John Ray III, the new CEO of troubled cryptocurrency exchange FTX, described the operations of FTX Group under co-founder and former CEO Sam Bankman-Fried as a “complete failure of corporate control.” Ray III also described the business environment under Bankman-Fried as “unprecedented”. Or “being CEO in some of the biggest corporate failures in history.”
Ray III states this in new FTX court filing, dated Thursday and filed in Delaware Bankruptcy Court, USA . Ray emerged on Friday as FTX’s liquidity crisis forced it to file for bankruptcy protection, forcing Bankman-Fried to resign as the struggling cryptocurrency exchange’s new CEO. FTX Group initiated voluntary proceedings under Chapter 11 of the United States Bankruptcy Code in the U.S. District of Delaware on the same day.
In new filings, Ray III criticizes governance structures, cash and human resource management, spending controls, and record keeping of digital asset custody, investment activity, and decision-making — under Bankman-Fried FTX Group.
“Never in my career have I seen such a complete failure of corporate controls, and such a complete lack of reliable financial information going on here,” Ray III said, adding “This is unprecedented because of compromised systemic integrity and misregulation from foreign oversight to control concentrated in the hands of a very small number of inexperienced, immature, and potentially compromised individuals.”
I read 30 pages of FTX bankruptcy court filings.
How bad are FTX’s internal controls?
THIS IS THE WORST EXAMPLE 👇
— Genevieve Roch-Decter, CFA (@GRDecter) 2022 November 17th “Common failure”
According to the new CEO, FTX Trading Limited, operator of Antigua-registered cryptocurrency trading platform FTX.com, Bahamas-based subsidiary FTX Digital Market, and the rest of FTX’s group of companies “does not have proper corporate Governance”. Many of them never had a board meeting, he noted. Ray III added that FTX Group also does not have centralized control over its cash.
“Cash management process failures included a lack of accurate bank accounts and account signatory lists, and insufficient focus on the creditworthiness of global banking partners,” he further explained.
Furthermore, the new CEO described having no durable record of decision making as “one of the most pervasive failures in the FTX.com business in particular.” He noted that “Mr. Bankman-Fried often uses set to automatically delete after a short period of time, and encourage employees to do the same.”
In addition, Ray III states that FTX Group refers employees of its various subsidiaries and external contractors to ” Records and lines of responsibility are unclear.” As a result, the company has been unable to prepare a full list of FTX Group employees prior to filing for bankruptcy protection. It also could not determine the terms of their employment. “Repeated attempts to locate certain putative employees to confirm their status have so far been unsuccessful,” Ray III said.
On payments, the CEO noted that many subsidiaries did not have proper controls, adding that regulators approved financial payments with “personalized emoji” “via online” chat platform.
The new executive also revealed that company funds were used to purchase homes and other personal items for employees and consultants, but were not recorded as loans. He added, “Records in the Bahamas Certain real estate is recorded in the personal names of these employees and consultants. “
John Ray III, new CEO of troubled cryptocurrency exchange FTX, will join co-founder and former CEO Sam Bankman-Fried FTX Group’s operations under its leadership have been described as “a complete failure of corporate control. Ray III also described the business environment under Bankman-Fried as “unprecedented.” This is stated in a new FTX court filing dated Thursday and filed in Delaware Bankruptcy Court, USA. Ray emerged last Friday as FTX’s liquidity crisis forced Its bankruptcy filing forced Bankman-Fried to resign as the troubled cryptocurrency exchange’s new CEO. FTX Group initiated voluntary proceedings under Chapter 11 in the U.S. District of Delaware on the same day.
In new filing, Ray III criticizes governance structure, cash and human resource management, spending controls, and record keeping of digital asset custody, investment activity, and decisions – FTX Group under Bankman-Fried .
“Never in my career have I seen such a complete failure of corporate controls and such a complete lack of reliable financial information going on here,” Ray III said, adding “With compromised systemic integrity and poor governance, the concentration of power from foreign oversight to control in the hands of a very small number of inexperienced, immature, and potentially compromised individuals is unprecedented. ”
I read 30 pages of FTX bankruptcy court filings.
How bad is FTX’s internal controls?
This is the worst example👇
— Genevieve Roch-Decter, CFA (@GRDecter) November 17, 2022 “Common failure”
According to the new CEO of FTX Trading Limited, the operator of Antigua-registered cryptocurrency trading platform FTX.com, based in the Bahamas FTX Digital Market, a subsidiary of FTX, as well as the rest of FTX’s corporate group “do not have proper corporate governance.” He noted that many of them have never had a board meeting. Ray III added that FTX Group also does not have centralized control over its cash .
“Cash management process failures included a lack of accurate bank accounts and account signatory lists, and insufficient attention to the credibility of global banking partners,” he further explained.
Additionally, the new CEO described having no durable record of decision making as “one of the most pervasive failures in the FTX.com business in particular. “Mr. Bankman-Fried regularly communicated using apps that were set to delete automatically after a short period of time, and encouraged employees to do the same,” he noted.
In addition, Ray III noted that FTX Group had “unclear records and lines of responsibility” for employees of its various subsidiaries and outside contractors. As a result, the company had been unable to prepare for bankruptcy until filing for bankruptcy protection. A complete list of FTX Group employees. It was also unable to determine their terms of employment. “Repeated attempts to locate certain putative employees to confirm their status have so far been unsuccessful,” Ray III said.
On payments, the CEO noted that many subsidiaries do not have proper controls, adding that regulators have approved financial payments with “personalized emoji” via online “chat” platforms.
The new executive also revealed that company funds were used to purchase homes and other personal items for employees and consultants, but were not recorded as loans. He added that “certain real estate is recorded in the personal names of these employees and consultants in the records of the Bahamas.”
