The restructuring officer tasked with overseeing FTX’s bankruptcy proceedings said in court filings that he had never seen a “more complete failure of corporate management” in his career. .
John J. Ray III said, who previously oversaw the liquidation of Enron,
“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 was appointed CEO of FTX when the cryptocurrency exchange filed for bankruptcy last Friday and its founder Sam Bankman-Fried stepped down from the position. The collapse of Bankman-Fried’s empire, which included bankrupt hedge fund Alameda Research, rocked the entire digital asset ecosystem and sparked an epidemic among cryptocurrency firms.
In Thursday’s court filing, Ray detailed a number of issues with financial statements prepared by FTX and Alameda under Bankman-Fried’s rules.
To his knowledge none of the accounts have been audited and he was not confident of their accuracy. Ray could not find the financial statements, at least for one of his FTX subsidiaries, which is Island Bay Ventures.
The filing said: Many of the companies in the FTX Group “did not have appropriate corporate governance,” and some “never had board meetings.”
FTX was also unable to centralize its cash holdings. The mismanagement of funds under Bankman-Fried was so bad that the new management does not yet know how much cash his FTX Group holds.
Other procedural errors included “lack of an accurate list of bank accounts and account signatories, and inadequate attention to the creditworthiness of banking partners.”
Additionally, Ray said company funds were used to purchase homes and other personal items for employees and consultants in the Bahamas, where FTX is based.
Ray said, “There does not appear to be documentation for certain of these transactions as loans.”
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