In a series of documents submitted to a Delaware court, the new CEO of FTX, John J. Ray III, attacked Sam Bankman Fried's "unprecedented" bad management techniques. Senior management, lack of expertise, and poor record-keeping were slammed by Ray, who has previously overseen financial disasters like Enron. He also blasted the use of company cash to buy property in the Bahamas.
Ray is working to sort through a complicated tangle that involves numerous businesses that don't seem to have given corporate norms much thought.
For its digital assets, FTX "did not keep appropriate books and records or security controls" used unsecured shared email accounts to access private keys, and continues to this day to be unable to produce a list of those employed by the company as of Nov. 11, he claimed.
"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."
Ray also criticized the lack of independent governance between Alameda and the group of businesses that includes FTX.com, the use of software to hide the "misuse of corporate funds," and the failure to reconcile blockchain positions on a daily basis. This last problem was first brought to light by CoinDesk and contributed to the company's decline.
Corporate monies from FTX Group were "used to purchase homes and other personal items for employees and advisors" in the Bahamas, and assets were assigned to staff members individually without any mention of their having to return any loans, he claimed. A complicated jurisdictional scuffle has now engulfed those trying to salvage something from the ruins of the intricate network of dozens of entities.
The corporation was, in fact, operated from the Bahamas, according to the Bahamas' liquidators, who have claimed that the U.S. portion of the case should be handled in a New York court under Chapter 15, another component of the U.S. bankruptcy code that addresses cross-border failures.
"Having two bankruptcy courts consider related issues simply makes no sense," based on a separate filing on behalf of what remains of FTX Trading, the Antiguan company which filed for bankruptcy in the U.S. "It would result in potentially inconsistent opinions, duplication of efforts, and unnecessary expense." "In terms of the celebrity of Mr. Bankman-Fried, his unconventional leadership style, his incessant and disruptive tweeting since the Petition Date, and the almost complete lack of dependable corporate records, these Chapter 11 Cases are unprecedented."