John J. Ray III, the new chief executive of bankrupt cryptocurrency exchange FTX.com, said the company’s failure was caused by the “concentration of control in a very small group of grossly inexperienced and unsophisticated individuals,” in his testimony prepared ahead of Tuesday’s House Financial Services Committee hearing.
See related article: Sam Bankman-Fried arrested in the Bahamas, expected to be extradited to U.S.
- Ray, a Chicago-based lawyer who managed the liquidation of Enron Corp. following its collapse in 2001, added that he had never seen “such an utter failure of corporate controls.”
- Ray added he found “unacceptable practices” at FTX, such as senior staff members’ access to customer assets, comingling of assets between the exchange and sister trading firm Alameda Research, allowing Alameda to trade with FTX customer funds and poor management of private keys that grant access to hundreds of millions of dollars worth of assets.
- Ray also said that FTX US, a U.S. branch of the collapsed empire, was not running independently of FTX, as Bankman-Fried had asserted. Ray said that Chapter 11 bankruptcy protection was necessary to avoid a run on FTX US and to give his team time to identify and protect the assets.
- Ray’s prepped testimony comes amid the arrest of FTX’s former chief executive officer, Sam Bankman-Fried, who was taken into custody on Monday by the Royal Bahamas Police at the request of the U.S. government.
- The U.S. will likely request his extradition, Bahamas Attorney General Ryan Pinder said, according to CNBC.
- Before his arrest, Bankman-Fried was expected to appear remotely before the House Financial Services Committee on Tuesday.