BY Fast Company 3 MINUTE READ

John Ray III knows a bad company when he sees it. After all, he’s the lawyer who was hired to oversee the liquidation of Enron after an accounting scandal at the energy giant drove share prices from $90.75 to less than $1. However, he says, he’s never seen a company in worse shape than FTX.

“I have over 40 years of legal and restructuring experience,” Ray says in an updated bankruptcy filing for the crypto exchange. “I have been the chief restructuring officer or chief executive officer in several of the largest corporate failures in history. . . . Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”

The list of concerns is notable, he says. Many of the companies in the collapsed FTX Group did not have appropriate corporate governance and never held board meetings. And there was no accurate list of bank accounts and account signatories, with no centralized control of the FTX Group’s cash.

“From compromised systems integrity and faulty regulatory oversight abroad to the concentration of control in the hands of a very small group of inexperienced, unsophisticated, and potentially compromised individuals, this situation is unprecedented,” reads the filing.

Ray also claims the company did not have appropriate disbursement controls, noting that employees submitted payment requests through an online chat platform. Approvals were signaled with personalized emojis of supervisors.

Then there was the matter of house purchases . . .

“In the Bahamas, I understand that corporate funds of the FTX Group were used to purchase homes and other personal items for employees and advisors,” Ray notes. “I understand that there does not appear to be documentation for certain of these transactions as loans, and that certain real estate was recorded in the personal name of these employees and advisors on the records of the Bahamas.”

Ray adds that one of the objectives of the Chapter 11 filing would be an investigation into FTX founder Sam Bankman-Fried, as well as the company’s other cofounders.

While that investigation is still in the very early stages, the company has found that Bankman-Fried’s hedge fund loaned $1 billion to Bankman-Fried directly as well as $2.3 billion to Paper Bird, an entity 100% controlled by him. (Fast Company contacted Bankman-Fried for comment regarding the allegations in the bankruptcy filing. He did not respond immediately, but this story will be updated should he reply.)

As for, which is bundled as part of what’s called “the dotcom silo” in the filing, Ray says the company apparently did not include customer liabilities in its financial statements, noting, “The dotcom silo debtors may have significant liabilities to customers through the platform. However, such liabilities are not reflected in the financial statements prepared by these companies while they were under the control of Mr. Bankman-Fried.”

And regarding the fair value of the crypto assets held by FTX International, Bankman-Fried has valued that at $5.5 billion. Ray says it’s worth just $659,000.

The filing is a damning account of the business that, just two weeks ago, was upheld as one of the paragons of the crypto culture. Debtors, says Ray, have been unable to find any audited financial statements for two of the company’s silos, and he says he has “substantial concerns” about the audited financial statements for the dotcom silo, adding, “I do not believe it appropriate for stakeholders or the court to rely on the audited financial statements as a reliable indication of the financial circumstances of these silos.”

FTX’s new management team hasn’t even been able to build a complete list of who worked for FTX Group or the terms of their employment. And FTX and its related companies did not have an accounting department, instead outsourcing that function.

Ray says the new management team has hired forensic analysts to look into who was responsible for unauthorized transactions. The team is also hoping to identify “what may be very substantial transfers of [FTX] property in the days, weeks, and months prior to the [bankruptcy filing].” (Bankman-Fried has blamed that on a hack.)

The document is littered with one stunning revelation after another. And it certainly casts Bankman-Fried in an even worse light. Ray, though, could be the best hope for investors to recoup some of their money. After Enron filed the largest corporate bankruptcy in U.S. history at the time, Ray was able to return $20 billion to the company’s creditors.