‘Grossly Inexperienced’ Management Led to FTX Collapse, New CEO Tells Lawmakers
John Ray, named CEO after Bankman-Fried stepped down last month, says crypto company had ‘absolutely no internal controls whatsoever’
FILE PHOTO: FTX Group CEO John J. Ray III speaks at a U.S. House Financial Services Committee hearing investigating the collapse of the now-bankrupt crypto exchange FTX after the arrest of FTX founder Sam Bankman-Fried, on Capitol Hill in Washington, U.S. December 13, 2022. REUTERS/ Elizabeth Frantz Reuters • December 13, 2022 11:55 am
By Hannah Lang
WASHINGTON (Reuters)—Shortly after U.S. regulators on Tuesday charged FTX founder Sam Bankman-Fried with defrauding investors, its new chief executive told lawmakers the crypto exchange’s implosion stemmed from poor management practices and inexperienced individuals at the helm.
“The FTX group’s collapse appears to stem from absolute concentration of control in the hands of a small group of grossly inexperienced, non-sophisticated individuals,” said John Ray, who was named CEO of FTX after Bankman-Fried stepped down and the company filed for bankruptcy on Nov. 11.
Ray also said there was virtually no distinction between the operations of FTX and Alameda Research, Bankman-Fried’s crypto trading firm, which maintained close ties with his exchange.
“I’ve just never seen an utter lack of record keeping—absolutely no internal controls whatsoever,” Ray told the U.S. House of Representatives Financial Services Committee.
It will take weeks, perhaps months, to secure all the group’s assets, Ray said.
Bankman-Fried was arrested Monday evening in the Bahamas and was set to appear before a magistrate Tuesday. U.S. federal prosecutors on Tuesday alleged that he committed fraud and violated campaign finance laws, and FTX’s founder and former CEO also faces additional charges by U.S. regulators.
The Bahamas attorney general’s office said it expects Bankman-Fried will be extradited to the United States.
Ray said in his testimony that he had hired a new chief financial officer, a head of human resources and administration, and a head of information technology. He has also appointed a board of directors, which is chaired by former U.S. Attorney Joseph Farnan.
Since he took over as CEO, Ray said he has established that customer assets at FTX were commingled with those of Alameda Research. Client funds were used to engage in margin trading, which exposed customers to massive losses, he said.
Ray also addressed why FTX US was included in the bankruptcy filing. Bankman-Fried has expressed confusion about that in media interviews, claiming the
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