Advertisement

New FTX CEO blasts ‘complete absence’ of trustworthy financial data

Click to play video: 'How the collapse of FTX crypto puts future of industry at risk'
How the collapse of FTX crypto puts future of industry at risk
WATCH ABOVE: The cryptocurrency industry — and the institutions and investors with billions wrapped up in it — are still coming to terms with the fallout from the collapse of FTX, once one of the largest crypto exchanges in the world. How this incredible and bizarre story puts the future of the industry at risk. Anne Gaviola has more – Nov 17, 2022

The new CEO of the collapsed cryptocurrency trading firm FTX, who oversaw Enron’s bankruptcy, said he has never seen such a “complete failure” of corporate control.

John Ray III, in a filing with the U.S. bankruptcy court for the district of Delaware, said there was a “complete absence of trustworthy financial information.”

“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,” Ray 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.”

Ray noted that many of the companies in the FTX Group, particularly those in Antigua and the Bahamas, didn’t have appropriate corporate governance and many had never held a board meetings. The group also had cash management procedural failures, including the absence of an accurate list of bank accounts and account signatories. There was also insufficient attention paid to the creditworthiness of banking partners.

Story continues below advertisement

Click to play video: 'What happened to FTX? Latest crypto collapse puts industry future in jeopardy'
What happened to FTX? Latest crypto collapse puts industry future in jeopardy

Ray also addressed the use of corporate funds to pay for homes and other items for employees.

“In the Bahamas, I understand that corporate funds of the FTX Group were used to purchase homes and other personal items for employees and advisors. I understand that there does not appear to be documentation for certain of these transactions as loans, and that certain real estate was recorded in the personal name of these employees and advisors on the records of the Bahamas,” he said.

Get expert insights, Q&A on markets, housing, inflation, and personal finance information delivered to you every Saturday.

Get weekly money news

Get expert insights, Q&A on markets, housing, inflation, and personal finance information delivered to you every Saturday.
By providing your email address, you have read and agree to Global News' Terms and Conditions and Privacy Policy.

So far, debtors have found and secured “only a fraction” of the group’s digital assets that they hope to recover, with about $740 million of cryptocurrency secured in new cold wallets, which is a way of holding cryptocurrency tokens offline, said Ray.

Ray was named CEO of FTX less than a week ago when the company filed for bankruptcy protection and its CEO and founder Sam Bankman-Fried resigned. The embattled cryptocurrency exchange, short billions of dollars, sought bankruptcy protection after the exchange experienced the crypto equivalent of a bank run.

Click to play video: 'Collapsed FTX hit by unauthorized transactions as millions in crypto vanishes'
Collapsed FTX hit by unauthorized transactions as millions in crypto vanishes

In its bankruptcy filing, FTX listed more than 130 affiliated companies around the globe. The company valued its assets between $10 billion to $50 billion, with a similar estimate for its liabilities.

Story continues below advertisement

Bankman-Fried was recently estimated to be worth $23 billion. His net worth has all but evaporated, according to Forbes and Bloomberg, which closely track the net worth of the world’s richest people.

FTX’s failure goes beyond finance. The company had major sports sponsorships as well, including Formula One racing and a sponsorship deal with Major League Baseball. Miami-Dade County decided Friday to terminate its relationship with FTX, meaning the venue where the Miami Heat play will no longer be known as FTX Arena. Mercedes was planning to remove FTX from its race cars starting last weekend.

Sponsored content

AdChoices