FTX’s Disaster Worse Than Enron’s, Says Who Oversees Its Bankruptcy


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By Geoffrey Smith

Investing.com — The disaster at crashed cryptocurrency exchange FTX is worse than Enron’s, according to the man in charge of the two companies’ bankruptcy proceedings.

“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of reliable financial reporting as what happened here,” said new FTX CEO John J. Ray – who also bankrupted the Texas energy giant 20 years ago – in his first statement to the Delaware court overseeing FTX’s Chapter 11 filing.

“From the compromised integrity of systems and faulty regulatory oversight overseas, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.” , he added.

Various reports have indicated that the gap between FTX’s assets and liabilities could be over $8 billion. Ray said he hasn’t been able to determine exactly how much cash the company has, but has only identified $564 million in unrestricted cash so far.

Ray exposed the essential frivolity of FTX’s corporate culture in painful detail, noting that one of the auditors – a company named Prager Metis – billed itself as the “first-ever accounting firm to open officially its headquarters in the Metaverse, the Decentraland platform”.

More seriously, he pointed out that company funds had been used to buy houses in the Bahamas for employees and advisers. The deal approval process appears to have been just a chat room, in which “a disparate group of supervisors approved disbursements by responding with personalized emojis,” according to Ray.

Despite this, Ray said he believes many FTX employees, including some senior executives, were unaware of the shortfalls or misappropriation of customer funds.

Elsewhere in the filing, Ray confirmed that specific software was used to conceal the hijacking – a line consistent with last weekend’s Reuters report that founder Sam Bankman-Fried had personally installed a “gateway” mechanism. stealth” to allow him to move assets without being detected.

Ray did not specifically blame Bankman-Fried for the software, but blamed him for what he called “erratic and misleading public statements” on social media in recent days that have given the impression that he always speaks on behalf of society. Ray’s task of handling the fallout with US authorities may not have been made easier by Bankman-Fried’s recent comment on Twitter (NYSE:) “F*** regulators, they only make it worse and by the fact that he implied that he was still trying to wrest bankruptcy jurisdiction from Delaware.

Crucially, Ray said he couldn’t find audited financials for the group of companies around Alameda Research, the FTX-affiliated hedge fund that appears to have played a pivotal role in channeling funds. customers outside of FTX. Alameda was included along with over 130 other FTX affiliates in the filing.



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