John Ray, who was appointed CEO of crypto-exchange FTX in bankruptcy proceedings, has given detailed written testimony prior to his December 13 appearance before United States House Financial Services Committee.
Ray provided testimony for the “Investigating The Collapse of FTX Part I” hearing. reiterated many of the claims made in bankruptcy court, saying the collapse of the collapse was due in part to “the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals.” Ray, who oversaw the liquidation of energy company Enron during the early 2000s, added that the leadership at FTX had “failed to implement virtually any of the systems or controls” 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 a complete failure of any internal controls or governance whatsoever,” said Ray.
The FTX CEO also disputed claims made by Sam Bankman-Fried his predecessor. He was scheduled to appear virtually at that hearing. Bankman-Fried has said in many interviews following the exchange’s bankruptcy filing that FTX US — the derivatives exchange under FTX Group — was likely solvent and capable of making users whole under certain circumstances.
However, according to Ray’s written statement, “FTX US was not operated independently of FTX.com” and a Chapter 11 filing was necessary to avoid a bank run:
“Since the time of the filing, I have become even more confident this was the correct decision, as the books and records issues at FTX US and the many relationships between FTX US and the other FTX Group companies become clearer.”
The FTX CEO said on Nov. 16 that Bankman-Fried “has no ongoing role” at the firm or its subsidiaries, and “does not speak on their behalf.” SBF 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 customer assets from FTX “commingled” with assets from Alameda Research, with the hedge fund using said assets for margin trading and exposing customers to “to massive losses.” In addition, FTX Group went on a “spending binge” from 2021 to 2022, acquiring firms and making investments ofroughly $5 billion.
Related: SBF is absent from the Senate hearing, but SBF promises to testify before the House: Law Decoded
After the Dec. 1 hearing by the Senate Agriculture Committee in which Rostin Behnam, the chair of the Commodity Futures Trading Commission, was the only witness, the House hearing will focus on the fall of FTX. The Senate Banking Committee has also scheduled a hearing for Dec. 14, with Hollywood star Ben McKenzie, investor Kevin O’Leary, law professor Hilary Allen, and Jennifer Schulp, the director of financial regulation studies at the Cato Institute’s Center for Monetary and Financial Alternatives, appearing as witnesses.