New FTX boss slams Bankman-Fried for “total failure of corporate governance.”


The new CEO of collapsed cryptocurrency exchange FTX issued a scathing rebuke to his predecessor, Sam Bankman-Fried, on Thursday, accusing the former boss of allowing a “total failure of corporate governance.”

John Ray III was appointed CEO of FTX shortly before the company filed for Chapter 11 bankruptcy and Bankman-Fried resigned. The attorney who previously oversaw the $23 billion bankruptcy of energy firm Enron is now tasked with investigating FTX’s rapid and stunning collapse.

“Never in my career have I seen such a complete failure of corporate control and 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 broken systems integrity and flawed regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this is unprecedented.”

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Sam Bankman-Fried, founder and CEO of FTX Cryptocurrency Derivatives Exchange, speaks at the annual membership meeting of the Institute of International Finance on October 13, 2022 in Washington, DC. (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 “unverified and manufactured by debtors [FTX] was directed by Mr. Bankman-Fried.”

A “substantial 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 companies included in the FTX Group do not have appropriate corporate governance, and board meetings have not been held. In addition, he suggested that employees use corporate funds to pay for housing and other items.

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“In the Bahamas, I understand that FTX Group’s corporate funds have been used to purchase homes and other personal items for employees and consultants. I understand that some of these transactions lack loan documentation and that certain Real Estate Bahamas records do not include these employees. and registered in the personal name of the advisers,” he said.

FTX, once the world’s third-largest exchange with a valuation of nearly $32 billion, sent shockwaves through the crypto world on Friday when it announced it was filing for bankruptcy along with Alameda Research and other related companies. A few days ago, industry rival Binance pulled out of a deal to buy its troubled rival after looking at the books and learning that FTX had “mismanaged client funds.”

Bankman-Fried, the firm’s founder and CEO, announced his resignation after filing for bankruptcy in Delaware on Friday.

FTX

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

Both the company and Bankman-Fried are being investigated for possible securities violations in the United States and other countries amid allegations that FTX used $10 billion in client funds to prop up trading firm Alameda Research.

The sudden crash that threatened to lift futures markets has been likened to the cryptocurrency industry’s “Lehman Brothers” moment — citing the 2008 bankruptcy of the global financial services firm that helped fuel the global financial meltdown.

This has raised major concerns about a largely unregulated industry.

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Panels as well Senate and House they are planning to hold hearings on the bankruptcy of FTX next month. The House Financial Services and Senate Banking committees are planning December hearings to investigate the sudden demise of FTX under Democratic mega-donor Bankman-Fried.



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