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CEO Who Oversaw Enron Bankruptcy Floored at 'Unprecedented' Scale of FTX Failure

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If John Ray III says the finances of recently collapsed cryptocurrency company FTX are a mess, that’s saying something.

Ray, a lawyer specializing in insolvency cases, and who has taken over as the new CEO of bankrupt FTX, held a similar role when energy giant Enron went belly-up in 2001.

Of FTX, Ray said: “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,” according to Fortune.

“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 said.

Enron represented the worst corporate failure in U.S. history at the time, liquidating life savings, sending executives to jail and destroying the venerable accounting firm Arthur Andersen.

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FTX, Ray says, is worse.

He said many companies in the Caribbean that were part of the FTX Group lacked proper governance, Fortune reported. Some didn’t even have board meetings.

Cash management was sloppy, and corporate monies bought homes and other goodies for employees.

“In the Bahamas, I understand that corporate funds of the FTX Group were used to purchase homes and other personal items for employees and advisors,” according to Ray.

Was there anything criminal happening at FTX?

“I understand that there does not appear to be documentation for certain of these transactions as loans, and that certain real estate was recorded in the personal name of these employees and advisors on the records of the Bahamas,” he said.

Described by Fortune as “the crypto equivalent of a bank run,” the FTX exchange came up short billions of dollars, prompting a November 11 filing for bankruptcy and its founder and CEO Sam Bankman-Fried to resign.

He is alleged to have taken clients’ funds and loaned them to Alameda Research, a trading company that he had founded. He is being sued on claims that FTX was a Ponzi scheme.

Bankman-Fried is second only to George Soros in making campaign donations to Democrats.

His mother, Barbara Fried, a Stanford professor of law, and his brother, Gabe Bankman-Fried, have resigned from Mind the Gap, a dark-money organization with close ties to Democrats.

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Investigating the FTX failure are the U.S. Department of Justice, the Securities and Exchange Commission, the Commodity Futures Trading Commission and federal prosecutors.

At first thought, it would seem unlikely for the Justice Department to go after a big donor to Democrats; however, if Sam Bankman-Fried’s money is gone, he may be, too.

And the question remains regarding how this will affect investor confidence in cryptocurrency.

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Mike Landry, PhD, is a retired business professor. He has been a journalist, broadcaster and church pastor. He writes from Northwest Arkansas on current events and business history.
Mike Landry, PhD, is a retired business professor. He has been a journalist, broadcaster and church pastor. He writes from Northwest Arkansas on current events and business history.




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