Collapsed cryptocurrency exchange FTX suffered a “complete failure of corporate controls” under founder Sam Bankman-Fried, the company’s new chief executive said on November 17, 2022, calling the situation “unprecedented.” Image for representation.
| Photo Credit: AFP
New FTX CEO John Ray said there was flawed regulatory oversight and a lack of corporate control of the bankrupt crypto exchange founded by Sam Bankman-Fried in a U.S. court filing on Thursday.
In the highest-profile crypto blowup to date, FTX filed for protection in the United States on November 11, 2022, after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal.
“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,” Mr. Ray said in the filing, which was lodged with the District of Delaware bankruptcy court.
“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,” Mr. Ray added in the filing.
Mr. Ray, a bankruptcy specialist, who took over from Mr. Bankman-Fried as CEO when FTX filed for protection on Friday, did not name any specific overseas regulator in that part of the 30-page filing.
FTX founder, Mr. Bankman-Fried, did not immediately respond to a request for comment on the allegations contained in the filing.
In the filing, Mr. Ray also alleged that Mr. Bankman-Fried had made “erratic and misleading public statements”, citing an exchange with a reporter on Twitter.
Vox on Wednesday published an interview with Mr. Bankman-Fried in which he said he regretted his decision to file for bankruptcy protection and criticised regulators.
He later attempted to douse the fire, saying the basis of the interview was an exchange of messages that was not supposed to be public.
Mr. Bankman-Fried said he expanded his business too fast and failed to notice signs of trouble at the exchange, the New York Times reported earlier this week.
“Had I been a bit more concentrated on what I was doing, I would have been able to be more thorough,” Mr. Bankman-Fried was quoted as saying in an interview with the newspaper.
‘Misplaced’
As the effects of the FTX collapse were felt across the globe, Singapore state investor Temasek Holdings, an FTX investor, also made reference to Mr. Bankman-Fried on Thursday in a detailed statement as it said it would write down the value of its entire investment of $275 million.
“It is apparent from this investment that perhaps our belief in the actions, judgment and leadership of Sam Bankman-Fried … would appear to have been misplaced,” Temasek said.
Other investors including Softbank Group’s Corp’s vision fund and Sequoia Capital have also written down their investments in the exchange to zero, as ripples from FTX’s bankruptcy continue to be felt around the world.
Major crypto player Genesis Global Capital suspended customer redemptions in its lending business on Wednesday, in response “to the extreme market dislocation and loss of industry confidence caused by the FTX implosion”.
Financial and markets authorities around the world reacted to FTX’s failure, with Singapore’s Finance Minister saying on Thursday that its collapse has raised “very serious allegations that amount to potential fraud”.
While Indonesia ordered crypto exchanges to stop trading FTX tokens, Brazilian crypto advocates are referencing FTX’s implosion as they urge lawmakers to give final approval on a bill to boost oversight of the cryptocurrency industry.
