Never seen such a failure of controls

Date:

Sam Bankman-Fried, founder and chief executive officer of FTX Cryptocurrency Derivatives Exchange, speaks at the annual membership meeting of the Institute of International Finance (IIF) in Washington, DC, on Thursday, October 13, 2022.

Ting Shen | Bloomberg | Getty Images

FTX’s newly appointed CEO, John Ray III, did not mince words in a filing with the U.S. Bankruptcy Court for the District of Delaware, stating that “in his 40 years of legal and restructuring experience” he had “never been treated like this” n had seen a complete failure of corporate controls”. and such a complete absence of reliable financial information as has happened here.”

Ray was formerly Enron’s CEO after the energy titan’s implosion. He promised to work with regulators to investigate FTX founder Sam Bankman-Fried.

In the filing, Ray revealed that he had “no confidence” in the accuracy of the balance sheets for FTX and its sister company Alameda Research, writing that they had been “unreviewed and produced while the Accounts Receivables [FTX] were controlled by Mr. Bankman-Fried.”

The document is a statement from Ray in his new role as CEO of FTX and related entities, which filed for bankruptcy last week in an implosion that rocked the crypto world and shocked, possibly robbed, investors.

Ray berated Bankman-Fried and his management team for what was described as deficient controls over systems and regulatory compliance.

“The concentration of control in the hands of a very small group of inexperienced, inexperienced and potentially compromised individuals” was unprecedented, Enron’s former recovery chief said.

Ray said a “substantial portion” of the assets being deposited with FTX may have been “missing or stolen” following widespread social media reports of the theft of hundreds of millions of cryptocurrencies.

Working with regulators, Ray wrote, the Chapter 11 bankruptcy process would investigate Bankman-Fried’s actions related to the FTX collapse.

Alarmingly, Ray wrote that part of his job would be to implement controls and core business standards such as “accounting, auditing, treasury management, cybersecurity, human resources, risk management, data protection and other systems that did not exist or did not exist”. appropriately, prior to my appointment.”

Bankman-Fried and FTX had “management practices that included using 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 position reconciliation on the blockchain, using software to hide the misuse of client funds.”

Sam Bankman-Fried was not immediately available for comment.

Similarly, the collapse of Bernie Madoff’s Ponzi scheme in 2008 used sophisticated software to hide mislabeled and fraudulent client positions.

FTX is currently working on accurate cash and crypto asset settlement. Ray said it “would not be appropriate for stakeholders or the Court to rely on FTX’s audited financial statements as a reliable indicator of financial conditions.”

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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