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FTX debtors' report finds company's collapse due to 'hubris, incompetence and greed'

LEILA FADEL, HOST:

The new leaders of the failed cryptocurrency exchange FTX say the company's collapse happened because of hubris, incompetence and greed. That's from FTX's first debtors' report since it filed for bankruptcy in November. Once valued at $32 billion, FTX now owes 8 billion to as many as 1 million creditors. When FTX founder Sam Bankman-Fried was arrested and extradited to the U.S., new leadership took over to try to steer the company through bankruptcy. One of those people is John J. Ray III. He took over Enron after that company's famous collapse. Stacy-Marie Ishmael is with us now. They are managing editor of crypto for Bloomberg News. Stacy-Marie, welcome.

STACY-MARIE ISHMAEL: Thank you for having me.

FADEL: So what details stand out to you the most in this debtors' report?

ISHMAEL: There were a couple. I think the overall gist from John J. Ray III is that, from his perspective, this was not a company that had good standards, controls or practices around anything ranging from basic things like password management to really important things like financial accounting and recordkeeping.

FADEL: So what does this mean for FTX? Where does it go from here?

ISHMAEL: There are a couple of things to understand. The first is that the primary responsibility of John J. Ray III and his team is to recover as many assets as possible to potentially give back to people to whom FTX owes money, its customers, its vendors, its business partners. And that's what this report is in service of. You know, at the very last line of the report is them saying, hey, we found another couple of billion dollars while also being worried about their standards and practices. And so that's what everybody's really paying attention to. How much money are they eventually going to find to return to creditors?

FADEL: And in the report, is there anything especially damning for Sam Bankman-Fried, who was arrested?

ISHMAEL: I mean, as you said, it's this idea that Sam Bankman-Fried and his colleagues allegedly used FTX as a personal piggy bank, giving themselves loans, using money from the company to pay political donations to various U.S. candidates and parties, and overall not having the kinds of recordkeeping and standards and practices that you would expect of a well-run organization.

FADEL: So with cryptocurrency and crypto exchanges, there's been a lot of concern about regulations and what people do with this money and how it's all regulated. Does this affect the credibility of crypto?

ISHMAEL: I think, overall, as an asset class, a lot of the folks who are skeptical of crypto - and there are a lot of them, including many people in the U.S. government - have pointed to the failures of FTX to say, look; this is what happens when people don't follow the rules. And that's one of the reasons that regulators in the U.S. are cracking down so hard now, to say, hey, OK, we will make sure that you follow the rules. And we will try to protect other customers from losing money in the future.

FADEL: Stacy-Marie Ishmael is managing editor of crypto for Bloomberg News. Thank you so much for your reporting and your time.

ISHMAEL: Thank you.

(SOUNDBITE OF SERGEY CHEREMISINOV'S "SEVEN LIGHTS") Transcript provided by NPR, Copyright NPR.

Leila Fadel is a national correspondent for NPR based in Los Angeles, covering issues of culture, diversity, and race.