Sam Bankman-Fried received harsh criticism from John Ray III, the newly appointed CEO of FTX, for his complete lack of reliable data and lack of financial precautions.
According to Ray, who oversaw Enron’s reorganization, FTX lacked sufficient human resources, cybersecurity, accounting, and auditing units. Ray acknowledged that he did not have faith in the accounting information of FTX, Alameda, or any of their affiliates.
In a document filed with the U.S. Bankruptcy Court for the District of Delaware, the recently appointed FTX CEO John Ray III was blunt in his assessment of the situation, saying that now in his 40 years of legal and retooling knowledge, he hadn’t ever witnessed “such a complete failure of corporate controls and such a complete absence of trustworthy accounting reporting as happened here.”
After the collapse of the energy giant, Ray used to be the CEO of Enron. He pledged to assist authorities in their inquiry of Sam Bankman-Fried, the founder of FTX.
The balance sheets for FTX and its sister firm Alameda Research were “unverified and generated while the Debtors [FTX] were controlled by Mr. Bankman-Fried,” Ray stated in the complaint, adding that he “did not have trust” in their authenticity.
The declaration was made by Ray in his new capacity as CEO of FTX and related entities. The other week, FTX and its connected entities filed for bankruptcy, causing investors and the cryptocurrency industry to reel.
Bankman-Fried and his management team came under fire from Ray for what he called lax system controls and failure to comply with regulations.
The former Enron recovery manager claimed that “the consolidation of management in the hands of a relatively small group of inexperienced, naive, and potentially tainted persons” was unprecedented.
Following numerous social media claims of the loss of hundreds of millions of dollars’ worth of cryptocurrencies, Ray said that a “significant amount” of the assets housed with FTX may be “lost or stolen.”
Ray noted that the Chapter 11 bankruptcy procedure will investigate Bankman-behavior Fried’s in connection with the collapse of FTX while working with regulators.
Alarmingly, Ray stated in his letter that part of his job description included putting control systems and fundamental corporate standards into place for things like “financial reporting, inspection, cash management, cybersecurity, human resources, risk evaluation, data security, and other mechanisms that didn’t exist, or did not exist to an adequate amount, before to my appointment.
The “management methods” used by Bankman-Fried and FTX included the use of an unencrypted team email account as the underlying cause user to access private keys for sensitive data and classified data for FTX Group companies worldwide, the lack of daily reconciliation of positions on the blockchain, and the use of software to hide the misappropriation of customer’s financial assets.
