“Never in my life have I seen such a total failure of corporate controls at all levels of an organization. » John Ray III, the new chairman of bankrupt cryptocurrency exchange FTX, nevertheless looked to others: a specialist in distressed companies, he was known in particular for securing them. The liquidation of the American energy giant EnronIn the early 2000s.
But SBF says he didn’t mince his words when he appeared before the U.S. House of Representatives’ Financial Affairs Committee on Tuesday, December 13, to oust the company’s previous administration, founded by Sam Bankman-Fried. Charged with ensuring the company’s restructuring, John Ray III assumed control of FTX Group on November 11, following the company’s establishment under the Chapter XI regime of the US Act, which regulates companies in bankruptcy.
Stored without encryption
Facing questions from members of the committee, the chairman recalled that he had only been chairman of the committee for four weeks and the hearings would continue for weeks, even months. But it still confirms several allegations that have appeared in the press earlier about the lack of safeguards put in place by FTX management to prevent fraud:
“The collapse of the FTX group appears to be the result of concentrating absolute control in the hands of a very small number of inexperienced individuals who rely on other people’s money and implement none of the systems or controls necessary for a society. Or assets. »
Specifically, John Ray III points out that the company’s IT tools allowed managers to directly access funds deposited by customers. “Without any security checks they prevent money laundering”. He also explains that some of the security keys used to protect hundreds of millions of dollars in cryptocurrencies were stored without encryption or any specific security measures. He also confirms that Alameda, a trading company founded by Sam Bankman Fried, had the ability to borrow from its American subsidiary FTX to finance its operations. “unlimited”, including borrowing funds deposited by FTX customers.
Incidentally, FTX’s new boss notes that the company’s US subsidiary, FTX.US, is not operating as independently as its predecessors suggested. “In general, there really was a difference, He agrees. But in reality, the digital assets of the two subsidiaries are hosted on the same infrastructure. »
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