Yahoo Finance’s Jennifer Schonberger breaks down a new court filing in Delaware as FTX begins Chapter 11 bankruptcy proceedings that contains comments from FTX CEO John Ray III slamming the crypto exchange’s lack of oversight controls.

Video Transcript

CHANGPENG ZHAO: But it's very difficult to not understand what's going on in a different platform in a different business. It's only-- for me, I was very surprised by the amount of money that they lost and the amount of customer funds they moved and the state of things there.

AKIKO FUJITA: That was Binance CEO Changpeng Zhao, known as CZ, moments ago at a TechCrunch crypto event in response to FTX's collapse, adding that Binance was, quote, "the last straw that broke the camel's back." Well, FTX's new boss is speaking out for the first time this morning with some damning words for founder Sam Bankman-Fried. John Ray calling his leadership a complete failure of corporate controls. Let's bring in Jen Schonberger, who's following that part of the story for us this morning. Jen.

JENNIFER SCHONBERGER: Good morning. That's right. In a new scathing rebuke of FTX, the now defunct crypto exchange's new CEO John Jay Ray III slammed FTX's poor recordkeeping and Sam Bankman-Fried and his inexperienced management team, according to a new court filing in Delaware. Ray, who oversaw Enron's financial scandal and who's been appointed to oversee the unwinding of FTX, said, quote, "Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here."

Ray said FTX's systems compromised integrity and had faulty regulatory oversight abroad. He noted concentration of control in the hands of what he called a, quote, "very small group of inexperienced, unsophisticated, and potentially compromised individuals." He called the situation, quote, "unprecedented."

Ray also criticized failure to reconcile blockchain positions daily, software used to conceal the misuse of customer funds, and the absence of independent governance between Alameda and FTX and other companies. This as court filings made in the Bahamas by Bahamas liquidators late Wednesday said that there were signs of, quote, "serious fraud and mismanagement" that occurred at FTX. Akiko.

AKIKO FUJITA: Jen, meantime, we have seen the contagion effect with so many other crypto exchanges, who have either suspended withdrawals or, at least, taken some action to stem the outbreak, so to speak. What are we learning about the very latest here?

JENNIFER SCHONBERGER: Akiko, we are seeing continued contagion from FTX's bankruptcy spread within the industry. On Wednesday, we learned that the lending arm of Genesis Global Trading, which is a major institutional lender to digital hedge funds, exchanges, and other digital investment firms, suspended new loans and redemptions after a surge in withdrawals following FTX's bankruptcy. And soon after that, Gemini, the crypto trading platform that is owned by the Winklevoss twins, said it could not meet its customer obligations due to exposure to Genesis.

Meanwhile, we've just learned this morning that the US arm of Binance is reportedly preparing a bid for bankrupt lending platform Voyager Digital. Of course, Voyager's assets were auctioned off earlier this year and actually won by, at the time, white knight FTX, but now given its bankruptcy, those assets up for grabs again. Binance looking to swoop back in. Back to you.

AKIKO FUJITA: OK, Jen, I appreciate you staying on top of the latest developments.