New FTX CEO says crypto exchange had ‘complete failure of corporate controls’

The new CEO of collapsed cryptocurrency exchange FTX blasted the company in a recent court filing for a “complete failure of corporate controls” before he assumed management.

John Ray III says he has more than 40 years of experience in restructuring companies after corporate failures, including some of the largest downfalls in history, but “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” at FTX.

“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 wrote in the court filing in the U.S. bankruptcy court in Delaware.

Sam Bankman-Fried resigned as CEO of FTX and filed for bankruptcy last week after an affiliated trading firm, Alameda Research, lost billions of dollars on risky bets. Bankman-Fried, whose net worth was once valued around $26 billion, has seen his money wiped out following the collapse.

The collapse of FTX, one of the globe’s largest cryptocurrency exchange markets, shocked the business and political world.

Former investors who may have collectively lost billions of dollars are now suing FTX in court, lawmakers on Capitol Hill are holding a hearing on the matter next month and federal agencies are investigating what happened.

Ray took over the Bahamas-based company in the early morning hours of Nov. 11 to oversee management of the corporation and mitigate damages during the bankruptcy process.

The new head of the FTX Group said in court filings Thursday that the roughly 134 companies under the corporation’s umbrella failed to manage cash properly, saying there was an “absence of an accurate list of bank accounts.”

Ray also noted the corporation lacked proper book records to track investments and said the pay disbursement controls were not “appropriate for a business empire.”

“For example, employees of the FTX Group submitted payment requests through an on-line ‘chat’ platform where a disparate group of supervisors approved disbursements by responding with personalized emojis,” he wrote.

Ray said debtors have only recovered a fraction of the digital assets from FTX Group they hope to regain but he was slowly getting the company into shape.