- FTX's new CEO issued scathing remarks about Sam Bankman-Fried in a bankruptcy filing on Thursday.
- He cited "inexperienced" execs, auto-deleting messages, and "a complete failure of corporate controls."
FTX's new CEO has issued a scathing rebuke of the collapsed cryptocurrency exchange's cofounder and former boss, Sam Bankman-Fried.
"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," John J. Ray said in a declaration on Thursday as part of the company's Chapter 11 bankruptcy proceedings.
Ray has overseen the aftermath of the "largest corporate failures in history" in his 40-plus years of legal and restructuring experience – including the liquidation of Enron.
"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 wrote.
FTX was set up by Bankman-Fried in 2019, when he was 27.
FTX, Bankman-Fried's trading firm Alameda Research, and about 130 affiliated companies have begun Chapter 11 bankruptcy proceedings. Bankman-Fried resigned as CEO of FTX on Friday, which Ray said was agreed following a meeting with senior FTX Group execs and consultation with his laywers. Bankman-Fried agreed to resign at around 4:30 a.m. ET, Ray wrote.
In the declaration, Ray said that debtors were unable to rely on many of FTX's financial statements because they were unaudited. He said he also lacked confidence in them because they were produced while the company was controlled by Bankman-Fried.
Ray said that FTX Group generally lacked liquidity forecasting, didn't keep an accurate list of bank accounts and account signatories, and paid "insufficient attention" to the creditworthiness of its global banking partners.
Ray said that FTX "did not keep appropriate books and records, or security controls, with respect to its digital assets." For example, it used an unsecured group email account to access confidential private keys and critically-sensitive data, used software to conceal the misuse of customer funds, and secretly exempted Alameda from certain aspects of FTX.com's auto-liquidation protocol.
Ray said that many companies in the FTX Group also lacked "appropriate corporate governance," with some of the entities never holding board meetings.
"One of the most pervasive failures of the FTX.com business in particular is the absence of lasting records of decision-making," Ray wrote. He said that Bankman-Fried often used apps where messages auto-deleted after a set time period and encourage other employees to do the same.
Some entities associated with FTX Group may have also bought homes for their staff and advisors using corporate funds, he said.
FTX Group had "unclear records and lines of responsibility" related to its staff and contractors, Ray wrote. He said that debtors had been unable to create a complete list of the group's employees.
Bankman-Fried didn't immediately respond to a request for comment from Insider.