New FTX CEO says lax oversight, bad decisions caused failure

WASHINGTON (AP) — The new CEO of the failed cryptocurrency exchange FTX is appearing before a House committee Tuesday, detailing for lawmakers the lack of oversight and financial controls that he discovered since taking over the company a month ago.

John Ray III called FTX’s collapse one of the worst business failures he has seen — a “paperless bankruptcy,” fueled by an “unprecedented lack of documentation.”

Notably absent from the hearing before the House Financial Services Committee is FTX’s founder and former CEO Sam Bankman-Fried, who was arrested in the Bahamas just hours before he was scheduled to testify. The arrest was made at the request of the U.S. government, which on Tuesday announced criminal charges against Bankman-Fried including wire fraud and money laundering.

FTX filed for bankruptcy protection on Nov. 11, when the firm ran out of money after the cryptocurrency equivalent of a bank run. The collapse of crypto’s second-largest exchange has garnered worldwide attention, and prompted worries in the crypto industry that the pain could become widespread. Estimates are that FTX customers could wind up losing billions of dollars.

Ray, who took over FTX on Nov. 11, told the committee that the problems at FTX were a cumulation of months or even years of bad decisions and poor financial controls.

“This is not something that happened overnight or in a context of a week,” he said.

Ray, a long-time corporate restructuring expert, said the situation at FTX was worse that what he found at Enron two decades ago. Enron was one of the biggest corporate frauds in U.S. history.

When asked to elaborate by Rep. Ann Wagner, R-Mo., Ray said there was “no record-keeping whatsoever” at FTX. Ray also said employees used QuickBooks, software typically used by small and...