collapsed due to FTX

Cryptocurrency exchange FTX Trading had no reliable financial statements, allowed senior executives to redirect customer funds and didn’t properly document transactions, its new CEO plans to tell Congress on Tuesday.

John J. Ray III, who stepped in to lead FTX after it filed for bankruptcy a month ago, is set to testify before the House Financial Services Committee at 10 a.m. Eastern Time. Sam Bankman-Fried, founder of FTX, is also scheduled to speak.

Bankman-Fried gave an interview at the New York Times DealBook Summit last month in which she claimed not knowing the limits about FTX’s problems and said that, while it made mistakes, it did not commit fraud.

“unsophisticated person”

Ray called the management of FTX the worst he had ever seen in his 40-year career, which included overseeing the Enron bankruptcy. In prepared remarks shared by the committee on Monday, he said that FTX collapsed because a “very small group of grossly inexperienced and unsophisticated individuals” who were running the company “failed to implement almost any system or control that a company should have.” are required for. entrusted with other people’s money or property.”

Among the failures that Ray summarizes: FTX Group’s computers allowed senior executives to get into customer accounts and redirect assets; Alameda, the company’s research arm, can borrow unlimited amounts of money from FTX; Transactions were not documented for approximately 500 investments made with FTX Group; the company did not provide audited or reliable financial statements; And FTX did not have financial and risk-management personnel.

FTX Co-Founder Sam Bankman-Fried Defends Crypto Exchange Collapse


The testimony also said that FTX loaned more than $1 billion to insiders and that the company went on a “spending binge” late last year, buying up $5 billion worth of companies that Ray Said to be “only a fraction” of that amount.

FTX, once the world’s second largest crypto exchange, raised nearly $2 billion from investors over three years before suddenly collapsing in November. Bahamas-based company shocked the crypto industry when it declared Chapter 11 bankruptcy last month. Bankman-Fried, who has been giving interviews from the Bahamas, is under investigation in the US and abroad for possible securities violations.

ftx due at least $3 billion to creditorsAccording to the bankruptcy filing.

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