FTX new CEO says crypto platform's collapse 'unprecedented'

John Ray III, the new CEO of embattled cryptocurrency platform FTX, labeled the firm's collapse "unprecedented" on Thursday. 

Ray was appointed CEO last week, after Sam Bankman-Fried gave up control of the company amid its collapse. 

A 'complete failure of corporate controls'

"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 in a bankruptcy court filing in the US state of Delaware. 

Ray has 40 years of experience in the corporate world and oversaw the liquidation of the bankrupt energy firm Enron in 2001. He sharply criticized the leadership style of his predecessor Bankman-Fried and said there was a lack of financial oversight of the company in the Bahamas, where it is headquartered. 

"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, the situation is unprecedented," Ray continued.

Ray said corporate funds of the FTX Group were used to buy homes in the Bahamas and other items for employees. He said debtors had managed to secure "only a fraction" of digital funds that had been lost amid the bankruptcy process.   

Bankman-Fried has not yet commented on Ray's allegations in the court filing. Earlier this week, Bankman-Fried spoke to US news outlet Vox via Twitter, where he disparaged regulators and expressed regret about filing bankruptcy.    

Thursday's court filing revealed that Bankman-Fried's attorneys and father convinced him to declare bankruptcy. Bankman-Fried's father, Joseph Bankman, is a law professor at Stanford University, where he specializes in tax policy. 

What caused FTX's collapse?

FTX's collapse was triggered by reports that Bankman-Fried had used consumer deposits on the platform for trading on his hedge fund, Alameda Research. Crypto outlet Coindesk reported on November 2 that much of Alameda's assets were tied in FTX's signature coin, FTT, raising concerns about the unusually close relationship between the two companies.  

The Coindesk report led to unease among investors, with Binance CEO Changpeng Zhao announcing on November 7 that he would sell all of his company's FTT tokens. This sparked a several-day bank run at the company, causing it to fold.  

Binance then backed out of a deal to buy FTX, adding to the company's woes. 

The liquidity crisis has caused Bankman-Fried's net worth to evaporate. The crypto mogul was worth $23 billion (€22.2 billion) at one point.

FTX had partnerships with Major League Baseball and credit card company Visa. 

The controversy has resulted in calls for greater oversight of crypto exchanges. FTX is currently being investigated by the US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), along with police in the Bahamas. 

wd/fb (AP, AFP, Reuters)