FTX New CEO Who Led Enron Liquidation: "This Is the First Time I've Seen Such a Complete Failure"

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Seolgina Jo] "In my 40 years of restructuring experience, I have never seen such a complete failure of corporate controls."

John J. Ray III, a restructuring expert and the new CEO, also criticized the cryptocurrency exchange FTX and its founder Sam Bankman-Fried, who filed for bankruptcy due to a liquidity crisis.

According to the Wall Street Journal (WSJ) and others, on the 17th (local time), Ray III stated in bankruptcy protection documents submitted to the Delaware court, "I have never seen such a complete failure of corporate controls and a place with absolutely no reliable financial information." He pointed out that the accuracy of the balance sheets of FTX and its affiliate Alameda Research is "untrustworthy." CEO Ray is a corporate restructuring expert who gained attention for successfully repaying $20 billion during the bankruptcy proceedings of Enron, which collapsed due to accounting fraud in 2001.

The WSJ reported details of the documents submitted by CEO Ray, saying, "They vividly describe the chaos in finance, accounting, and leadership during the tenure of former CEO Bankman-Fried."

According to the documents, FTX used company funds to purchase housing and personal items for employees in the Bahamas without related internal documentation. It was also confirmed that former CEO Bankman-Fried used an auto-deleting communication platform to convey important company decisions to employees, resulting in very few records remaining. Furthermore, sensitive data was accessed through insecure group emails, and the personnel system was so disorganized that they could not even prepare a complete list of employees.

CEO Ray strongly criticized, "A precarious system, incorrect regulation and supervision by foreign authorities, and control concentrated in the hands of a few inexperienced, unsophisticated, and seemingly risky individuals. This situation is unprecedented."

FTX’s legal team claimed that even after former CEO Bankman-Fried filed for bankruptcy in Delaware last week, he tried to divert FTX’s assets and transfer them to external accounts.

Changpeng Zhao, CEO of Binance, the world's largest cryptocurrency exchange, also publicly criticized former CEO Bankman-Fried. In a CNBC interview, Zhao pointed out Bankman-Fried’s recent tweet calling him merely a sparring partner, saying, "When he was tweeting, his house was on fire. On the day he tweeted, he should have been doing something else."

Zhao, who had expressed interest in acquiring FTX but canceled the deal within a day, said, "When he contacted me, I realized he was desperate," and added, "It didn’t take long to discover that FTX had much bigger problems than we had imagined." He continued, "I was shocked that former CEO Bankman-Fried lied to everyone," criticizing the misuse of customer funds as "potential fraud."

Earlier, Bloomberg cited Anthony Scaramucci, CEO of the US hedge fund SkyBridge Capital, suggesting that Binance’s sale of FTT, which triggered FTX’s collapse, might have been an act of retaliation by CEO Zhao. Previously, Zhao announced the sale of $530 million worth of FTT tokens, which led to $5 billion leaving FTX in a single day, rapidly escalating the liquidity crisis.

FTX filed for bankruptcy protection under Chapter 11 of the US Bankruptcy Code in Delaware on the 11th. With creditors estimated to number around 1 million, ten times the figures stated in the documents, the shockwaves from FTX are spreading further.

This content was produced with the assistance of AI translation services.