The new FTX CEO John J. Ray III has cited that unsophisticated and grossly inexperienced individuals caused the firm’s downfall. The remarks come before a House Financial Services Committee hearing on December 14. Ray III, who is in charge of restructuring the FTX finances, claims that he has never seen such as utter failure of corporate controls.
Tomorrow, Washington, D.C. lawmakers plan to grill the former CEO of the Bahamas-based exchange, Sam Bankman-Fried. However, following Bankman-Fried’s arrest that took place earlier today, the planned grilling could be rescheduled. Before its collapse last month, FTX was among the biggest crypto exchanges in the world.
Ray III says even though the investigations are still ongoing, the FTX collapse seems to stem from the absolute concentration of control in the hands of a few individuals. These individuals failed to implement virtually the systems or controls vital for a firm entrusted with people’s funds or assets.
New FTX CEO Uncovers Illegal Practices Engineered by Firm’s Senior Leaders
RAY III continues claiming that some of the unacceptable practices that caused FTX’s collapse included systems configured on the platform that allowed the company leaders to access users’ assets. Also, FTX’s sister firm, Alameda Research, had the power to utilize users’ crypto for its investments or trading.
Alameda Research is a trading company founded by Sam Bankman-fried. Ray III has accused the company of using FTX users’ crypto assets to make risky bets. According to him, Alameda Research traded on FTX with leverage by borrowing more money to place bets against other FTX users and allegedly played by its own rule set.
New FTX CEO Disagrees with Bankman-Fried’s Claims on FTX US Solvency Issue
Ray III also claims that FTX US, an American firm under Bankman-Fried leadership, did not operate independently from the Bahamas-based exchange. In addition, he disagrees with Bankman-Fried’s statement that FTX US was solvent enough to continue processing users’ withdrawals.
Ray III says Chapter 11 protection was vital to avoid a bank run at FTX US and also to allow its team the time it needed to identify and protect the firm’s assets. He adds that he is confident that Chapter 11 for FTX US was the right move as books and records issues at FTX US and the relationships between FTX US and other FTX Group firms become clearer.
