New CEO of FTX condemns ‘complete failure’ of corporate control

The new chief executive of collapsed cryptocurrency trading firm FTX says said he has never seen such a “complete failure” of corporate control.

John Ray III, in a filing with the US 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,” 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.”

Ray noted that many of the companies in the FTX Group, particularly those in Antigua and the Bahamas, did not have appropriate corporate governance and many had never held a board meeting.

The group also had cash management procedural failures, including the absence of an accurate list of bank accounts and signatories. There was also insufficient attention paid to the creditworthiness of banking partners.

Mr 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 advisers,” he said.

“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 advisers on the records of the Bahamas.”

Mr Ray, who oversaw Enron’s bankruptcy, was named chief executive 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 of billions of dollars, sought bankruptcy protection after the exchange experienced the crypto equivalent of a bank run.

So far, debtors have found and secured “only a fraction” of the group’s digital assets they hope to recover, with about 740 million dollars (£626 million) of cryptocurrency secured in new cold wallets, which is a way of holding cryptocurrency tokens offline, said Mr Ray.

In its bankruptcy filing, FTX listed more than 130 affiliated companies around the globe. The company valued its assets between 10 billion and 50 billion dollars (£8 billion to £40 billion), with a similar estimate for its liabilities.

Mr Bankman-Fried had recently been estimated to be worth 23 billion dollars (£20 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, including Formula One racing and a sponsorship deal with Major League Baseball.

Miami-Dade County decided on Friday to terminate its relationship with FTX, meaning the venue where the Miami Heat basketball team play will no longer be known as FTX Arena.

Mercedes was planning to remove FTX from its race cars starting last weekend.