John Ray III criticizes FTX for private keys decision
John Ray III — FTX CEO John Ray III provided an interim update on the company’s actions this week.
Ray said that the corporation held nearly every cryptocurrency asset in hot wallets.
Report and service
John Ray III has been in charge of FTX’s Chapter 11 bankruptcy reorganization.
While it was not included in the interim report, Ray stated that while Amazon Web Services is a useful tool, it is not appropriate for a multibillion-dollar corporation’s private keys.
The FTX CEO condemned the company’s usage of Amazon Web Services in the same manner he chastised its accounting software, QuickBooks.
“Nothing against Quickbooks. Very nice tool,” said Ray as he testified before the House Financial Services Committee in December.
“It’s not for a multibillion dollar company.”
Instead, the FTX CEO stated in a court statement on Sunday that the business held practically every crypto asset in hot wallets.
John Ray III underlined his argument by referencing the $432 million in unlawful transactions that drained FTX wallets the day after the company declared bankruptcy on November 11.
John Ray III filed an interim report with the Delaware bankruptcy court, updating them on the company’s efforts to recover cash and the issues they encountered.
Ray stated that the FTX Group’s lack of accurate record keeping made the task more difficult.
In addition, the study included an in-depth look into how the company was operated and its failure to maintain security.
“In this regard, while the FTX Group’s failure is novel in the unprecedented scale of harm it caused in a nascent industry, many of its roots are familiar, hubris, incompetence, and greed,” it wrote.
The company’s collapse
Sam Bankman-Fried, the disgraced founder of FTX, built a crypto empire.
However, the empire imploded in November 2022.
Alameda Research, SBF’s trading desk, was found to have billions of FTX Token or FTT on its balance sheet.
Furthermore, complaints surfaced accusing the corporations of mixing user cash with their own.
Sam Bankman-Fried is now facing thirteen felony counts.
Meanwhile, the FTX Group has been trying for five months to collect consumer monies.
Read also: FTX estate provides update with interim report
Sam Bankman-Fried is charged with a slew of offenses, including:
- Wire fraud
- Securities fraud
- Conspiracy to commit bank fraud
- Defrauding the Federal Election Commission
Prosecutors said that SBF and his associates cheated the United States in their FEC-related accusations.
He was also accused of impeding the FEC’s capacity to enforce federal law.
As a consequence, Sam Bankman-Fried was charged with further offenses, including:
- Conspiracy to operate an unlicensed money transmitting business
- Conspiracy to commit wire fraud on lenders to Alameda Research
- Conspiracy to make unlawful political contributions and defraud the FEC
According to John Ray III, storing the majority of the cash in hot wallets and the private keys in Amazon Web Services was a bad risk management approach.
Amazon Web Services and its competitors in cloud computing are not impenetrable.
According to data breach tracker Firewall Times, the service has had many large-scale breaches since 2017, exposing data from hundreds of millions of voters, Instagram users, bank clients, consumers, and COVID-19 testing site visitors.
“The FTX group undoubtedly recognized how a prudent crypto exchange should operate, because when asked by third parties to describe the extent to which it used cold storage, it lied,” said Ray in the report.
He also mentioned the company’s 2022 response to advisers and counterparties, as well as a 2019 tweet from Sam Bankman-Fried.
According to the two mails, FTX employed a combination of hot and cold wallets.
However, according to John Ray III, the corporation did not safeguard the crypto assets with offline, air-gapped encrypted, and geographically scattered computers.
Ray also cited messages from a person affiliated to LedgerX, a derivatives exchange owned by the FTX Group.
It was not, however, included in the bankruptcy proceedings, pushing FTX.US to make greater use of cold wallet storage.
Nonetheless, according to John Ray III, no mechanism was in place prior to the bankruptcy.