Recall that John Ray III was in charge of the bankrupt energy giant Enron Corporation in 2001. At the time, it was the largest corporate bankruptcy scandal in U.S. history, but Ray still managed to return at least $20 billion to defrauded investors.

In fact, Ray’s professionalism can be judged by his recent decisions. It will be recalled that the lawyer published relevant statements in which he distanced himself from the current activity of Sam Bankman-Fried. Still, the latter is now active, which among other things angered members of the blockchain community who lost money due to the collapse of FTX. John has therefore made it clear that Sam’s comments and what is happening with the exchange today are different unrelated things.

By the way, the FTX website went down the day before. So this approach certainly makes sense.

FTX cryptocurrency exchange website down

What will happen to the FTX cryptocurrency exchange

John Ray has filed FTX’s bankruptcy proceedings in Delaware Federal Court with some very interesting remarks. In the document, he briefly described his 40 years of experience and mentioned the complexity of the cases he had to deal with. Nevertheless, the crisis surrounding the Sam Bankman-Fried exchange is considered by the lawyer to be unprecedented. Here is a relevant rejoinder.

Never in my career have I seen such a complete failure of corporate control and such a lack of reliable financial information as I have seen here. From the compromised structure of the entire system and the failure to deal with regulators – to the concentration of control in the hands of a very small, inexperienced and potentially untrustworthy group of people. The situation is unprecedented.

Part of John Ray’s statement

That same group of people are likely to be close subordinates of Sam Bachmann-Fried, with whom he was in close contact and shared apartments in the Bahamas. The juicy details of what has been going on all along have been published on the blog of Caroline Allison, now a former head of trading firm Alameda Research.

Ex-CEO of FTX Sam Bankman-Fried

There are many other interesting details to be found in the lawyer’s filing. For example, Alameda Research, which just happened to be founded by Bankman-Fried, had previously issued loans to Paper Bird, which was also founded by Bankman-Fried.

Excerpt on the Bankman-Fried loan from Alameda

On FTX’s balance sheet, the fair value of the exchange’s crypto reserves was just $659. As a reminder, the trading platform was the second-largest in the industry in terms of trading volumes.

Part of FTX’s balance sheet statistics

The accounting within Bankman-Frieda companies is particularly noteworthy. John Ray reported that the management of the bankrupt organisations had no central control over cash. More specifically, they did not have a clear list of bank accounts held by Alameda Research and FTX.

The lawyer has tried to distance himself from the Bankman-Fried persona because his actions only complicate the process of restructuring the companies’ debts. Here is a quote from a document on the matter published by the news outlet Decrypt.

Mr. Bankman-Fried, currently in the Bahamas, continues to make inconsistent and misleading public statements. Mr Bankman-Fried, whose connections and financial assets in the Bahamas remain unclear to me, recently told a reporter on Twitter, “To hell with the regulators, they make things worse” and suggested that the next step for him would be to “win a legal battle against the state of Delaware.

As part of the declaration of all the information he has discovered so far, Ray has also repeatedly questioned statements made by Bankman-Fried during his activity as CEO of FTX. In other words, the lawyer has no confidence in the financial statements produced under the former CEO. He continues.

Mr Bankman-Fried also claimed that FTX.com had “millions” of registered users as of July 2022. These figures have not been verified by my team.

Finally, even Bankman-Fried’s communication with his own team was problematic. Now, lawyers do not have a clear chronology of management decisions, as the former FTX CEO handed out instructions predominantly in messengers with auto-delete messages after a certain deadline. Given the complexity of the aforementioned circumstances, the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) enforcement directors will be involved in the debt restructuring process.

That’s not all. As noted in the documents, FTX founder Sam Bankman-Fried will be investigated.

Document that mentions the Sam Bachman-Fried investigation

Particularly bizarre in the whole story was the news that the liquidation protocol of the exchange ignored FTX company Alameda due to the non-public changes made to it. Accordingly, the trading company’s positions were not liquidated in the face of abrupt changes in market conditions. And this is at the very least unfair treatment of a certain market participant.

Document that mentions no liquidation of Alameda Research’s positions


We don't think all these details are good for Sam Bankman-Fried's already suffering reputation. Obviously, they will eventually culminate in the justice problems that are now threatening the FTX founder - and from different countries at that. The case involves both the Bahamas, where the company was registered, and the US. Earlier, the US Securities and Exchange Commission (SEC) made it clear that the whole situation with the collapse of the platform had attracted its interest.

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