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FTX's new CEO reveals just how big a mess he's dealing with

RACHEL MARTIN, HOST:

The new CEO of the collapsed cryptocurrency exchange FTX has been brought in to clean up big messes before. We're talking Enron big. But he said none of that compares to the spectacular collapse of a firm with millions of customers that just months ago was valued at more than $30 billion. It was all in full display when bankruptcy proceedings got underway yesterday. NPR's David Gura reports.

DAVID GURA, BYLINE: So there's a lot we don't know about John J. Ray III, the man responsible for steering FTX through one of the largest and most complex bankruptcies in history. He keeps a low profile. He doesn't have a website. And it's tough to track down a photo of him or a tape of him talking, which is something. His predecessor, Sam Bankman-Fried, seemed to be everywhere. We do know Ray's first day on the job was November 11, and he started right after 4:30 in the morning. That's when Bankman-Fried relinquished control of his crypto empire after talking to his attorneys and his dad.

(SOUNDBITE OF MONTAGE)

UNIDENTIFIED NEWSCASTER #1: A stunning crash.

UNIDENTIFIED NEWSCASTER #2: FTX went from a $32 billion company to bankruptcy.

UNIDENTIFIED NEWSCASTER #3: Its new CEO is John Ray III, who helped manage the notorious energy firm Enron after its collapse in an accounting fraud scandal in 2001.

GURA: Investors in FTX have given Ray a lot of power to make big decisions, but he has his work cut out for him. Not only does he have to figure out the opaque world of crypto, something few of us can manage, he has to understand the ins and outs of the FTX group, more than 100 companies all over the world.

ODETTE LIENAU: He has so much to muddle through, and part of the issue he has is that he doesn't even know what he has to muddle through.

GURA: Odette Lienau is a bankruptcy expert at Cornell Law School, and she says Ray's first objective is to gather information. In court on Tuesday, lawyers outlined what they know so far. One stunning discovery is it doesn't appear an outside auditor ever reviewed the FTX group's financial statements. In other words, only Bankman-Fried and his buddies knew what was going on with those billions. So Ray has hired forensic accountants. He's also trying to track down critical correspondence, noting Bankman-Fried used apps that delete messages automatically. Lienau says Ray is doing a postmortem.

LIENAU: Only after he's gotten this clearer picture by figuring out, you know, what happened, what actually is the case can you begin to speak - think about recovery of assets, possible civil actions, things like that - to actually do the turnaround.

GURA: Which is what Ray was hired to do and what he's done for decades. FTX didn't make Ray available for an interview, but his reputation precedes him, according to Christine Chung, who's a professor at Albany Law School.

CHRISTINE CHUNG: He's viewed as something of a turnaround artist. He has been involved in several situations in which he's been quite dogged in recovering assets for creditors.

GURA: Ray got high marks for how he handled the unwinding of Enron and Nortel's bankruptcy, two of the largest in modern history, which is why something Ray wrote in a recent court filing is so astonishing, according to Chung.

CHUNG: In his 40 years of experience - in all that time, he has never seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information.

GURA: With that characterization, Ray is making it known early he's going to need some time to figure this out, according to Ted Janger, a professor at Brooklyn Law School. Janger says that directness will help Ray with what he has to do next - sharing the information he collects and plotting a path forward.

TED JANGER: You need someone who can establish trust. And when you say establish trust, that means they have to be someone who speaks with candor to the various constituencies.

GURA: Millions of creditors, along with regulators, a government trustee, lawmakers and law enforcement - FTX filed for Chapter 11, so the goal here is to reorganize the company and to sell off assets. Ray has wasted no time, bringing in backup - outside attorneys and five new board members. Ray says FTX now has appropriate corporate governance for the first time since it was founded.

David Gura, NPR News, New York.

(SOUNDBITE OF THE BAD PLUS JOSHUA REDMAN'S "AS THIS MOMENT SLIPS AWAY") Transcript provided by NPR, Copyright NPR.

David Gura
Based in New York, David Gura is a correspondent on NPR's business desk. His stories are broadcast on NPR's newsmagazines, All Things Considered, Morning Edition and Weekend Edition, and he regularly guest hosts 1A, a co-production of NPR and WAMU.