FTX Managed Critical Accounting Via Slack, New CEO Testifies

The collapse and fraud associated with FTX is “worse than Enron,” Ray said, who oversaw the liquidation of the commodity and services company in 2007

article-image

Keerthi Satheesh/Shutterstock.com modified by Blockworks

share

Now-bankrupt FTX may have experienced financial trouble for years before the public became aware, the exchange’s new CEO testified Tuesday. 

John Ray, who took over to handle the exchange’s restructuring, appeared before lawmakers for the first of several expected hearings to discuss the fraud and what’s next for customers. 

“What was first disclosed to the public happened around Nov. 2, But when this began was months, if not earlier, years,” Ray said. “Investigation is continuing…but this is not something that happened overnight.” 

Bankman-Fried, who was expected to appear virtually before he was arrested in the Bahamas Monday evening, likely knew far more than he has let on in recent interviews, Ray added. 

The 30-year-old founder faces several charges in the US, including wire fraud, conspiracy, securities fraud conspiracy and money laundering. 

FTX’s restructuring team has secured more than $1 billion in assets so far, Ray said, which are now being held in cold storage for security. The team anticipates it will take additional “weeks, if not months” to recover additional assets.

The majority of FTX’s creditors were clients of FTX.com — Bankman-Fried’s flagship global exchange headquartered in the Bahamas — and not based in the US, Ray added. 

FTX’s collapse and associated fraud is “worse than Enron,” the veteran insolvency expert said, primarily because FTX’s management system was so inappropriately structured. Ray oversaw liquidation of the commodity and services giant in 2007.

“This one is unusual and unusual in the sense that literally, there’s no record keeping whatsoever,” Ray said of FTX. 

“In the absence of record keeping, employees would communicate invoicing and expenses on Slack, which is essentially a way of communicating in chat rooms.” 

The exchange also used online accounting platform QuickBooks, a product more appropriate for mid-sized companies than multibillion-dollar corporations, Ray said. 

“There was no sophistication whatsoever,” Ray said. “There was an absence of any.” 

Sam Bankman-Fried crypto bill still in play

In Tuesday’s Congressional session, lawmakers were primarily concerned with getting to the bottom of exactly how FTX ended up in this situation.

Still, some used the opportunity to express greater concerns about the digital asset industry as a whole. 

“For five years I’ve been trying to ban American investments in crypto,” Rep. Brad Sherman, D-Cali., said. “I’m the only member of the House to get an F from the only crypto promoting organization that rates members of Congress.” 

Members of Congress and the Securities and Exchange Commission failed to protect investors by neglecting to investigate the exchange and its founder, Sherman said. 

“Don’t trash Sam Bankman-Fried and then pass his bill,” Rep. Sherman urged, referring to the Digital Commodities Consumer Protection Act, which Bankman-Fried advocated for prior to the exchange’s public collapse. 

As of Tuesday morning, Bankman-Fried is the only person associated with FTX who faces criminal charges. 

When asked if Bankman-Fried’s right-hand associates, namely Ryan Salame, co-CEO of FTX, and Caroline Ellison, Alameda Research’s CEO, would face prosecution, Ray only said his team would turn over any relevant information found.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

kamino cover.jpg

Research

Kamino has solidified its position as the leading money market on Solana and is emerging as a DeFi bluechip. Although DeFi competition is fierce, Kamino has kept iterating on its product to provide the best-in-class UX, paired with a robust risk management framework and battle-tested infrastructure. Given the rollout of Kamino Lend V2, the protocol may scale aggressively over the coming months, penetrating previously untapped markets in Solana DeFi.

article-image

Also in the tokenized fund space, Franklin Templeton launches on Base and Securitize hits $1 billion in tokenized RWA onchain

article-image

It turns out that bitcoin never actually hit an all-time high in March. Thanks a lot, inflation.

article-image

Spire, Citrea and Nillion also announced raises this week

article-image

The latest recipient of an SEC Wells notice is a Web3 gaming company

article-image

Thursday’s selloff was led by tech stocks, triggered by disappointing outlooks from giants Meta and Microsoft

article-image

Historically, positive returns have been a bit more of a toss-up during the year’s 11th month