FTX CEO John Ray III speaks during a House Financial Services Committee hearing on the FTX collapse at the U.S. Capitol on Tuesday. Photo by Bonnie Cash/UPI | License Photo
Dec. 13 (UPI) -- FTX's new CEO John Ray III, who took the helm of the troubled cryptocurrency exchange after the departure of founder Sam Bankman-Fried, on Tuesday blamed a reckless corporate culture and lack of oversight for the firm's collapse.
Testifying before the House Financial Services Committee, Ray described "unacceptable management practices" and a lack of security controls.
"The FTX group's collapse appears to stem from absolute concentration of control in the hands of a small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls that are necessary for a company entrusted with other peoples money or assets," Ray testified.
Bankman-Fried had been expected to testify before the committee, but he was arrested Monday in Nassau, Bahamas, on a sealed indictment from New York. He was also charged with fraud Tuesday by the Securities and Exchange Commission and the Commodity Futures Trading Commission.
FTX, which was the second-largest cryptocurrency trading platform in the world, lost over $8 billion in customer deposits.
Ray, who took over as CEO in November, told lawmakers bankruptcy was the best course.
"I accepted the position of chief executive officer of FTX in the early morning hours of Nov. 11. Immediately, it became clear to me that Chapter 11 was the best course available to preserve any remaining value of FTX. Therefore, my first act as CEO was to authorize the Chapter 11 filings," Ray testified.
He blamed the company's failure on a reckless corporate culture and lack of oversight.
"The FTX group's collapse appears to stem from absolute concentration of control in the hands of a small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls that are necessary for a company entrusted with other peoples money or assets," Ray said, adding that corporate leadership had improper access to clients' assets.
Under Ray's management, FTX is trying to compensate investors.
"I've implemented a five-part bankruptcy plan, which is detailed in my written statement. Our overarching objective is to maximize value for FTX customers and creditors so that we can mitigate to the greatest extent possible the harm suffered by so many," Ray told the committee.
Bankman-Fried tweeted that the company "has enough to cover all client holdings" on Nov. 7, shortly before stepping down as CEO. When asked about the tweet Ray told the committee the tweet was inaccurate.
In a draft of Bankman-Fried's prepared testimony for the committee, obtained by Forbes on Monday, he outlined his timeline for events leading up the collapse, apologized for the customer losses and complained about the team handling the bankruptcy and his loss of access to data.
"I [expletive] up," he said.