New FTX chief says lack of controls at bankrupt exchange ‘unprecedented’

Pradipta Mukherjee

2 years ago

John J. Ray III, a Chicago-based lawyer and new CEO of now-bankrupt crypto exchange FTX, has criticized the lack of “appropriate corporate governance” across many FTX Group companies under Sam Bankman-Fried, the founder and former CEO of FTX.

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“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 court filing on Thursday.

“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,” he said.

Since the departure of Bankman-Fried, new directors have been appointed in the primary companies of the FTX Group as part of a new governance structure, Ray said in his filing.

Ray added the FTX Group did not maintain centralized control of its cash, failed to have an accurate list of bank accounts and account signatories and did not maintain appropriate books and records or security controls for its digital assets.

“In the Bahamas, I understand that corporate funds of the FTX Group were used to purchase homes and other personal items for employees and advisors. I understand that there does not appear to be documentation for certain of these transactions as loans, and that certain real estate was recorded in the personal name of these employees and advisors on the records of the Bahamas,” he said.

The sudden collapse of FTX, which was once the second-largest crypto exchange in the world and valued at over US$30 billion, sent shockwaves through the crypto industry and has affected companies including BlockFi and AAX exchange. Singapore’s state investment fund Temasek International is also writing off its US$275 million investment in FTX.