes 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 properties in the personal names of such employees and advisors are registered in Bahamas records.”

FTX, once the third largest exchange in the world with a value of nearly $32 billion, sent shock waves through the crypto world on Friday when it announced that it was filing for bankruptcy, along with Alameda Research and other subsidiaries. Days ago, industry rival Binance backed out of a deal to buy its troubled rival after taking a look at the books and learning that FTX “mishandled customer funds.”

Bankman-Fried, the company’s founder and CEO, announced his resignation when bankruptcy papers were filed in Delaware on Friday.

FTX

FTX was once the third largest stock exchange in the world with a valuation close to $32 billion. (OLIVIER DOULIERY/AFP via Getty Images/Getty Images)

Both the company and Bankman-Fried are under investigation in the United States and other countries for possible securities violations amid allegations that FTX used $10 billion in client funds to support Alameda Research, its trading subsidiary.

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The flash crash, which threatened to upend futures markets, has been likened to the cryptocurrency industry’s “Lehman Brothers” moment — a reference to the collapse of the global financial services firm in 2008 that helped spark the global financial meltdown.

It has raised major concerns about an industry that has remained largely unregulated.

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The panels are in each of the files Senate and House It plans to hold FTX crash hearings next month. The House and Senate Financial Services Committees are planning hearings in December that will examine the sudden demise of FTX under the leadership of Bankman-Fried, a massive Democratic donor.