Security was so weak that founders could “download half a billion dollars” of cryptocurrency without being detected – FTX’s new CEO

John J. Ray III said an FTX exec could have downloaded $500m of crypto and walked away, per Coindesk. Describing his first 48hrs in charge as “pure hell.”

Image: Erika P. Rodriguez

FTX’s weak security meant that its cofounders could easily have stolen hundreds of millions of dollars in cryptocurrency. This is according to the bankrupt firm’s new CEO in court testimony obtained by Coindesk.

 

According to Coindesk, John J. Ray III, who was drafted in to oversee FTX after its collapse. He had also previously handled Enron’s liquidation, made the comments at the Delaware bankruptcy court on Monday.

 

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

On November 11, FTX filed for bankruptcy in the United States, and then-CEO Bankman Fried resigned. Later, FTX lawyers stated that the company ran out of assets in part because executives had a $65 billion line of credit to draw on funds from customers.

 

Bankman-Fried was arrested in December and has pleaded not guilty to charges that include fraud, money laundering. A spokesperson for Bankman-Fried declined to comment on Ray’s remarks when contacted by Insider.

 

Ray told the court on Monday that his first 48 hours in charge were “pure hell,” according to Coindesk. He stated that he charged FTX $690,000 for his services during the last 50 days of 2022.

The court hearing came amid calls for an independent examiner from the US Trustee, who represents the Department of Justice. The allegations of “fraud, dishonesty, incompetence, misconduct, and mismanagement” are “too serious to be left to an internal investigation,” according to RushHourDaily.

 

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