by Megan Henney
FTX CEO says crypto exchange suffered 'complete failure of corporate controls'
The new CEO of collapsed crypto exchange FTX on Thursday issued a scathing rebuke of his predecessor, Sam Bankman-Fried, accusing the former boss of allowing "a complete failure of corporate controls."
John Ray III was appointed chief executive of FTX last week shortly before the company filed for chapter 11 bankruptcy and Bankman-Fried resigned. The attorney – who previously oversaw the $23 billion bankruptcy of energy firm Enron – is now tasked with investigating the rapid and stunning downfall of FTX.
"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 in a filing with the U.S. bankruptcy court for the district of Delaware. "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."
INSIDE THE COLLAPSE OF CRYPTO EXCHANGE FTX: EVERYTHING YOU NEED TO KNOW
Sam Bankman-Fried, founder and chief executive officer of FTX Cryptocurrency Derivatives Exchange, speaks during the Institute of International Finance (IIF) annual membership meeting in Washington, DC, US, on Thursday, Oct. 13, 2022. (Photographer: Ting Shen/Bloomberg via Getty Images / Getty Images)
FTX, once the world's third-largest exchange with a valuation near $32 billion, sent shockwaves through the crypto world on Friday when it announced that it was filing for bankruptcy, along with Alameda Research and other affiliated companies. Days earlier, industry rival Binance backed out of a deal to buy its troubled competitor after taking a look at the books and learning that FTX had "mishandled customer funds."
Bankman-Fried, the firm's founder and CEO, announced his resignation when the bankruptcy papers were filed in Delaware on Friday.
Both the company and Bankman-Fried are under investigation in the U.S. and other countries for possible securities violations amid allegations that FTX used $10 billion of customer funds to prop up Alameda Research, its affiliated trading firm.
WHO’S REALLY TO BLAME FOR FTX CRYPTO COLLAPSE?
The sudden collapse, which threatened to upend futures markets, has been likened the crypto industry's "Lehman Brothers" moment — a reference to the 2008 collapse of the global financial services firm that helped to spark the global financial meltdown.
This illustration photo shows a smartphone screen displaying the logo of FTX, the crypto exchange platform, with a screen showing the FTX website in the background in Arlington, Virginia on Feb. 10, 2022. (Photo by OLIVIER DOULIERY/AFP via Getty Images / Getty Images)
It has raised major concerns about an industry that has remained largely unregulated.
Panels in both the Senate and the House are planning to hold hearings on FTX's collapse next month. The House Financial Services and Senate Banking committees plan December hearings that will examine the sudden demise of FTX under the leadership of Bankman-Fried, a Democratic mega-donor.
This is a developing story. Please check back for updates.
Megan Henney
Source: https://www.foxbusiness.com/markets/new-ftx-boss-condemns-bankman-fried-for-complete-failure-of-corporate-controls
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