John Ray III has constructed a 40-year profession tending to firms hit by epic blow-ups, from Enron to Nortel Networks. However as the brand new boss of FTX, he could also be dealing with his hardest activity but.
Ray took over the beleaguered cryptocurrency alternate at 4.30am on November 11, when founder Sam Bankman-Fried signed over management amid a multibillion-dollar financial institution run.
Ever since, he has been working day and night time to revive order within the face of a world firestorm that has left the once-lionised Bankman-Fried arrested and jailed on fraud expenses as greater than 1mn prospects of an organization with an $8bn stability sheet gap marvel if they are going to ever recuperate their financial savings.
“Consider John Ray within the vein of Purple Adair,” mentioned James Bromley, a lawyer for FTX at Sullivan & Cromwell, in a reference to the celebrated firefighter who circled the globe to tackle blazes at oil wells.
Ray, a Massachusetts native, educated as a lawyer and by the Nineteen Nineties had risen to basic counsel at clothes maker Fruit of the Loom. When the corporate went belly-up in 1999, he obtained a crash course in methods to choose up the items of a busted firm.
Finally he began his personal consulting agency specialising in messy blow-ups, touchdown at such high-profile firms as Nortel Networks, Abroad Shipholding Group and Residential Capital. However he made his identify at Enron within the mid-2000s as each a tactician and brawler trying to recuperate cash for claimants of the fraudulent group.
The job at FTX entails not solely a deft understanding of finance, accounting and regulation but additionally a capability to make each day judgments that may deliver calm amid the cacophony. Then, the fundamental duties of finding and valuing property that may finally be allotted and distributed to FTX victims can proceed.
The distinction is stark between the besuited Ray, 63, and his predecessor at FTX identified for his T-shirts, board shorts and a shrub of curly hair.
Ray has rigorously prevented any public judgments directed in direction of Bankman-Fried, selecting his phrases rigorously. And in contrast to Bankman-Fried, he has largely communicated his public ideas in authorized filings or by way of FTX attorneys talking in court docket.
Nonetheless, he has been unsparing in his descriptions of FTX.
In testimony to the US Congress this week, Ray mentioned that regardless of a profession spent tackling “massive and vexing company failures involving allegations of prison exercise”, he had by no means “seen such an utter failure of company controls at each stage of an organisation, from the shortage of economic statements to an entire failure of any inside controls or governance”.
Amongst his findings, Ray, who has largely been working from New York, couldn’t even decide how a lot money FTX possessed and in addition discovered that some quantity of FTX cryptocurrency had gone lacking.
Of the knowledge he has been capable of collect and evaluate, Ray has sought to organise its presentation methodically. Among the many 100 FTX subsidiaries that filed for chapter in a Delaware federal court docket, he defined to the choose the sprawling and intertwined operations may very well be distilled into 4 separate silos. He instructed Congress that he had 5 distinct aims in his job.
Bromley, who recruited Ray, recalled assembly him years in the past within the wind-down of Enron, the infamous Texas vitality dealer. Ray, as Enron’s emergency chief, had aggressively litigated with Enron counterparties, together with Bromley’s consumer, Lehman Brothers.
Enron collectors believed large Wall Avenue banks had been the important thing enablers of the corporate’s byzantine shell firms that facilitated its fraud. There was little hope initially that a lot may very well be achieved to recuperate cash. Finally, nevertheless, Ray was in a position to make use of litigation as a method of successful billions in whole settlements with the likes of Citigroup and Lehman Brothers.
The contentiousness at FTX has been restricted however vital. The corporate is searching for to maintain the names of its accountholders, who’re its major collectors, confidential. This has drawn the ire of the Workplace of the US Trustee, which says the transfer violates the spirit of transparency in Chapter 11 proceedings.
A jurisdictional battle between Ray and the Bahamas, the place Bankman-Fried positioned the FTX command centre, has already commenced. FTX Digital, a subsidiary not included within the US chapter case, has been taken over by a trio of native liquidators who say substantial FTX property stay throughout the Bahamian entity.
Ray has accused authorities within the Bahamas of withdrawing cryptocurrency from FTX in cahoots with Bankman-Fried within the days surrounding the chapter submitting.
Either side has sharply criticised the actions of the opposite. Bahamian authorities have rejected Ray’s claims, which they’ve mentioned “don’t look like involved with information however fairly, seem supposed solely to make headlines and advance questionable agendas”.
For his fire-fighting expertise, Ray is being paid by FTX a flat $1,300 per hour — even when it requires being up earlier than daybreak.