FTX had “complete failure” of controls, new CEO says

FTX had “complete failure” of controls, new CEO says


FTX had “complete failure” of controls, new CEO says

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FTX had “complete failure” of controls, new CEO says
The new CEO of cryptocurrency exchange FTX slammed founder Samuel Bankman-Fried and the “inexperienced, unrefined and potentially vulnerable” leadership
AFP – Stefani Reynolds


Collapsed cryptocurrency exchange FTX suffered a “complete failure of corporate controls” under founder Sam Bankman-Fried, the company’s new chief executive said on Thursday, calling the situation “unprecedented.”

The scathing conviction came in a US bankruptcy court filing by John J. Ray — an executive with 40 years of experience in corporate restructurings, including Enron’s infamous implosion in 2001.

Ray has slammed oversight failures, incomplete records, missing and unreliable financial reports and “potentially compromised” leadership at FTX, which filed for bankruptcy last week – a stunning sinking for a company recently valued at $32 billion.

“Never in my career have I seen such a complete failure of corporate controls and a complete lack of trustworthy financial information as here,” Ray said in the filing.

“From the compromised system integrity and flawed regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, inexperienced and potentially vulnerable individuals, this situation is unprecedented,” he said.

FTX’s demise came amid growing doubts about its financial stability, with attention focused on the exchange’s relationship with Alameda Research, a trading house also owned by Bankman-Fried, which reports it was moving funds off the exchange, though he tried to fill a funding gap of $7 billion.

Binance, the world’s largest cryptocurrency platform, has pulled out of a buyout deal that could have halted the fall amid reports of mismanagement of customer funds and possible investigations by regulators.

US officials are now calling for more oversight of the industry, and Congress plans to hold hearings to investigate.

Ray said he had “significant concerns” about the reliability of financial statements and affiliates, noting that there had been “at least $372 million in unauthorized transfers.”

Company executives — many of whom were unaware of the deficiencies or the potential commingling of digital assets,” according to Ray — “have located and secured only a fraction of the FTX Group’s digital assets that they hope to recover.”

The implosion was a spectacular turnaround for founder and one-time cryptocurrency prodigy Bankman-Fried.

Ray slammed the former CEO, saying he “often communicated with applications that were set to auto-delete,” making it clear that despite his frequent public statements, he no longer speaks for FTX.

Bankman-Fried “continues to make erratic and misleading public statements,” Ray said, citing comments published by Vox on Thursday in which the disgraced manager said he regretted filing for bankruptcy.

“F*** regulators, they’re making things worse,” Bankman-Fried said in a direct message on Twitter to the Vox reporter.

He later tweeted that he was “winding off” and that his comments should remain private.


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