FTX's New CEO John Ray III Calls Meltdown 'A Complete Failure Of Corporate Controls'
Ray has criticised the former CEO Sam Bankman-Fried for handling FTX in the worst way possible.
The newly appointed CEO of FTX, John Ray III, came down heavily on its former CEO and founder Bankman-Fried for the complete failure of the company. In a court filing, he called the FTX turmoil "a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here." He was appointed as the new CEO of FTX after the company filed for bankruptcy in a US court. Ray has been a veteran insolvency professional with Enron. He has over 40 years of experience in the corporate world.
He said, "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."
John Ray went on to say that multiple companies in the FTX group did not have 'appropriate governance'. He even said that several entities never had any
board meetings. Elaborating on the cause of such a spectacular failure, he said, "The FTX Group did not keep appropriate books and records, or security controls, with respect to its digital assets."
According to him, multiple issues, such as the absence of daily reconciliation of positions on the blockchain, and the use of software to conceal the customer funds' misuse
among other things, fell under the category of "unacceptable management practices". He said that "an unsecured group email account was used as the root user to access confidential private keys and critically sensitive data for the FTX Group companies around the world."
Ray alleged that "Bankman-Fried, currently in the Bahamas, continues to make erratic and misleading public statements."
The new CEO has divided FTX's business into four groups as per the court filings. He calls them "silos".
The first one is the WRS Silo. FTX US is a cryptocurrency exchange that is registered with the Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) and is included in WRS Silo. The second one is called the Alameda Silo, which has Alameda Research LLC under it. Other silos are known as the Ventures Silo and the Dotcom Silo.
Ray has also alleged that the financial statements of all four silos were not audited under Bankman-Fried. There were no proper balance sheets as well. Commenting on the discrepancies, he said, "I do not have confidence in it, and the information therein may not be correct as of the date stated."
In an interview to Vox, the former CEO of FTX Group said he regretted his decision to file for bankruptcy in a US court. He blamed others, and claimed that the "withdrawals would be opening up in a month with customers fully whole" had he not filed for bankruptcy. Bankman-Fried accused all those in charge of FTX's Chapter 11 bankruptcy process were "trying to burn it all to the ground out of shame."
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