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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

  • March 12, 2023
John J. Ray III and Sam Bankman-Fried.

John J. Ray III (left), the new CEO of FTX, and Sam Bankman-Fried, his predecessor.Nathan Howard/Getty Images; Michael M. Santiago/Getty Images

  • FTX’s new CEO berated the crypto exchange’s security in court testimony.

  • John J. Ray III said an FTX exec could have downloaded $500m of crypto and walked away.

  • Ray also described his first 48 hours in charge of FTX as “pure hell.”

FTX’s weak security meant its cofounders — who have both been charged with fraud — could easily have stolen hundreds of millions of dollars’ worth of crypto, the bankrupt firm’s new CEO said in court testimony.

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

“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 in a recording of the hearing reviewed by Insider. “And there’d be no accounting for that whatsoever.”

Ray said FTX crypto wallets have now been moved into “cold storage,” adding that the crypto firm previously had “hot wallets in a system where multiple people had access to passwords.”

“Where we are today is pretty satisfying,” he added.

Then-CEO Bankman Fried resigned his position, and FTX filed for bankruptcy protection in the US on November 11. FTX lawyers later said the company ran out of assets partly because executives had a $65 billion line of credit to draw on customers’ funds.

Bankman-Fried was arrested in 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 told the court Monday his first

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Must be broke, court says

  • February 21, 2023
Johnson's <a href=baby powder” sizes=”100vw” src=”https://images.axios.com/vsfCiuSOg0Hn6E7GjcED1o2yPB8=/320×180/smart/2023/01/31/1675166470487.jpg?w=320 320w, https://images.axios.com/vsfCiuSOg0Hn6E7GjcED1o2yPB8=/320×180/smart/2023/01/31/1675166470487.jpg?w=320 320w, https://images.axios.com/1KmFgyI7iFmJt2ZQSbo2WX2MWnI=/640×360/smart/2023/01/31/1675166470487.jpg?w=640 640w, https://images.axios.com/1KmFgyI7iFmJt2ZQSbo2WX2MWnI=/640×360/smart/2023/01/31/1675166470487.jpg?w=640 640w, https://images.axios.com/A1zYgdIoe5PhGxSfrEmWBh9iE_8=/768×432/smart/2023/01/31/1675166470487.jpg?w=768 768w, https://images.axios.com/A1zYgdIoe5PhGxSfrEmWBh9iE_8=/768×432/smart/2023/01/31/1675166470487.jpg?w=768 768w, https://images.axios.com/Bz67nJhbJBVoB-JUQZp9w-aINMw=/1024×576/smart/2023/01/31/1675166470487.jpg?w=1024 1024w, https://images.axios.com/Bz67nJhbJBVoB-JUQZp9w-aINMw=/1024×576/smart/2023/01/31/1675166470487.jpg?w=1024 1024w, https://images.axios.com/R9rntj16FvBOLrToueKWhaDKgCU=/1366×768/smart/2023/01/31/1675166470487.jpg?w=1366 1366w, https://images.axios.com/R9rntj16FvBOLrToueKWhaDKgCU=/1366×768/smart/2023/01/31/1675166470487.jpg?w=1366 1366w, https://images.axios.com/JIYPQF149PFAi02E39HzuDfU84k=/1600×900/smart/2023/01/31/1675166470487.jpg?w=1600 1600w, https://images.axios.com/JIYPQF149PFAi02E39HzuDfU84k=/1600×900/smart/2023/01/31/1675166470487.jpg?w=1600 1600w, https://images.axios.com/-dqFUPpUWNCdnadoLhflbzI3vVU=/1920×1080/smart/2023/01/31/1675166470487.jpg?w=1920 1920w, https://images.axios.com/-dqFUPpUWNCdnadoLhflbzI3vVU=/1920×1080/smart/2023/01/31/1675166470487.jpg?w=1920 1920w” decoding=”async” data-nimg=”responsive” style=”position:absolute;top:0;left:0;bottom:0;right:0;box-sizing:border-box;padding:0;border:none;margin:auto;display:block;width:0;height:0;min-width:100%;max-width:100%;min-height:100%;max-height:100%”/

Johnson & Johnson’s baby powder. Photo: Justin Sullivan/Getty Images

You have to actually be broke to file for bankruptcy protection — at least that’s what a federal appellate court ruled Monday.

Driving the news: The court dismissed the bankruptcy filing by a subsidiary of corporate giant Johnson & Johnson. J&J created the unit — dubbed LTL Management — for the express purpose of holding legal liabilities and then filing for Chapter 11.

Why it matters: The ruling undercuts the emerging corporate strategy of using bankruptcy to excise costly liabilities when the organization itself is perfectly solvent.

  • “Because LTL was not in financial distress, it cannot show its petition served a valid bankruptcy purpose and was filed in good faith,” a three-judge panel said in its unanimous ruling.

Catch up quick: J&J faces some 38,000 lawsuits from people and their survivors claiming that the company’s talc-based powder caused cancer. J&J has repeatedly denied the allegation.

  • Critics say that transferring the litigation claims to the new subsidiary and placing that unit in bankruptcy was a tactic to cap J&J’s exposure to the liabilities.

State of play: At the time it put newly formed subsidiary LTL Management into bankruptcy in October 2021, J&J had an equity value of more than $400 billion, a AAA credit rating, and $31 billion in cash and marketable securities.

  • That means it almost surely had ample liquidity to pay LTL’s obligations — and can’t instead use the bankruptcy process, the court ruled. When LTL filed for bankruptcy, J&J was worth at least 25 times more than its estimated total product liabilities over
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U.S. bankruptcy judge weighs demand for independent investigation into collapse of FTX

  • February 11, 2023

Former FTX chief executive Sam Bankman-Fried leaves Manhattan federal court, on Jan. 3.DAVID DEE DELGADO/Reuters

A U.S. bankruptcy judge is considering at a Monday court hearing in Delaware whether to greenlight a court-supervised investigation into the collapse of FTX, a course of action that the crypto exchange opposes as redundant and wasteful.

The U.S. Department of Justice’s bankruptcy watchdog has urged U.S. Bankruptcy Judge John Dorsey, who is overseeing FTX’s Chapter 11, to appoint an independent examiner to investigate allegations of “fraud, dishonesty, incompetence, misconduct, and mismanagement” that are “too important to be left to an internal investigation.”

Juliet Sarkessian, an attorney for the U.S. Trustee, said such an investigation is mandatory under federal law in all large bankruptcy cases where DOJ requests one.

FTX has said an examiner would merely duplicate work already being done by FTX, its creditors, and law enforcement agencies.

FTX attorney James Bromley told Dorsey that an investigation is not appropriate, and allowing new investigators to access its systems could jeopardize the cybersecurity of FTX’s ongoing investigation.

FTX’s new CEO, John Ray, said that FTX has already answered 156 requests for information from federal prosecutors in Manhattan, producing 70,000 documents, as well as 151 requests from the U.S. Commodity Futures Trading Commission and hundreds of requests from other U.S. regulators and prosecutors, members of Congress and foreign governments.

FTX has acknowledged that its past conduct raised questions about fraud and mismanagement, but has said another layer of review would only add cost and delay to the company’s effort to repay customers in bankruptcy.

Ray, who worked with court-appointed examiners while leading Enron Corp and Residential Capital through bankruptcy, told the court that examiners in those two cases cost $90 million and $100 million, respectively, but were not useful.

“They were very shallow –

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Longford woman accused of Penneys ‘feud assault’ to provide receipts for Turkey dental treatment

  • August 15, 2022

The Longford woman, accused of carrying out a feud-related assault, recently spent ten days in Turkey receiving cosmetic dental treatment while on free legal aid after getting her bail terms relaxed.

Thirty-five-year-old Teresa Dinnegan, 18 Grian Ard, Longford, who together with a female co-accused, is charged with assault inside Penneys, Longford Shopping Center on March 16 last.

Teresa Dinnegan

Teresa Dinnegan

The court had previously heard the alleged incident involved a third female who was also charged.

Details surrounding Ms Dinnegan’s bail while depending on the taxpayer-funded criminal legal aid system led to stinging criticism for a major overhaul of the system by prominent local politicians.

At the District Court hearing Sergeant Mark Mahon spoke of ‘concerns’ the Gardaí had about the defendant’s status. Sgt Mahon said the defendant had attended on a vouched medical certificate to receive medical attention in Turkey.

Teresa Dinnegan

Teresa Dinnegan

The prosecutor said Gardaí would like to see the receipts and the vouched medical expenses Sgt Mahon outlined ‘concerns’ with regard to the matter.

Solicitor for Ms Dinnegan, John Quinn, told the court his client could furnish the necessary documents, and asked for a short remand to allow his client to have the receipts in court.

Judge Bernadette Owens directed that the defendant brought the receipts to court and also file a statement of means.

Noting that the DPP had yet to give directions in the matter, Judge Owens remanded the defendant on bail.

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Kentucky attorney general asks state Supreme Court to reinstate abortion ban

  • July 5, 2022

Kentucky Attorney General Daniel Cameron (R) asked the state’s Supreme Court on Sunday to reinstate an abortion ban that briefly went into effect following the overturning of Roe v. Wade but was later blocked by a lower court.

kentucky/” data-ylk=”slk:A judge on Thursday had temporarily blocked” class=”link “A judge on Thursday had temporarily blocked the implementation of two state laws, which would effectively ban abortion unless necessary to save the woman’s life, following a challenge from abortion-rights groups arguing that Kentucky’s state constitution protected abortion rights. An appeals court judge later denied a request from Cameron to reinstate the ban.

“We are exhausting every possible avenue to have Kentucky’s Human Life Protection Act and Heartbeat Law reinstated,” Cameron said in a statement. “There is no more important issue than protecting life, and we are urging the state’s highest court to consider our request for emergency relief.”

Cameron’s filings with Kentucky’s Supreme Court argue there is no right to abortion in the state’s constitution and that without an emergency ruling from it, unborn children will suffer immediate and irreparable harm.

Samuel Crankshaw — spokesman for the American Civil Liberties Union of Kentucky, which represents one of the abortion providers in the suit — praised the appeals court ruling that affirmed blocking the law’s immediate implementation.

“We’re glad to see the Court of Appeals agrees the lower court has taken proper emergency action to protect abortion access,” Crankshaw said in a statement. “This win is temporary, but we won’t back down in the fight to defend Kentuckians’ most basic rights from extremist politicians like Daniel Cameron.”

Planned Parenthood Great Northwest, Hawaii, Indiana, Kentucky, another plaintiff in the suit, did not immediately return a request for comment.

The US Supreme Court last month upheld a 15-week abortion ban in

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December 2023
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