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FTX’s new boss says security was so weak that founders could ‘download half a billion dollars’ of crypto without detection, report says

John J. Ray III and Sam Bankman-Fried.John J. Ray III and Sam Bankman-Fried, the current and former CEOs of FTX.

Nathan Howard/Getty Images; Michael M. Santiago/Getty Images

  • John J. Ray III, the current FTX CEO, berated the crypto exchange’s security.
  • He told a Monday court hearing that an exec could download $500m of crypto and walk away unchecked.
  • Ray also described his first 48 hours in charge of FTX as “pure hell” due to the chaos.

FTX’s weak security meant that its cofounders — who have both been charged with fraud — could easily have stolen millions of dollars of crypto at any time, according to the bankrupt firm’s new CEO.

John J. Ray III, who has been drafted in to oversee FTX and previously handled Enron’s liquidation, made the comments at the Delaware bankruptcy court Monday, according to CoinDesk

“Literally one of the founders could come into this environment, download half a billion dollars’ worth of wallets onto a thumb drive, and walk off with them,” he said, adding: “And there’d be no accounting for that whatsoever.”

FTX filed for bankruptcy on November 11, weeks after its then-CEO Sam Bankman-Fried insulted rival crypto CEO Changpeng Zhao. He then sold large holdings of FTX’s own cryptocurrency, which prompted a run on the firm. FTX lawyers said the company ran out of assets partly because executives had a $65 billion line of credit to draw on customers’ funds, and Bankman-Fried instructed his cofounder, Gary Wang, to code that “backdoor.”

Bankman-Fried was arrested last December, and has pleaded not guilty to charges including fraud, money laundering, and campaign finance violations. When contacted by Insider, a spokesperson for Bankman-Fried declined to comment on Ray’s remarks.

Ray also said his first 48 hours in charge of FTX were “pure hell.”

Hours after the exchange filed for bankruptcy, more than $370 million of crypto disappeared from FTX. “Those hacks went on virtually all night long,” the current CEO said, per CoinDesk. 

Ray also described a “massive scramble for information” as liquidators looked to secure customers’ passwords and crypto wallets. Court documents filed a few days after bankruptcy showed that FTX didn’t have its own accounting department, and records were unreliable.

Monday’s court hearing took place amid calls from the US Trustee – which represents the Department of Justice – for an independent examiner. The federal agency said the allegations of “fraud, dishonesty, incompetence, misconduct, and mismanagement” are “too important to be left to an internal investigation,” Reuters reported.

Ray also told the court that, over the last 50 days of 2022, he charged FTX $690,000 for his work.

Read the original article on Business Insider