•John J. Ray III, appointed after FTX filed for bankruptcy last week, says he’s seen nothing like this case in his 40-year career.
• Ray criticizes FTX’s former CEO, Sam Bankman-Fried, for “erratic and misleading public statements.”
• Another aspect of FTX that came in for criticism was the lack of information retention.
• Former directors of enforcement from both the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) are now part of the team investigating what went wrong inside FTX, Ray confirmed.
FTX in complete disarray
Last week, cryptocurrency exchange FTX filed for bankruptcy after suffering heavy losses in the wake of the truth of the FTT token and Sam Bankman-Fried’s fraudulent activity. Since then, many have been quick to point fingers and assign blame. In a recent interview, John J. Ray III, the trustee appointed to oversee FTX’s bankruptcy case, says he’s never seen anything like this case in his 40-year career — and he has some harsh words for FTX’s former CEO Sam Bankman-Fried.
Ray is particularly critical of Bankman-Fried for what he calls “erratic and misleading public statements” made in the aftermath of the flash crash. These statements, Ray says, served only to “heighten fear and speculation” among FTX’s creditors and investors — and needlessly so, as the losses suffered by FTX were not nearly as severe as initially feared.
FTX lacks retention
Another aspect of FTX that has come in for criticism is the lack of information retention. Former directors of enforcement from both the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) are now part of the team investigating what went wrong inside FTX, Ray confirmed. This is due in part to the fact that FTX did not retain any written records of its board meetings — a highly unusual practice that is sure to raise red flags among regulators.
It remains to be seen exactly how much blame FTX’s management will ultimately shoulder for the exchange’s demise. However, one thing is certain: The lax regulation of cryptocurrencies continues to be a major problem in the industry. Until this issue is addressed, we can expect more stories like this one to make headlines in the months and years to come.