Taking the helm from founder Sam Bankman-Fried, new FTX CEO John Ray III wrote in a filing with the U.S. Bankruptcy Court for the District of Delaware that he has never seen "such a complete failure of corporate controls and such a complete absence of trustworthy financial information" as what has occured at the collapsing cryptocurrency exchange.
"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," Ray wrote in the filing.
Ray has over 40 years of legal and restructuring experience, and notably served as CEO of Enron after the energy giant fell under scrutiny for claims of fraud and corruption. Upon taking over the failing crypto exchange, Ray has promised to work with regulators as they investigate both the company and Bankman-Fried.
In the filing, Ray lays out damning claims on how FTX handled its cash, writing that the company "did not maintain centralized control" of its cash and that its cash management procedures operating in "absence of an accurate list of bank of accounts and account signatories," as well as "insufficient attention to the creditworthiness" of global banking partners.
Due to its cash management failures, "the Debtors do not yet know the exact amount of cash that the FTX Group held as of the Petition Date," Ray wrote in the filing. Moreover, Ray disclosed that he did not "have confidence" in the accuracy of either balance sheets for FTX and its sister company Alameda Research due to the fact they were "unaudited and produced when the Debtors were controlled by Mr. Bankman-Fried."
The filing is a declaration from Ray of his new role as CEO of FTX and associated business arms to the bankruptcy court of with the company field for Chapter 11 protections earlier this month.
Ray stated in the filing that FTX's management practices under Bankman-Fried included "the use of an unsecured group email account as the root user to access confidential private keys and critically sensitive data ... the absence of daily reconciliation of positions on the blockchain, the use of software to conceal the misuse of customer funds, [and] the secret exemption of Alameda from certain aspects of FTX.com's auto-liquidation protocol."
Notably, Ray wrote that his first mode of actions as CEO would be to establish basic corporate controls and standards, including "accounting, audit, cash management, cybersecurity, human resources, risk management, data protection and other systems that did not exist," when he took over control of the exchange.
The crypto exchange is currently working to account for an accurate statement of cash and crypto assets as it begins to navigate bankruptcy.