“Never in my career have I seen such a total failure of corporate controls at all levels of an organization. » John Ray III, the new leader of the bankrupt cryptocurrency exchange FTX, has however seen others: specializing in companies in distress, he became known in particular for having ensured the liquidation of the American giant of Enron Energy in the early 2000s.
But before the Financial Affairs Committee of the House of Representatives of the United States, Tuesday, December 13, he does not mince his words to thrash the previous governance of the company founded by Sam Bankman-Fried, says SBF. In charge of ensuring the restructuring of the company, John Ray III took over the reins of the FTX group on November 11, following the placement of the company under the regime of Chapter XI of the American law, which regulates companies in bankruptcy. .
Stored without encryption
Faced with questions from members of the committee, the leader recalls that he has only been at the head of the group for four weeks and that the investigations will continue for weeks, even months. But it still confirms several of the accusations that previously appeared in the press about the lack of safeguards put in place by FTX management to prevent embezzlement:
“The collapse of the FTX group appears to be the result of the absolute concentration of control in the hands of a very small group of grossly inexperienced individuals, who have implemented none of the systems or controls required for a society to which entrusted other people’s money or assets. »
Specifically, John Ray III points out that the company’s IT tools allowed managers to directly access funds deposited by customers, “without any security checks preventing them from embezzling the funds”. He also explains that certain security keys used to protect several hundred million dollars in cryptocurrencies were stored without encryption or without any particular protection measure. He also confirms that the trading company Alameda, also founded by Sam Bankman Fried, had the capacity to borrow funds belonging to the American subsidiary of FTX to carry out its financial operations, and this in a way “unlimited”, including by borrowing funds deposited by FTX customers.
Incidentally, the new boss of FTX notes that the company’s US subsidiary, FTX.US, was not run as independently as its predecessors had suggested. “Publicly, there was indeed a distinction, he acknowledges. But in fact, the digital assets of the two subsidiaries were hosted in the same infrastructures. »
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