New CEO Says FTX Is the Worst Case of Corporate Failure With Untrustworthy Financial Data and Unacceptable Practices

The new CEO of FTX, appointed after the crypto alternate filed for chapter, has blasted the corporate beneath former CEO Sam Bankman-Fried. “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” he mentioned in a courtroom submitting.

‘Complete Failure of Corporate Controls’

John Ray III, the brand new CEO of FTX and a veteran insolvency skilled who oversaw the liquidation of Enron, revealed in a courtroom submitting on Thursday that FTX is the worst case of company failure that he had seen in his greater than 40-year profession.

Ray, who was appointed to switch Sam Bankman-Fried (SBF) when FTX filed for Chapter 11 bankruptcy on Nov. 11, wrote:

Never in my profession have I seen such a whole failure of company controls and such a whole absence of reliable monetary data as occurred right here.

“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,” he described.

‘Unacceptable Management Practices’

“Many of the companies in the FTX Group, especially those organized in Antigua and the Bahamas, did not have appropriate corporate governance,” Ray defined, noting that many entities by no means had board conferences.

In addition, “The FTX Group did not keep appropriate books and records, or security controls, with respect to its digital assets,” the brand new CEO detailed, elaborating:

Unacceptable administration practices included … the absence of day by day reconciliation of positions on the blockchain, the usage of software program to hide the misuse of buyer funds, the key exemption of Alameda from sure facets of FTX.com’s auto-liquidation protocol, and the absence of unbiased governance.

He added that the crypto agency beneath Bankman-Fried used “an unsecured group email account as the root user to access confidential private keys and critically sensitive data for the FTX Group companies around the world.”

Bankman-Fried ‘Continues to Make Erratic and Misleading Public Statements’

“One of the most pervasive failures of the FTX.com business in particular is the absence of lasting records of decision-making,” Ray mentioned, including:

Bankman-Fried usually communicated through the use of purposes that have been set to auto-delete after a brief time frame, and inspired workers to do the identical.

Furthermore, he pressured that “Bankman-Fried, currently in the Bahamas, continues to make erratic and misleading public statements.”

FTX’s 4 Business Silos

Ray divided FTX’s companies into 4 teams, which he calls “silos,” the courtroom submitting exhibits.

One is the WRS Silo, which incorporates crypto alternate FTX US that’s registered with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) as a cash providers enterprise and holds a sequence of state cash transmission licenses within the U.S.

The subsequent silo is the Alameda Silo, which incorporates Alameda Research LLC, organized within the State of Delaware. The others are the Ventures Silo, which incorporates FTX Ventures Ltd., and the Dotcom Silo, which incorporates crypto buying and selling platform FTX.com. FTX Trading Ltd., the guardian firm of FTX.com, is organized in Antigua.

According to Ray, a lot of the monetary statements for FTX’s 4 silos, together with stability sheets, don’t seem to have been audited. Emphasizing that every monetary assertion was created whereas the corporate was managed by Bankman-Fried, the chief mentioned:

I do not need confidence in it, and the knowledge therein might not be right as of the date acknowledged.

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