Exec who cleaned up Enron calls FTX mess ‘unprecedented’

Nov 17, 2022, 6:40 AM | Updated: Nov 19, 2022, 4:11 pm
File - The FTX logo appears on home plate umpire Jansen Visconti's jacket at a baseball game with t...

File - The FTX logo appears on home plate umpire Jansen Visconti's jacket at a baseball game with the Minnesota Twins on Tuesday, Sept. 27, 2022, in Minneapolis. The new CEO of the collapse cryptocurrency trading firm FTX, who oversaw Enron's bankruptcy, said, Thursday, Nov. 17, he has never seen such a "complete failure" of corporate control. John Ray III, in a filing with the U.S. bankruptcy court for the district of Delaware, said there was a "complete absence of trustworthy financial information." (AP Photo/Bruce Kluckhohn, File)

(AP Photo/Bruce Kluckhohn, File)

NEW YORK (AP) — The man who had to clean up the mess at Enron says the situation at FTX is even worse, describing what he calls a “complete failure” of corporate control.

The filing by John Ray III, the new CEO of the bankrupt cryptocurrency firm, lays out a damning description of FTX’s operations under its founder Sam Bankman-Fried, from a lack of security controls to business funds being used to buy employees homes and luxuries.

“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” Ray said. “From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.”

Ray was appointed CEO on November 11, after the company was near collapse and its previous management sought legal counsel on what to do next. Bankman-Fried was persuaded to give up control of the company by his lawyers as well as his father, Joseph Bankman, a professor at Stanford Law School, according to Thursday’s filing.

Since his resignation, Bankman-Fried has sought out news outlets for interviews and has been active on Twitter trying to explain himself and the firm’s failure.

In an interview with the online news outlet Vox, Bankman-Fried admitted that his previous calls for regulation of cryptocurrencies were mostly for public relations.

“Regulators, they make everything worse,” Bankman-Fried said, using an expletive for emphasis.

In a terse statement, Ray said that Bankman-Fried’s statements have been “erratic and misleading” and “Bankman-Fried is not employed by the Debtors and does not speak for them.”

Ray noted that many of the companies in the FTX Group, particularly those in Antigua and the Bahamas, didn’t have appropriate corporate governance and many had never held a board meeting. Ray also addressed the use of corporate funds to pay for homes and other items for employees.

“In the Bahamas, I understand that corporate funds of the FTX Group were used to purchase homes and other personal items for employees and advisors. I understand that there does not appear to be documentation for certain of these transactions as loans, and that certain real estate was recorded in the personal name of these employees and advisors on the records of the Bahamas,” he said.

So far, debtors have found and secured “only a fraction” of the group’s digital assets that they hope to recover, with about $740 million of cryptocurrency secured in new cold wallets, which is a way of holding cryptocurrency tokens offline, said Ray.

Ray was named CEO of FTX less than a week ago when the company filed for bankruptcy protection and its CEO and founder Bankman-Fried resigned. The embattled cryptocurrency exchange, short billions of dollars, sought bankruptcy protection after the exchange experienced the crypto equivalent of a bank run.

In its bankruptcy filing, FTX listed more than 130 affiliated companies around the globe. The company valued its assets between $10 billion to $50 billion, with a similar estimate for its liabilities.

Bankman-Fried was recently estimated to be worth $23 billion. His net worth has all but evaporated, according to Forbes and Bloomberg, which closely track the net worth of the world’s richest people.

FTX’s failure goes beyond finance. The company had major sports sponsorships as well, including Formula One racing and a sponsorship deal with Major League Baseball. Miami-Dade County decided Friday to terminate its relationship with FTX, meaning the venue where the Miami Heat play will no longer be known as FTX Arena. Mercedes was planning to remove FTX from its race cars starting last weekend.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Associated Press

Vermont settles religious schools tuition lawsuits

The Vermont Agency of Education and several school districts will pay tuition costs and legal fees to five families to settle lawsuits challenging the state’s practice of not paying for students to attend religious schools if their towns do not have a public school. In court filings late Wednesday, the two sides agreed to dismiss […]
16 hours ago
FILE - Former film producer Harvey Weinstein appears in court at the Clara Shortridge Foltz Crimina...
Associated Press

Weinstein lawyer in closing: ‘Tears do not make truth’

LOS ANGELES (AP) — An attorney for Harvey Weinstein at his Los Angeles rape and sexual assault trial told jurors Thursday that prosecutors’ case relies entirely on asking them to trust women whose testimony showed they were untrustworthy. “Take my word for it,” Jackson told jurors in his closing argument. “Five words that sum up […]
16 hours ago
FILE - Democratic Arizona Gov.-elect Katie Hobbs speaks at a victory rally, Tuesday, Nov. 15, 2022,...
Associated Press

Arizona judge orders county to immediately certify election

PHOENIX (AP) — An Arizona judge on Thursday ordered Cochise County officials to certify the midterm election results by the end of the day, saying Republican supervisors broke the law when they refused to sign off on the vote count by this week’s deadline. Two Republicans on the county’s three-member board of supervisors have not […]
16 hours ago
Associated Press

10 Los Angeles students appear to OD on cannabis edibles

LOS ANGELES (AP) — Ten Los Angeles students appear to have overdosed on cannabis edibles Thursday at their middle school in the San Fernando Valley, officials said. The students, between 13 and 14 years old, were in mild to moderate distress at Van Nuys Middle School around 10:30 a.m., according to the Los Angeles Fire […]
16 hours ago
Associated Press

How major US stock indexes fared Thursday 12/1/2022

Stocks ended mixed after an uneven day of trading and bond yields fell broadly after the government reported that a measure of inflation that’s closely watched by the Federal Reserve eased in October. The S&P 500 ended 0.1% lower Thursday. The benchmark index is coming off its second straight monthly gain. A day earlier, markets […]
16 hours ago
Associated Press

Salesforce, Lands’ End fall; Splunk, Synopsys rise

NEW YORK (AP) — Stocks that traded heavily or had substantial price changes Thursday: Salesforce Inc., down $13.25 to $147.00. Bret Taylor is resigning as as Co-CEO of the customer-management software developer . Synopsys Inc., up $18.30 to $357.84. The maker of software to test and develop chips gave investors a strong profit forecast. Snowflake […]
16 hours ago

Sponsored Articles

...
Children’s Cancer Network

Children’s Cancer Network celebrates cancer-fighting superheroes, raises funds during September’s Childhood Cancer Awareness Month

Jace Hyduchak was like most other kids in his kindergarten class: He loved to play basketball, dress up like his favorite superheroes and jump as high as his pint-sized body would take him on his backyard trampoline.
...
Day & Night Air Conditioning, Heating and Plumbing

Here are 4 signs the HVAC unit needs to be replaced

Pool renovations and kitchen upgrades may seem enticing, but at the forefront of these investments arguably should be what residents use the most. In a state where summertime is sweltering, access to a functioning HVAC unit can be critical.
...
Day & Night Air Conditioning, Heating and Plumbing

Ways to prevent clogged drains and what to do if you’re too late

While there are a variety of ways to prevent clogged drains, it's equally as important to know what to do when you're already too late.
Exec who cleaned up Enron calls FTX mess ‘unprecedented’