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FTX CEO John Ray Blames Collapse on ‘Inexperienced and Unsophisticated Individuals’ in Testimony Following SBF Arrest

According to a news release issued by the Bahamas Attorney General on December 12, the US government has filed criminal charges against SBF and is expected to seek extradition.

According to FTX CEO John Ray III’s statement to the United States Congress on December 13, the insolvent exchange commingled funds and kept wallets’ private keys without encryption.

According to Ray, the lack of corporate controls at FTX was the worst he has seen in his over 40 years of managing bankruptcy cases. He said that the operation of FTX was concentrated in the hands of a “very small number of extremely unskilled and unsophisticated persons” who failed to establish the kind of oversight required for a corporation handling other people’s money.

Earlier in the day, FTX co-founder Sam Bankman-Fried was detained in the Bahamas on US government demands. According to a news release issued by the Bahamas Attorney General on December 12, the US government has filed criminal charges against SBF and is expected to seek extradition.

Damian Williams, the United States Attorney for the Southern District of New York, confirmed the news. According to Williams, SBF “was arrested at the request of the United States Government, based on a secret indictment filed by the SDNY.”

Ray testified that FTX Group engaged in eight improper management practices. These included asset commingling, the lack of audited financial accounts, the lack of independent governance, and a lack of professionals to handle financial and risk management.

Furthermore, the failing exchange’s top management had access to customer cash, they failed to adequately disclose FTX investments, and Alameda had unlimited borrowing.

Ray also emphasized Alameda’s participation in the insolvent exchange’s demise. The CEO claims that FTX mixed users’ assets with Alameda’s trading platform.

Aside from that, Alameda borrowed without limitations from clients’ assets kept at FTX; these monies were utilized for margin trading, resulting in massive losses.

In addition, Alameda transferred “funds to numerous third-party exchanges that were inherently risky, which was worsened by the minimal safeguards afforded in some international countries.”

According to the evidence, FTX embarked on a $5 billion spending spree between late 2021 and 2022. During this time, Ray said that the firm purchased and invested in a number of businesses that “may be worth barely a fraction of what was spent for them.”

Meanwhile, insiders received preferential treatment, receiving over $1 billion in personal loans.

Ray said that attempts are still being made to recover some of the lost cash, maximize value for customers and creditors, and rehabilitate FTX’s relationships with authorities throughout the globe.

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