John Ray III, the new CEO of collapsed crypto exchange FTX, has revealed that the new leadership has managed to recover $1 billion worth of assets.
On Tuesday, Ray, a bankruptcy expert who previously oversaw the aftermath of the collapsed energy giant Enron, testified with the US House Committee on Financial Services on the collapse of FTX.
“Thus far, we have secured more than $1 billion of digital assets to protect against the risk of theft or unauthorized transfers,” he said, noting that he is working with some high-profile crypto research companies, including Chainalysis, BitGo, and Alvarez & Marsal, to trace and secure as much as funds as possible.
Ray consistently mentioned that there was an utter lack of financial and other record-keeping, which makes it difficult to trace funds. He even revealed that FTX used QuickBooks, an accounting software package aimed at small to medium-sized businesses, for recordkeeping.
As reported, in prepared remarks released ahead of his testimony, Ray claimed that FTX collapsed because of the “concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals” who seem to be unfamiliar to virtually any of the systems or controls necessary for a multi-billion company. He added,
“We are working around the clock to locate and secure the property of the estate, a substantial portion of which may be missing, misappropriated, or not readily traceable due to the lack of proper record keeping,”
Ray also noted that one of the biggest issues around FTX and Alameda Research, which were supposed to act as two separate companies, was that they commingled user funds, allowing Alameda to use FTX customers’ money and make risky financial bets.
A lack of transaction documentation for nearly 500 investments made with FTX Group, the absence of audited or reliable financial statements, and a shortage of financial and risk-management personnel are some other problems that Ray highlighted.
On Monday, Sam Bankman-Fried, the disgraced founder of FTX, was arrested in The Bahamas after US prosecutors formally filed criminal charges against him. According to the government of the Bahamas, SBF is likely to be extradited to the US.
Among the US law enforcement agencies, the Southern District of New York, which is investigating the FTX collapse, confirmed the arrest, while the Securities and Exchange Commission said they had authorized separate charges relating to Bankman-Fried’s “violations of securities laws,”.
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