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The CEO who mopped up Enron is now wading into FTX. And it’s messy…

The new FTX CEO has seen more than his share of dirty deals and badly run companies. This one, he says, is the worst yet

FTX, one of the world’s largest cryptocurrency exchanges recently fell into crisis, with the then CEO Sam Bankman-Fried stepping down from his role and the company filing for backruptcy.

And when a financial web of mystery (given a uniquely crypto spin) goes down, who ya gonna call? Step in the new FTX CEO, John Jay Ray III, who is known for managing the aftermath of some other very prominent company collapses including the Enron fraud scandal. If one man can put the worms back in the can, Ray can though his opening statement as part of the company’s bankruptcy filing turned out to be a little more frank, open and brutal than even the staunchest FTX-sceptic was expecting.

Setting the scene Ray states “I have over 40 years of legal and restructuring experience. I have been the Chief Restructuring Officer or Chief Executive Officer in several of the largest corporate failures in history. I have supervised situations involving allegations of criminal activity and malfeasance (Enron). I have supervised situations involving novel financial structures (Enron and Residential Capital) and cross-border asset recovery and maximization (Nortel and Overseas Shipholding). Nearly every situation in which I have been involved has been characterized by defects of some sort in internal controls, regulatory compliance, human resources and systems integrity.”

So far so correct. Now the killer blow:

“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. 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.”

So essentially, Ray, in all of his years of experience including the fraudulent practices committed by Enron is saying that leadership and practices that resulted in the fall of FTX are the worst he has ever seen… That’s quite the statement.

Behind the facade of FTX

Ray also spoke on the quantitative cryptocurrency trading firm Alameda Research which was also founded by Sam Bankman-Fried “Alameda Research LLC prepared consolidated financial statements on a quarterly basis. To my knowledge, none of these financial statements have been audited. The September 30, 2022 balance sheet for the Alameda Silo shows $13.46 billion in total assets as of its date. However, because this balance sheet was unaudited and produced while the Debtors were controlled by Mr. Bankman-Fried, I do not have confidence in it and the information herein may not be correct as of the date stated.”

Balance sheets and information that hasn’t been officially audited is certainly reason enough for lack of confidence. And in terms of how many users were registered on, Ray and his team have not been able to verify those numbers either, noting that, “Mr. Bankman-Fried claimed that, by the end of 2021, around $15 billion of assets were on the platform, which according to him handled approximately 10% of global volume for crypto trading at the time. Mr. Bankman-Fried also claimed that, as of July 2022, had “millions” of registered users. These figures have not been verified by my team.”

Can it get worse? Yes.

The statement given by Ray doesn’t get any lighter as it goes on, he also shares details that many of the companies under the FTX Group didn’t receive proper governance and that many “never had board meetings.” The bombardment of unsettling news continues as Ray explains that “The FTX Group did not maintain centralised control of its cash. Cash management procedural failures included the absence of an accurate list of bank accounts and account signatories, as well as insufficient attention to the creditworthiness of banking partners around the world.”

Balance statements that are not audited and the absence of accurate bank account lists speak volumes to what was actually happening, or rather, what wasn’t happening behind the scenes at FTX. If it seems like surely, Nothing else can be added to this list of wrongdoings, then you would, unfortunately, be incorrect.

It would seem that it isn’t even possible to determine who exactly has worked for the FTX group, Ray reveals that “The FTX Group’s approach to human resources combined employees of various entities and outside contractors, with unclear records and lines of responsibility. At this time, the Debtors have been unable to prepare a complete list of who worked for the FTX Group as of the Petition Date, or the terms of their employment. Repeated attempts to locate certain presumed employees to confirm their status have been unsuccessful to date.”

And there’s more

The state of FTX’s affairs just continues to unfold. “Unacceptable management practices included the use of an unsecured group email account as the root user to access confidential private keys and critically sensitive data for the FTX Group companies around the world, the absence of daily reconciliation of positions on the blockchain, the use of software to conceal the misuse of customer funds, the secret exemption of Alameda from certain aspects of’s auto-liquidation protocol, and the absence of independent governance as between Alameda (owned 90% by Mr. Bankman-Fried and 10% by Mr. Wang) and the Dotcom Silo (in which third parties had invested).”

Ray goes on to speak of Bankman-Fried and it’s not good. “Mr. Bankman-Fried often communicated by using applications that were set to auto-delete after a short period of time, and encouraged employees to do the same.” While this alone instantly makes the alarm bells in your head begin to go off, we can only imagine the clanging that must be happening within John Jay Ray III.

Ray adds that, “Finally, and critically, the Debtors have made clear to employees and the public that Mr. Bankman-Fried is not employed by the Debtors and does not speak for them. Mr. Bankman-Fried, currently in the Bahamas, continues to make erratic and misleading public statements. Mr. Bankman-Fried, whose connections and financial holdings in the Bahamas remain unclear to me, recently stated to a reporter on Twitter: “F*** regulators they make everything worse” and suggested the next step for him was to “win a jurisdictional battle vs. Delaware”. 

A happy ending?

It may be fair to assume that Ray doesn’t particularly have any sympathy towards the ex-CEO and feels that various misleading statements and attempts to assign blame elsewhere are simply making a bad situation even worse. Ray does however express sympathy towards FTX employees as many wouldn’t have been aware of the severity of FTX’s practices “I believe some of the people most hurt by these events are current and former employees and executives, whose personal investments and reputations have suffered”

Considering the serious nature of all of the inaction and losses caused by FTX, there’s going to be a long drawn-out process to get things on a better path. At the time of writing Sam Bankman-Fried is in the Bahamas and is yet to comment.

Written By

Paige Cook is a writer with a multi-media background. She has experience covering video games and technology and also has freelance experience in video editing, graphic design, and photography. Paige is a massive fan of the movie industry and loves a good TV show, if she is not watching something interesting then she's probably playing video games or buried in a good book. Her latest addiction is virtual photography and currently spends far too much time taking pretty pictures in games rather than actually finishing them.

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