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The Street
The Street
Business
Martin Baccardax

Sam Bankman-Fried Collapsed FTX Amid 'Complete Failure of Corporate Controls', Says New CEO

FTX's new CEO, brought in to clean up the speculator collapse of the world's second-largest crypto exchange, told a Delaware court Thursday that only a 'fraction' of the digital assets he hopes to recover for creditors have been found. 

In a court filing linked to FTX's Chapter 11 bankruptcy filing last week, John J. Ray, who oversaw creditor recoveries in the Enron scandal, said the concentration of power among a "small group of inexperienced, unsophisticated and potentially compromised individuals" was key to the group's ultimate failure. Ray said FTX did not keep complete books and records, had inappropriate cash governance and failed to institute basic security controls.

"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 wrote in a petition to the court. 

"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 added.

Ray also took former CEO Sam Bankman-Fried to task for his increasingly vocal presence in mainstream and social media, saying the 30-year old "continues to make erratic and misleading public statements".

Bankman-Fried, who no longer represents the firm in any way, has continued to claim that he is working to raise billions in order to repay customers whose deposits were either mistakenly or deliberately moved to his in-house hedge fund, Alameda Research, in order to cover its risky bets and outstanding loans.

In a series of messages allegedly shared between Bankman-Fried and Kesley Piper, a reporter for Vox magazine, the former FTX CEO said his biggest regret in the group's collapse was the decision to file for bankruptcy protection, rather than the mis-use of client funds.

He also claimed that his public calls for stricter crypto market regulation, as well as his indications that the vast majority of his then-sizeable wealth would be donated to charity were "just PR". 

U.S. lawmakers, meanwhile, have quickly convened a hearing of the House Financial Services Committee in December, with plans to demand testimony from Bankman-Fried and well as senior executives associated with Alameda Research and Binance, the rival crypto exchange that backed-away from a rescue of FTX just days prior to its bankruptcy filing. 

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