FTX mess is worse than Enron, says the man overseeing its bankruptcy

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By Geoffrey Smith

AiVIF.com -- The mess at collapsed cryptocurrency exchange FTX is worse than the one at Enron, according to the man in charge of both companies' bankruptcy procedures.

"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," said FTX's new CEO John J. Ray - who also shepherded the Texan energy giant through bankruptcy 20 years ago - in his first filing to the Delaware court overseeing FTX's chapter 11 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," he added.

Various reports have indicated that the gap between FTX's assets and liabilities could be over $8 billion. Ray said he has been unable to find out exactly how much cash the company has, but has so far identified only $564M in unrestricted liquidity.

"The FTX Group did not maintain centralized control of its cash," Ray said. "Cash management procedural failures included the absence of an accurate list of bank accounts and account signatories, as well as insufficient attention to the creditworthiness of banking partners around the world."

Ray was also scathing about the quality of audit work performed for the company and said it could probably not be relied on.

He noted that the website of one of the auditors - a firm named Prager Metis -  referred to it as the "first-ever CPA firm to officially open its Metaverse headquarters in the metaverse platform Decentraland."

Crucially, Ray said he had not found any audited financial statements for the group of companies around Alameda Research, the hedge fund affiliate of FTX that appears to have played a central role in channeling customer funds out of FTX. Alameda was included with over 130 other FTX affiliates in the filing.