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FTX’s new CEO, appointed after the crypto exchange filed for bankruptcy, lambasted the company under former CEO Sam Bankman-Fried. “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of reliable financial reporting as has happened here,” he said in a court filing.

“Corporate Controls Complete Failure”

John Ray III, the new CEO of FTX and a seasoned insolvency practitioner who oversaw the liquidation of Enronrevealed in a court filing Thursday that FTX is the worst case of corporate failure he has seen in his more than 40-year career.

Ray, who was named to replace Sam Bankman-Fried (SBF) when FTX requested Chapter 11 bankruptcy November 11, wrote:

Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as has happened here.

“From the compromised integrity of systems and faulty regulatory oversight overseas 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 described.

“Unacceptable management practices”

“Many FTX Group companies, especially those organized in Antigua and the Bahamas, lacked proper corporate governance,” Ray explained, noting that many entities have never had a board meeting. administration.

Additionally, “FTX Group failed to maintain proper books and records, or security controls, regarding its digital assets,” the new CEO detailed, stating:

Unacceptable management practices included…failure to reconcile positions on the blockchain on a daily basis, use of software to conceal misuse of client funds, covert exemption of Alameda from certain aspects of the auto protocol. -liquidation of FTX.com and lack of governance.

He added that the crypto company under Bankman-Fried used “an unsecured group email account as the root user to access confidential private keys and highly sensitive data for FTX Group companies across the world”.

Bankman-Fried ‘continues to make erratic and misleading public statements’

“One of the most pervasive failures of the FTX.com business in particular is the lack of lasting records of decision-making,” Ray said, adding:

Bankman-Fried often communicated using apps set to automatically delete themselves after a short period of time and encouraged employees to do the same.

Further, he pointed out that “Bankman-Fried, currently in the Bahamas, continues to make erratic and misleading public statements.”

The 4 commercial silos of FTX

Ray has divided FTX’s business into four groups, which he calls “silos,” according to the court filing.

New CEO Says FTX Worst Case of Corporate Failure Never in My Career Have I Seen Such a Complete Failure of Corporate Controls
FTX’s four silos. Source: Bankruptcy court document filed by John Ray.

One is the WRS silo, which includes the FTX US crypto exchange which is registered with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) as a money services business and holds a series of licenses to state money transmission in the United States.

The next silo is the Alameda silo, which includes Alameda Research LLC, hosted in the state of Delaware. The others are the Ventures Silo, which includes FTX Ventures Ltd., and the Dotcom Silo, which includes the FTX.com crypto-trading platform. FTX Trading Ltd., the parent company of FTX.com, is organized in Antigua.

According to Ray, most of the financial statements of FTX’s four silos, including the balance sheets, do not appear to have been audited. Emphasizing that each financial statement was created while the company was controlled by Bankman-Fried, the executive said:

I do not trust it and the information it contains may not be correct as of the date shown.

What do you think of the conclusions of the new CEO of FTX? Let us know in the comments section below.

Kevin Helms

An economics student from Austria, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests include Bitcoin security, open source systems, network effects, and the intersection between economics and cryptography.




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