New FTX CEO Says Former Billionaire Bankman-Fried Led ‘Unprecedented’ Failure—’Incessant’ Tweets Undermine Bankruptcy Case

Topline

Longtime bankruptcy attorney John J. Ray III, the new CEO of befallen cryptocurrency exchange FTX Trading who led disgraced energy firm Enron after its storied collapse in 2001, issued a scathing critique of the mismanagement that prompted the former crypto darling’s sudden collapse—calling it the worst failure of corporate controls he’s seen in his more than 40-year career in new court filings.

Key Facts

“Never in my career have I seen such a complete failure of corporate controls… as occurred here,” Ray said in a Delaware bankruptcy court filing unveiled Thursday, as he also criticized FTX’s “complete absence of trustworthy financial information.”

In his declaration, the veteran bankruptcy attorney outlined his experience cleaning up after “several of the largest corporate failures in history” and then called the situation at FTX “unprecedented”—marked by “faulty regulatory oversight abroad” and controlled by a “very small group of inexperienced, unsophisticated and potentially compromised individuals.”

Ray also said he accepted the position as CEO in the “early morning hours” of last Friday, the day FTX announced it had commenced Chapter 11 bankruptcy proceedings and that its former billionaire CEO, Sam Bankman-Fried, had resigned from the company following the sudden liquidity crisis it experienced in the days prior.

Ray went on to detail what several financial statements for FTX and Bankman-Fried’s proprietary trading firm Alameda alleged and repeatedly said he did not have “confidence” in the information because the statements were unaudited and produced while controlled by Bankman-Fried.

In a separate filing, Ray also accused Bankman-Fried of undermining FTX’s bankruptcy case, blasting the “celebrity…, his unconventional leadership style, incessant and disruptive tweeting since [Friday]

, and the almost complete lack of dependable corporate records” at FTX.

The filing comes after a series of nearly three dozen bizarre tweets from FTX’s former CEO—in which he acknowledged becoming “overconfident and careless”—prompted Ray to issue a statement saying Bankman-Fried “does not speak on [FTX’s] behalf.”

Key Background

FTX’s bankruptcy announcement and the overnight departure of its 30-year-old founder capped a week of turmoil for the crypto wunderkind. FTX paused user withdrawals, and its namesake token collapsed in value last week after Binance CEO Changpeng Zhao tweeted that his firm would sell all of its holdings in the FTX crypto token due to “recent revelations,” an apparent reference to a Coindesk report claiming Alameda largely held its assets in FTX’s coin. As the liquidity crisis unwound, Binance quickly swooped in on a rescue mission, announcing a nonbinding agreement to purchase FTX—only to back out one day later, citing liquidity issues “beyond our control or ability to help.”

Tangent

Bankman-Fried’s fortune swelled to more than $26 billion as pandemic-era trading helped push FTX’s valuation to as much as $32 billion at the end of last year. Just last month, the 30-year-old referred to himself as a modern-day J.P. Morgan for helping to acquire struggling crypto firms. Following FTX’s own collapse, Bankman-Fried was pulled from Forbes’ billionaire ranks.

Further Reading

FTX Files For Bankruptcy—Former Billionaire Sam Bankman-Fried Resigns As CEO (Forbes)

Source: https://www.forbes.com/sites/jonathanponciano/2022/11/17/new-ftx-ceo-says-former-billionaire-bankman-fried-led-unprecedented-failure-incessant-tweets-undermine-bankruptcy-case/