FTX's new boss says security was so weak that founders could 'download half a billion dollars' of crypto without detection

Pete Syme
Updated ·2 min read
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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 48 hours in charge of FTX were "pure hell." He said that over the last 50 days of 2022, he charged FTX $690,000 for his work.

Monday's court hearing took place amid calls from the US Trustee – which represents the Department of Justice – for an independent examiner. The federal agency said the allegations of "fraud, dishonesty, incompetence, misconduct, and mismanagement" are "too important to be left to an internal investigation," Reuters reported.

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