Sam Bankman-Fried (SBF) founded FTX in 2019 and served as CEO ever since. However, the crypto exchange suffered a monumental meltdown this month, which caused SBF's $16 billion fortune to vanish overnight and forced him to declare Chapter 11 bankruptcy on November 11. At the same time, SBF also stepped down from his position as CEO and handed over the reins to a John Ray III. But who is he and why has he been appointed FTX's new CEO? Tag along to find out.
Who is John Ray III? John Ray III is a Chicago-based lawyer who has served as the restructuring officer in several high-profile bankruptcy cases. He is often referred to as the 'turnaround titan' for successfully mopping up some of the biggest corporate collapses in US history. He is best known for leading Enron, the disgraced energy giant, through its infamous bankruptcy proceedings.
Enron was once one of the largest companies in the United States and was also known as a Wallstreet Darling. However, the firm's leadership used fake holdings and off-the-book accounting practices to fool regulators, eventually leading to its downfall. The company disintegrated almost overnight, sending shockwaves throughout the industry. In December 2001, the company became Enron Creditors Recovery Corp. after initiating insolvency proceedings. It was and still is the largest-ever Chapter 11 bankruptcy filing in US history.
John Ray handled the liquidation of Enron's operations and successfully put more than $20 billion back into the hands of investors. A few years later, in 2003, he was called back to fight a civil lawsuit against Deutsche Bank, Citigroup, and other banks accused of manipulating Enron's finances. This action resulted in a further $7 billion being distributed to creditors.
Also Read: Crypto firms affected by the FTX crash and the extent of their exposure to the bankrupt exchange Before Enron, John Ray III was a general counsel at Fruit of the Loom, a prominent American company that manufactures clothing, casual wear, and underwear. However, the company filed for bankruptcy in 1999, and John Ray found himself managing the sale of Fruit of the Loom's assets. He seemed to have enjoyed the role and formed Avidity Partners, a firm specialising in giant bankruptcies. Besides Enron, John Ray III is known for overseeing the bankruptcy and restructuring proceedings of other prominent companies, such as National Century Financial Enterprises, Pac-West Telecomm, Nortel Networks, and the Overseas Shipholding Group.
What has John Ray done at FTX so far? One of the first things John Ray did at FTX was to file for Chapter 11 bankruptcy. He said it was an important step for "developing plans to restructure the crypto exchange." Ray then appointed the renowned firm Sullivan and Cromwell as restructuring advisors. Finally, he announced that Alvarez and Marsal, another top law firm, would take an advisory role in the bankruptcy proceedings.
Over the next few days, John Ray tore into SBF and how he managed FTX, which was once the second-largest cryptocurrency exchange in the world. In his bankruptcy filing, John Ray says he has never seen "such a complete failure of corporate controls and such a complete absence of trustworthy financial information." He also questioned the accuracy of FTX balance sheets, calling them "unaudited and produced while the Debtors [FTX] were controlled by Mr. Bankman-Fried." More worryingly, Ray revealed that a large chunk of the company's assets was either "missing or stolen."
Ray plans to completely overhaul the company's basic structure, including "accounting, audit, cash management, cybersecurity, human resources, risk management, data protection and other systems that did not exist or did not exist to an appropriate degree" before his appointment.
The road forward Initial reports suggest that FTX has an $8 billion hole in its financial records and owes money to more than one million creditors. The exchange is also under investigation by the New York Justice Department, the Securities and Exchange Commission (SEC), and law enforcement agencies in the Bahamas, where FTX is headquartered. The list of lawmakers pursuing the bankrupt exchange and its ex-CEO could grow further in the coming months, and John Ray III will play a pivotal role in how things shape up. However, legal experts expect that the case will take more than three to four years for the case to be settled.
Also Read: New FTX CEO slams collapsed crypto firm, calls it complete failure of corporate control
