FTX Bankruptcy Manager Calls Crypto Firm "A Complete Failure" Of Corporate Controls

FTX Bankruptcy Manager Calls Crypto Firm “A Complete Failure” Of Corporate Controls

The FTX logo in the background, blurred, and in the foreground some reading cubes

John J. Ray III, FTX’s new CEO charged with handling the company’s bankruptcy, wrote that it was one of the worst cases he’s had to go through, calling it “a complete failure of security controls. the company”.
Photo: Sergey Yelagin (Shutterstock)

How bad do you have to be for a 40-year veteran of corporate woes to call you one of the most flawed and compromised entities he’s ever seen? John J. Ray III was typed handle chapter 11 bankruptcy proceedings multiple large corporate entities of FTX. In his last bankruptcy filing published Thursday, Ray noted that in his 40 years of legal and restructuring experience:

“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of reliable financial reporting as has happened here.”

He cited the companies’ failing system integrity and faulty regulatory oversight. He also noted that FTX had concentrated control of the company “in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals.”

It’s unclear exactly who he calls “potentially compromised,” but the blame could very well end with former CEO Sam Bankman-Fried. The former leader of the crypto space remained out of gun range in the Bahamas, where his many companies were based. All the time it’s been somehow trying to fix his image claiming that it is working hard to recover the millions of dollars in user funds that have been locked up in their exchange accounts.

Many of Bankman-Fried’s crypto-centric businesses were under the umbrella of the West Realm Shires, which included FTX US and other US-centric entities. The former CEO’s crypto hedge funds were led by Alameda Research, but this so-called “silo” of corporate entities also included several investment entities. According to Ray, both were essentially controlled by Bankman-Fried with minority interests by FTX co-founder Zixiao “Gary” Wang and engineering director Nishad Singh.

The latest reports coming out of the FTX debacle noted that Bankman-Fried, who often goes through SBF, had created backchannels that allowed him to secretly funnel $10 billion in client funds from FTX to Alameda, even though they were supposed to be separate entities. Previous bankruptcy documents stated there could be about 1 million creditors looking to salvage something from this mess.

Ray is a veteran of major corporate bankruptcies and restructurings. As mentioned in a Tuesday Wall Street Journal Biographyhe handled the bankruptcy of Fruit of the Loom in 1999, but his greatest fame was overcoming the Enron debacle, scooping up billions for creditors from the corporate fraud dunghill that was the former company. ‘energy.

But in a interview with Vox’s Kelsey Piper conducted Nov. 13 and released Wednesday, SBF said it regrets accepting bankruptcy in the first place. In his own words provided verbatim via Twitter DM screenshots, Bankman-Fried argued that he could have righted the ship if he still had his hands on the controls, somehow claiming other than “everything would be ~70% fixed right now” and that “withdrawals would open in a month with fully whole clients”.

He even hinted that he was pushed into bankruptcy by Wang and Singh because they were both scared and felt “ashamed and guilty”.

This Vox interview makes SBF the herald of “effective altruismsounds even more like a sociopath who had no idea how badly he had run his businesses. A handy chart created by Web3’s Molly White just goes to great fame shows how deep the contagion between FTX spinoffs has been with other crypto companies. Earlier this week, digital asset lender BlockFi announced that it may file for bankruptcy, and crypto lender Genesis and crypto platform Gemini both declared bankruptcy on Wednesday. interrupted withdrawals. It is an open question whether the FTX fallout could sink the crypto economy even further.

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