FTX CEO Ray details firm’s lack of controls, sophistication under SBF in testimony to Congress

FTX CEO John Ray refuted Sam Bankman-Fried’s contention that FTX US has enough segregated funds on hand to re-open user withdrawals.

The CEO laid out the core structural flaws that led to the collapse of the multi-billion dollar empire early last month in a written statement ahead of his appearance tomorrow before the House Financial Services Committee. 

“Questions have been raised as to why all of the FTX Group companies were included in the Chapter 11 filing, particularly FTX US,” Ray said. “The answer is because FTX US was not operated independently of FTX.com.”

He further mapped a series of problems involving FTX’s entanglement with Alameda Research that led to the collapse.

“Customer assets from FTX.com were commingled with assets from the Alameda trading platform,” he said, also noting that senior management faced no controls on access to private keys. 

Other issues plaguing that relationship were Alameda’s risky margin trading and unrestricted borrow from FTX’s deposits; FTX’s wave of investments and loans to insiders at FTX and Alameda; and the fact that Alameda’s market-making left customer assets on outside exchanges around the world, Ray said.

‘Utter failure of corporate controls’

His testimony will come before Bankman-Fried’s own virtual appearance. 

Ray again noted an unprecedented “utter failure of corporate controls at every level of an organization” that is hampering his diagnostics, including incomplete documentation for “transactions involving nearly 500 investments made with FTX Group funds and assets.”

Bankman-Fried has quibbled with such criticism from Ray of the company’s corporate controls in numerous media appearances since the collapse. 

Ray cordoned off a number of subjects he would not address, including communications or lack thereof with Bankman-Fried, and ongoing legal proceedings, including investigations from U.S. law enforcement. 

Despite those limits, Ray very clearly addresses a number of the core concerns with FTX, including the division of its global and U.S. branches.

Bankman-Fried was also unclear as to whether he would testify before the Senate Banking Committee at a Wednesday hearing that the committee’s leadership have pushed him to attend. 

Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from former FTX and Alameda founder Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions.

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