John Jay Ray III, a lawyer who specializes in restructuring troubled companies, has helped to manage the fallout from some of the largest corporate failures in history, including the implosion of the energy trading firm Enron after an accounting scandal in 2001.
Mr. Ray, 63, took over the collapsed cryptocurrency exchange FTX after its chief executive, Sam Bankman-Fried, resigned last month. Mr. Bankman-Fried was arrested in the Bahamas on Monday after U.S. prosecutors filed criminal charges, and on Tuesday the Securities and Exchange Commission charged him with misleading big investors.
Mr. Bankman-Fried was scheduled to testify on Tuesday before the House Committee on Financial Services in a hearing focused on FTX’s collapse. He is no longer going to appear, but Mr. Ray is scheduled to testify at the hearing, which started at 10 a.m.
In a prepared statement for the committee, Mr. Ray said that he had never seen “such an utter failure of corporate controls at every level of an organization.”
Mr. Ray added that FTX had been run by “a very small group of grossly inexperienced and unsophisticated individuals.” He listed a series of “unacceptable management practices,” such as untrustworthy financial statements and “an absence of independent governance” between FTX and Alameda Research, a hedge fund owned by Mr. Bankman-Fried.
In a bankruptcy court filing for the company last month, Mr. Ray said FTX used software to “conceal the misuse of customer funds” and gained access to sensitive data through an unsecured group email.
Mr. Ray has been involved in several other prominent corporate restructuring efforts, including that of the mortgage lender Residential Capital and the underwear maker Fruit of the Loom. He is best known for serving as the chief executive of Enron during its bankruptcy and for recovering more than $828 million for creditors.
Since Mr. Ray has assumed leadership at FTX, he said his team had secured about $740 million worth of cryptocurrency from parts of its business — a sum he has called “only a fraction” of what he hopes to recover. A run on deposits at FTX left the company owing its customers $8 billion.
Mr. Ray and the rest of FTX’s new leadership have distanced themselves from Mr. Bankman-Fried, saying in the bankruptcy court filing that “Mr. Bankman-Fried is not employed by the debtors and does not speak for them.”