John J. Ray III, the official who is responsible for reorganizing the fallen cryptocurrency behemoth FTX informed lawmakers that the catastrophic collapse of the company was due to failings on the part of its former management. The new CEO of FTX has released his prepared remarks ahead of tomorrow’s Congressional hearing, which SBF has confirmed to testify, although virtually.
Lack Of Governance
In his remarks for the House Financial Services Committee, John Ray largely echoed his prior remarks regarding the complete lack of governance under Sam Bankman-Fried’s leadership.
He states that,
The FTX Group’s collapse appears to stem from the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals.
Ray further made it clear that FTX US, the exchange’s American branch, was a part of Chapter 11 since FTX US was not run independently of FTX(.)com.” Ray stated that the bankruptcy filing assisted in preserving present assets and preventing a “bank run” on FTX US.
John J Ray’s Scathing Remarks
Additionally, Ray highlights some of the inappropriate management practices that have been found thus far at the FTX Group. These activities include the use of computer infrastructure that gave individuals in senior management access to systems that stored customer assets; without security controls to prevent them from redirecting those assets.
Ray remarked that certain private keys that had access to hundreds of millions of dollars in cryptocurrencies were stored without any sort of effective security measures or even basic encryptions.
Read More: FTX News: SBF Says Senate Hearing “Not Currently Scheduled” For Attending
He even outlined how Alameda Research, the crypto hedge fund within the FTX Group had the freedom to borrow funds held at the FTX crypto exchange, which were later utilized for its own trading and investment purposes, without any effective limits, rules or boundaries.
And the most noted one being — the active “commingling of assets” occurring in the FTX empire under SBF’s purview.
Read More: SBF Jail: Is FTX Founder Trying To Escape Arrest With Virtual Testimony?
Although, Sam Bankman-Fried has denied the above claim multiple times in his recent interviews, it appears Ray might have landed on strong evidence after saying it under oath on Monday afternoon.
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