John J. Ray III, the new chief executive officer of collapsed cryptocurrency exchange FTX, said in a bankruptcy filing Thursday that he has never seen “corporate control fail completely. like that” in his career working with troubled companies.
Mr. Ray helped manage Enron after it collapsed in the 2001 accounting fraud scandal. “From compromised system integrity and offshore regulatory oversight, to centralization of power control into the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, the situation was unprecedented, he wrote in the filing.
FTX crashed last week after depleting deposits exposed deep financial holes in its business. Last Friday, the company filed for bankruptcy and its chief executive, Sam Bankman-Fried, resigned.
The collapse set off a series of investigations focusing on whether FTX improperly used customer funds to support Alameda Research, a trading firm that Bankman-Fried also founded. .
In a court filing, Mr. Ray described the company’s staggering level of turmoil. He listed a range of “unacceptable regulatory practices,” including the use of software to “hide the misuse of customer funds.” He said there was “no independent management” between FTX and Alameda, which is owned almost entirely by Mr. Bankman-Fried.
He said he could not be trusted that the financial statements compiled by Mr. Bankman-Fried were accurate. “The FTX Group has failed to maintain proper books and records, or control the security of its digital assets,” he wrote.
Mr. Ray said the company’s human resources department was so disorganized that his team was unable to prepare a complete list of people who had worked at FTX. And he said company funds were used to buy homes and other personal items for employees and advisers without proper documentation.
According to the filing, FTX lacks a long-term record of corporate decisions, in part because Mr. Bankman-Fried relies on established communication platforms to automatically delete messages after a short period of time.
This is breaking news. Check back for updates.
