On Tuesday, November 22nd, the first hearing was held in the bankruptcy case of the cryptocurrency exchange FTX. One of the attorneys representing the company, James Bromley, was blunt. “You have witnessed probably one of the most abrupt and difficult collapses in the history of corporate America,” he told a Delaware courtroom. He described FTX as having been run like “the personal fiefdom” of its co-founder and former chief executive, Sam Bankman-Fried, and said that a significant amount of FTX’s assets had either been “stolen or are missing.” The comments came five days after John J. Ray III, FTX’s new C.E.O., filed a document with the federal bankruptcy court of Delaware in which he echoed the same sentiment. “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” Ray wrote in the filing. “From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.” (“I wish that I had been more careful,” Bankman-Fried wrote in a letter to former employees on the day of the hearing, apologizing for FTX’s collapse. “I deeply regret my oversight failure.” Still, the former C.E.O. argued that, had he not given in to the pressure to file for bankruptcy, he could have saved the company.)
The assessment carries enormous weight coming from Ray, who, throughout the course of his forty-plus-year career, has overseen some of the most high-profile company bankruptcies in recent history. He managed the liquidation of the energy-trading firm Enron after its collapse, in 2001, and supervised the bankruptcies of the Canadian telecom company Nortel and the subprime-mortgage company Residential Capital. His report is a harsh indictment of FTX’s leaders, including…
