John Ray, who took over as CEO of FTX exchange amid bankruptcy proceedings, has drafted detailed testimony to prepare for his appearance before the US House Committee on Financial Services.
In testimony provided for the December 13 “FTX Collapse Inquiry, Part I” hearing, Ray reiterated many of the assertions made in bankruptcy court, stating that the bankruptcy collapse was partly due to “the absolute concentration of control in the hands of a very small group of highly inexperienced and unsophisticated individuals.” Ray, who oversaw the liquidation of energy company Enron in the early 2000s, added that FTX’s leadership had “virtually none of the systems or controls in place” necessary to protect consumer assets.
“Never in my career have I seen such an utter failure of corporate controls at every level of an organization, from the lack of financial statements to the total failure of any internal control or governance,” Ray said.
The FTX CEO also disputed the claims of his predecessor Sam Bankman-Fried, who is scheduled to appear at virtually the same hearing. Bankman-Fried has asserted in numerous interviews following the bankruptcy filing of FTX US – the derivatives platform owned by FTX Group – was likely solvent and able to compensate users in certain circumstances.
However, according to Ray’s written statement, “FTX US was not working independently of FTX.com” and the filing of Chapter 11 was necessary to avoid bankruptcy:
“From the time of the filing, I am even more confident that this was the right decision, as the books and records issues at FTX.US and the many relationships between FTX US and the other companies in the FTX Group become clearer.” .
The FTX CEO said on November 16 that Bankman-Fried “has no ongoing role” in the company or its subsidiaries, and “does not speak on their behalf.” Sam Bankman-Fried has continued to give interviews detailing his role in the events leading up to the exchange’s downfall as part of an “apology tour.”
Ray’s breakdown of the events leading up to the bankruptcy filing included FTX client assets “mixed” with Alameda Research assets, the hedge fund using those assets for margin trading, and exposing them to “massive losses.” In addition, FTX Group went on a “spending binge” between 2021 and 2022, acquiring companies and making investments worth approximately $5 billion.
The one in the House of Representatives will be the second hearing on the bankruptcy of FTX, after the one held on December 1 in the Senate Agriculture Committee, in which the chairman of the Commodity Futures Trading Committee, Rostin Behnam, he was the only witness. The Senate Banking Committee has also scheduled a hearing for December 14, at which Hollywood star Ben McKenzie, investor Kevin O’Leary, law professor Hilary Allen and Jennifer Schulp, director of financial regulation studies at the Center for Monetary and Financial Alternatives of the Cato Institute.
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