John Ray, chief restructuring officer and new CEO of fallen cryptocurrency exchange FTX, wastes no time.
Eight days after being appointed to lead the restructuring of Sam Bankman-Fried’s empire, he sets out to liquidate the group’s assets.
Ray, who served as the bankruptcy trustee for insolvent energy brokerage firm Enron, just announced that he has hired an outside attorney to review FTX’s assets and decide how to proceed. The goal is to sell certain assets with the approval of the judges.
“FTX Debtors have engaged Perella Weinberg Partners LP as the lead investment bank and have begun preparing certain businesses for sale or restructuring,” Ray’s office said in a Nov. 19 statement.
“PWP’s commitment [Perella Weinberg Partners] subject to court approval.”
Some subsidiaries are solvent
Ray also notes that some FTX affiliates are solvent, which is good news for platform creditors hoping to recover some of their money.
“Based on our review over the past week, we are pleased to learn that many of FTX’s regulated or licensed subsidiaries inside and outside the United States have strong balance sheets, responsible management and valuable franchises,” Ray said in the statement.
“Some of these affiliates — such as LedgerX LLC and Embed Clearing LLC — are not obligors in the Chapter 11 cases. Other affiliates — such as FTX Japan KK, Quoine Pte. Ltd, FTX Turkey Teknoloji Ve Ticaret A.Ş. , FTX EU Ltd, FTX Exchange FZE and Zubr Exchange Ltd – are debtors.”
He continued, “In any event, one of our priorities over the coming weeks will be to explore any sale, recapitalization or other strategic transaction relating to these subsidiaries and others that we identify as our work progresses.”
Ray then calls for patience “while we make the arrangements that we were unable to make prior to filing our Chapter 11 cases due to corporate governance failures at FTX.”
These announcements come two days after he painted an unflattering portrait of the Bankman Fried regime. In a 30-page document filed with the United States Bankruptcy Court for the District of Delaware, Ray described a company whose practices seem surreal. What dominates here are outlaw cowboys.
“Never in my career have I seen such a complete failure of corporate controls and a complete lack of trustworthy financial information,” Ray wrote. “From the compromised system integrity and flawed regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, inexperienced and potentially vulnerable individuals, this situation is unprecedented.”
According to the new CEO, Bankman-Fried received a $1 billion personal loan from Alameda. The company also provided a $543 million personal loan to Singh and $55 million to Ryan Salame, co-CEO of FTX Digital Markets, one of FTX’s subsidiaries.
Alameda Research was Bankman-Fried’s trading platform. There were close ties between FTX and Alameda.
“As far as I know, FTX Group corporate funds have been used in the Bahamas to buy houses and other personal items for employees and consultants,” the veteran manager said.
“I understand that there appears to be no documentation for certain of these transactions as loans and that certain properties have been entered in the Bahamas records in the personal names of these employees and consultants.”