New CEO says FTX mismanagement was worse than Enron: ‘Complete failure’
Zachary Halaschak
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The new CEO of FTX said the company suffered a total management failure and that the mess at the cryptocurrency company is worse than any he’s ever seen, including the historic scandal at Enron.
John Ray, who took over the company from embattled FTX founder Sam Bankman-Fried after it declared bankruptcy, revealed his shock at the situation in a filing in federal bankruptcy court. Ray has overseen some of the largest corporate failures in United States history, including the collapse of Enron.
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“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,” Ray said.
“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,” he added.
The news comes as FTX and Bankman-Fried’s spectacular fall from grace has dominated headlines in the finance and cryptocurrency spaces and has sent bitcoin spiraling downward to two-year lows as investors fret over the contagion.
The company filed for bankruptcy on Friday and announced that Bankman-Fried was stepping down from helming the failing company.
This week, an Oklahoma resident filed a class-action lawsuit against Bankman-Fried and several celebrities, such as Tom Brady, who were involved in promoting the FTX platform and taking advantage of what the lawsuit called “unsophisticated investors.”
“The deceptive and failed FTX Platform was based upon false representations and deceptive conduct,” the suit reads.
In another blow to FTX and Bankman-Fried, the House Financial Services Committee announced that it would hold a hearing in December to investigate the cryptocurrency company’s descent into bankruptcy. The committee expects to hear from the companies and people involved, including Bankman-Fried, Alameda Research, Binance, FTX, and others.
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“The fall of FTX has posed tremendous harm to over one million users, many of whom were everyday people who invested their hard-earned savings into the FTX cryptocurrency exchange, only to watch it all disappear within a matter of seconds,” said Chairwoman Maxine Waters (D-CA).
Bitcoin is now trading at about $16,500 — about 20% lower than where it was at the start of the month before news broke that FTX was crumbling.