Fraud at FTX: More shocking revelations in a new bankruptcy filing
John J. Ray III, CEO of FTX, has filed a new bankruptcy filing. This document reveals what he calls a “complete failure in corporate controls” at the crypto exchange. Cover art: Jeenah Moon/Bloomberg/Getty Images and Relight Motion (edited Mariia Kozyr).
Key TakeawaysA filing by FTX’s new CEO has revealed more about the company’s financial state.
John J. Ray III, the new CEO of FTX, was responsible for Enron’s dissolution and wrote that he had never witnessed “such a complete failure in corporate controls and such a complete lack of trustworthy financial information” like this.
This document is only the tip of an iceberg. However, it has already exposed negligent accounting practices, regular deletions of corporate communications and secret loans from corporate accounts.
Share this article. The new filing discusses fraud, embezzlement and incompetence as well as several other subjects. “A Complete Failure in Corporate Controls” Things are getting worse for Sam Bankman-Fried, former CEO of FTX, and his associates. John J. Ray III, the new CEO of FTX, filed a Thursday bankruptcy filing that sheds new light on the egregious activities at the now-bankrupt crypto-exchange under the leadership of Sam Bankman-Fried. Ray, a 40-year veteran in bankruptcy restructuring, has a resume that includes directing Enron’s dissolution back in 2001. Ray also reveals many instances of fraud, poor record-keeping, and malpractice at FTX. Ray’s opening statement was a detailed assessment of the company’s overall condition. He stated that he had never seen such a failure in corporate controls or such a complete lack of trustworthy financial information. Ray assumed control from Bankman-Fried on November 11, when FTX and its affiliate companies filed for Chapter 11 voluntary bankruptcy. Ray stated that he had never witnessed FTX in such bad shape despite his previous experience. He wrote that the situation was unprecedented because of the concentration of control in the hands a small number of inexperienced, unsophisticated, and potentially compromised individuals. One of the most shocking revelations in the document is about loans made out to Bankman Fried and senior FTX executives Nishad Sing and Ryan Salame. Ray claims that Alameda Research, a FTX-affiliated trading company, paid out $3.3 billion to Bankman-Fried (and his shell company Paper Bird Inc.) along with $543 million and $55 million to Singh and Salame. Another shocking revelation is that FTX had a negligent approach to bookkeeping. According to the document, FTX’s negligent approach to bookkeeping led to $372 million in user deposits being stolen from the exchange. Notable is also the discrepancy between the value of FTX’s crypto holdings. According to a Financial Times article, the value of FTX’s crypto assets was estimated at $5.5 billion according to a leaked FTX balancesheet. Ray, however, estimated that the company’s crypto holdings had a fair value of $659,000. Ray also revealed that FTX did not have a complete list of employees for its crypto holdings. He also said that the company’s poor record-keeping was due to personal communications being conducted using applications that automatically delete messages after a certain period. This practice was encouraged by Bankman-Fried. Ray also reported that corporate funds from the FTX Group were used to purchase homes and personal items for employees and advisers. Moreover, FTX secretly exempted Alameda Research’s position from liquidation on FTX far beyond what a normal user would do. This lack of risk management may partially explain why Alameda lost so many dollars in its trading strategies. Although today’s bankruptcy filing revealed numerous instances of malpractice within FTX it is unlikely that it is exhaustive. As FTX’s bankruptcy proceedings progresses, more information about the company’s dodgy dealings will likely emerge. Ray has called for a comprehensive, transparent, and deliberate investigation into Mr. Samuel Bankman Fried’s claims. It is possible that the former CEO of FTX could be facing his own legal battle in not too distant future. Disclosure: The author was a shareholder in ETH, BTC and other crypto assets at the time this article was written. Share this article. The information found on this website or accessed through it is obtained from independent sources that we believe are accurate and reliable. However, Decentral Media, Inc. does not make any representations or warranties as to the timeliness, completeness, accuracy or timeliness of any information found on this website or accessed via it. Decentral Media, Inc. does not act as an investment advisor. We do not provide personalized investment advice or any other financial advice. This website’s information is subject to change at any time. The information on this website could become obsolete or incorrect. You may not be able to update any information that is outdated, incomplete or inaccurate. We also reserve the right to change any information that is incorrect, incomplete or outdated. If you need investment advice about an ICO, IEO or other investment, we strongly recommend that you consult a licensed financial advisor or other qualified financial professional. We do not accept compensation in any form for analyzing or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or commodities.See full terms and conditions.Recommended News