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New CEO appointed to lead FTX to undo Sam Bankman-Fried Damage

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FTX | Former liquidator of Enron and Fruit of the Loom, among others, John J. Ray III must now pick up the broken pieces of Sam Bankman-Fried’s chaotic reign.

In a harsh court document, John J Ray IIIthe newly appointed CEO of the cryptocurrency exchange FTX Bankrupt said he had never seen “such a complete failure of corporate controls and such a complete lack of reliable financial information”. Given his decades of experience in the turbulent world of corporate bankruptcies and restructurings, including cases of fraud, his statements matter most.

Over the past 20 years, John J. Ray III, 63, has worked on numerous corporate bankruptcies and restructurings, including the energy company Enronan issuer of subprime mortgages residential capitalTelecom Company Nortel Networksa clothing manufacturer The fruit of the loom And many other things. He has fought in court with former CEOs (Fruit of the Loom), dismantled complex financial structures (Residential Capital), handled complex international deals (Nortel), and recovered far more money than expected from creditors (Enron).

Contact John J. Ray III, who works for a company in Naples, Florida Owl Hill Alertis now in the epicenter of the storm at FTX, which has been overvalued $32 billion before it collapsed. He was appointed CEO in the early hours of November 11, when Sam Bankman Friedthe 30-year-old known to all as SBF, resigned after a sudden cash crunch led to a shortage of $8 billion. “I’m drunk”, SBF tweeted While the company was bankrupt. Multiple US agencies, incl Securities and Exchange Commission And the Department of Justice, is currently investigating.

I think he will stick to the same strategy here as with Enron, but it will be more difficult for him than with Enron, because the situation is more chaotic. »

John J. Ray III’s mission is to delve into the details of FTX’s bankruptcy and unearth the maze of legal entities to identify assets, including lost or stolen funds, and maximize value for stakeholders through the reorganization or sale of a complex portfolio of businesses. Over the weekend, FTX said it had retained the investment bank Perella Weinberg Partners, after court approval, to prepare for the sale or reorganization of some of its businesses. “Based on our review last week, we are pleased to learn that many of FTX’s regulated or licensed affiliates, in the United States and abroad, have solvent balance sheets, responsible franchises and value,” John J. Ray III said in a statement.

Since becoming President of FTX, John J. Ray III assembles his team of attorneys and counsel for meetings twice a day, seven days a week. For his work, the new CEO will be paid 1300 dollars per hourplus reasonable expenses, according to a statement fromEdgar MoseleyManaging Director of a restructuring consulting firm Alvarez and Marsalin bankruptcy court on Sunday.

“He is one of the best in the business,” he says. Jared EliasProfessor at Harvard Law School, specializing in corporate bankruptcy. “He has real experience skydiving into some of the worst situations and getting the best possible outcome for creditors.”

Perhaps it would suit someone in their role, John J. Ray III has kept a small footprint online. A rare public photo of him was taken 15 years ago as part of the profile he put together Chicago Tribune. as such Autism CapitalA columnist on FTX’s downfall on Twitter joked: John J. Ray III should be like the company’s version of Weston Wolf in Pulp Fiction. You call him in to clean up the mess in your work, you don’t ask him any questions, and he disappears into the sunset. »

That’s why John J. Ray III’s public statement regarding the state of FTX’s affairs was particularly shocking, and perhaps a harbinger of what was to come. “I was surprised that so soon after bankruptcy he made such an explosive comment,” he says. Mark Lichtenstein, an Akerman bankruptcy partner who worked on the Enron case with John J. Ray III, but was not involved in the FTX case. “It was very unusual for a wonderful client like him.”

Although the FTX press team declined the opportunity to speak with John J. Ray III Forbes, the latter is well known in a very closed world of bankruptcies and restructurings. His approach is to get down to the details and work quickly with teams built specifically for the bankruptcy he’s focused on. At FTX, he quickly divided the operations into four different parts, or silos, each now headed by an independent director made up of two directors of eminent lineage, with whom John J. Ray III appears to have worked during the preceding period. missions.

“John is a rare bird in the world of bankruptcy. He’s had a lot of high-profile assignments and been extraordinarily successful, but he’s a separate man.” Jim Bromleypartner in Sullivan and Cromwell and Co-Head of the Restructuring Practice, who has worked with John J. Ray III on several bankruptcies and is part of FTX’s legal team. “He is a real sniper. There is no pretense with John.”

John J. Ray III grew up in western Massachusetts, the son of an industrial plumber and a stay-at-home mom, according to an article in Chicago Grandstand in 2007. Graduated from the University of Massachusetts, earned a law degree from Drake University, Iowa, in 1982, and spent his early career in Chicago in the law firm Mayer Brown, where he handled mergers and acquisitions, securities law, and employee benefit plans. Then, as a public defender Waste management and its affiliates, it has handled environmental remediation projects, including Superfund sites, and managed complex civil and criminal investigations and litigation.

“He has real experience skydiving into some of the worst situations and getting the best possible outcome for creditors.”

It was in Fruit of the Loom that he experienced his first bankruptcies. In 1999, less than two years after he was hired, the heavily indebted company filed for bankruptcy. As CEO and General Counsel, John J. Ray III “all aspects” of the US Chapter 11 bankruptcy proceeding, according to his bio. He also coordinated legal proceedings against Bill Farleya Chicago changer who was the CEO of the company, in connection with a bank loan of $65 million Acquired by Bill Farley and guaranteed by the company.

The stunning blowout of Enron, which sent its CEO to prison for 12 years, was the biggest bankruptcy of John J. Ray III’s career. As president of the reorganized company after it filed for bankruptcy, John J. Third Ray on the liquidation of Enron’s operations at $ $23 billion. In this capacity, he has led the prosecution of more than 1,000 cases, including complaints of fraud, and has been responsible for recovering money from creditors.

“It was realistic,” he says. Jim Latimer, a Dallas accountant who served as an Enron director with John J. Ray III. “He had a good sense of what could be done, what the court could look at, and how to make the best use of the situation for different groups of creditors. He certainly gives the impression of being self-assured, but by no means did he seem to know everything.” John not like that. “

Along with Fruit and Enron, John J. Ray III is also the CEO of Canadian Communications Nortel and its US subsidiaries, as of 2010. In 2014, he became an independent board member Advanced GT Technologieswhich filed for Chapter 11 bankruptcy in the United States after losing a supplier contract with apple. And in 2016, he was hired to manage a trust liquidating the assets of Residential Capital, which was one of the largest subprime mortgage companies in America. He also worked with Overseas ship managementAnd the Ditech Mortgage And the Burlingtonindustries in their bankruptcy proceedings.

As with FTX, many of these companies were once industry favorites, with assets spread all over the world, until they ran into trouble. Nortel, for example, was worth $250 billion at the height of the tech bubble of the 1990s, but it collapsed after an accounting and mismanagement scandal. After years of litigation and asset sales, the company has distributed more than $7 billion to its creditors.

Unlike many CEOs and board members who deal with changes at once, John J. Ray III is known for focusing on one big issue at a time. At FTX, John J. Ray III will first have to find the assets to create a viable picture of the company’s balance sheet, and then figure out how to get the money back to the company’s creditors, a risky process that involves a lot of indictments and litigation.

This type of case, like the Enron case before it, could take years, possibly a decade or more, to be resolved. “He did a very impressive job with Enron, and this case is somewhat reminiscent of Enron,” says Mark Lichtenstein. I think he will stick to the same strategy here as with Enron, but it will be more difficult for him than with Enron, because the situation is more chaotic. »

Translated article from the American magazine Forbes – Author: Amy Feldman

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