- FTX’s new CEO John J. Ray III said its collapse was due to “grossly inexperienced” leadership.
- Ray prepared remarks for the House Financial Services Committee, and is set to testify on Tuesday.
- Former CEO Sam Bankman-Fried was arrested in the Bahamas on Monday.
FTX’s new CEO John J. Ray III blamed the crypto lending firm’s collapse on former leadership saying they were “grossly inexperienced and unsophisticated,” in prepared remarks shared by the House Financial Services Committee on Monday.
Speaking on Tuesday, Ray will say: “FTX Group’s collapse appears to stem from the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls that are necessary for a company that is entrusted with other people’s money or assets.”
Ray’s searing comments are directed towards FTX’s previous leadership including former CEO Sam Bankman-Fried, and said that he had never “seen such an utter failure of corporate controls at every level of an organization,” including the lack of financial statements and “complete failure” of internal management.
Ray, an insolvency expert of over 40 years who oversaw the bankruptcy of energy giant Enron, was called to testify before the House Financial Services Committee on Tuesday morning.
Bankman-Fried was also expected to testify remotely from the Bahamas before he was arrested by Bahamian authorities on Monday, based on an indictment accusing him of “orchestrating a massive years-long fraud.”
FTX filed for Chapter 11 bankruptcy in November alongside 130 other affiliated groups including Alameda Research, which are called “FTX Group” altogether. The collapse exposed the mishandling of customer funds including transferring funds to Alameda Research.
Ray was appointed to lead FTX’s restructuring and rebuked management in the bankruptcy filing saying: “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.”
“This situation is unprecedented,” he added.
Ray revealed in his remarks to the House Committee that the FTX Group went on a $5 billion spending binge from late 2021 through 2022 to buy a number of businesses “worth only a fraction of what was paid for them.” He also said over $1 billion went on “loans and other payments” to insiders.
FTX did not immediately respond to Insider’s request for comment about Ray’s remarks.
