With A New CEO, An Grownup Has Arrived To Clear Up The FTX Mess

John J. Ray III, a veteran of Enron, Fruit of the Loom and different bankruptcies, now should decide up the shattered items from Sam Bankman-Fried’s chaotic reign.


Ina scathing court filing on Thursday, John J. Ray III, the newly appointed CEO of failed crypto change FTX, stated that he’d by no means seen “such an entire failure of company controls and such an entire absence of reliable monetary info.” Given his a long time of expertise within the rough-and-tumble world of company bankruptcies and restructurings, together with in instances involving fraud, that was saying one thing.

Over the previous twenty years, Ray, 63, has labored on a laundry record of a few of the nation’s greatest and ugliest failures and restructurings, together with vitality agency Enron, the nation’s seventh-largest chapter in historical past; subprime mortgage issuer Residential Capital; telecommunications firm Nortel Networks; underwear maker Fruit of the Loom; and a bunch of others. He’s tussled in courtroom with charming former CEOs (Fruit), sorted by way of complicated monetary constructions (ResCap), handled difficult worldwide operations (Nortel) and garnered far-higher-than-expected funds again for collectors (Enron).

Ray, who works out of a Naples, Florida, agency referred to as Owl Hill Advisory, is now on the heart of the storm at FTX, which was valued at $32 billion earlier than its collapse. He was appointed CEO within the early morning hours of November 11 as Sam Bankman-Fried, the 30-year-old recognized to all as SBF, resigned following a sudden liquidity disaster that resulted in an $8 billion shortfall. “I fucked up,” SBF tweeted as the corporate was failing. A number of U.S. businesses, together with the Securities and Alternate Fee and the Division of Justice, at the moment are investigating.

“I believe he’ll follow the identical playbook right here as Enron, nevertheless it’s going to be tougher for him than Enron as a result of it’s extra of a multitude.”


Ray’s job is to delve into the messy particulars of FTX’s demise and unwind the maze of company entities to find property, together with any funds which are lacking or stolen, and maximize worth for stakeholders by reorganizing or promoting the complicated array of companies. Over the weekend, FTX stated that it had retained funding financial institution Perella Weinberg Companions, topic to courtroom approval, to arrange for the sale or reorganization of a few of its companies. “Primarily based on our overview over the previous week, we’re happy to be taught that many regulated or licensed subsidiaries of FTX, inside and outdoors of the U.S., have solvent stability sheets, accountable administration and priceless franchises,” Ray said in a statement.

Since taking on as FTX’s CEO, Ray has gathered his workforce of attorneys and advisors for twice-daily conferences, at 9:30 a.m. and 6 p.m., seven days every week. For his work, Ray will likely be paid $1,300 an hour, plus affordable out-of-pocket bills, in response to a declaration by Edgar Mosley, managing director of restructuring advisory agency Alvarez & Marsal, filed Sunday in chapter courtroom. FTX’s first listening to in chapter courtroom is scheduled for Tuesday in Delaware.

“He’s one of many perfect on this enterprise,” says Jared Elias, a professor at Harvard Regulation Faculty who focuses on company chapter. “He has an actual observe document of parachuting into a few of the worst conditions and getting the absolute best outcomes for collectors.”

As maybe befits somebody in his function, Ray has saved a small on-line footprint. Uncommon public pictures had been taken of him 15 years in the past as a part of a profile by the Chicago Tribune. As Autism Capital, a chronicler of the FTX downfall on Twitter, jokingly noted: “John J. Ray III have to be like the company model of The Wolf from Pulp Fiction. You deliver him in to scrub up your company messes, you don’t ask any questions, and he disappears into the sundown.” Winston Wolf was the character performed by Harvey Keitel.

Restructuring professional and FTX CEO John J. Ray III in a uncommon picture at his then workplace in Chicago’s Prudential Tower in 2007.

Zbigniew Bzdak/Chicago Tribune

That made Ray’s public declaration in regards to the state of FTX’s affairs a selected shock—and maybe a warning signal of what’s to come back. “I used to be shocked that such a brief interval after the chapter he would make such an explosive remark,” says Mark Lichtenstein, a accomplice within the chapter observe at Akerman who labored on Enron with Ray however isn’t concerned in FTX. “That was so uncharacteristic of such a cool buyer like him.”

Although FTX’s press workforce declined to make Ray accessible to talk with Forbes, he’s well-known within the tight-knit world of chapter and restructuring. Ray’s strategy is to immerse himself within the particulars and to maneuver quick with groups created particularly for the blowup he’s centered on. At FTX, he rapidly divided the operations into 4 completely different buckets, or silos, every of which is now run by an impartial director of administrators with an illustrious pedigree, a few of whom Ray seems to have labored with at earlier assignments.

“John is a uncommon hen within the chapter world. He’s had a variety of high-profile assignments and been terribly profitable, and he’s his personal man,” says Jim Bromley, a accomplice at Sullivan and Cromwell and co-head of its restructuring observe, who has labored with Ray on a number of bankruptcies and is a part of the workforce of attorneys on FTX. “He’s an actual straight shooter. There’s no pretense about John.”

Ray grew up in western Massachusetts, the son of an industrial plumber and a stay-at-home mother, in response to a 2007 Chicago Tribune story. A graduate of the College of Massachusetts at Amherst, he acquired his legislation diploma from Drake College in Des Moines, Iowa, in 1982, and spent his early profession in Chicago at legislation agency Mayer Brown, engaged on mergers and acquisitions, securities legislation and worker profit plans. Then, as normal counsel of Waste Administration and its associates, he handled environmental remediation tasks, together with Superfund websites, and managed complicated civil and legal litigations and investigations.

“He has an actual observe document of parachuting into a few of the worst conditions and getting the absolute best outcomes for collectors.”


His first brush with messy bankruptcies got here at Fruit of the Loom. In 1999, lower than two years after he was employed on the underwear maker, deeply indebted Fruit filed for chapter. As chief administrative officer and normal counsel, Ray managed “all points” of the Chapter 11 continuing, according to his resume. He additionally orchestrated the authorized motion in opposition to Invoice Farley, the Chicago raider who had been the corporate’s chairman and CEO, in reference to a $65 million financial institution mortgage that Farley had obtained and the corporate had assured.

Enron, the spectacular vitality blowup that despatched its CEO to jail for 12 years, was the most important chapter in Ray’s profession. As chairman of the reorganized firm after Enron’s chapter submitting, Ray oversaw the $23 billion liquidation of Enron’s operations. In that function, he led the prosecution of greater than 1,000 instances, together with fraud claims, and was charged with recovering cash for collectors. Creditor recoveries surpassed 50 cents on the greenback, much better than had been anticipated on the time.

“He was a realist,” says Jim Latimer, a Dallas accountant who labored as an Enron director with Ray. “He had an excellent sense of what you might do, what the courtroom would take into account and tips on how to make the most effective of the state of affairs for the varied creditor teams. He actually tasks confidence, however he doesn’t challenge I-know-everything-there-is-to-know and it’s-only-my-way-or-the-highway. That’s not John.”

Along with Fruit and Enron, Ray additionally served as principal officer of defunct Canadian telecommunications firm Nortel and its U.S. associates, starting in 2010. In 2014, he grew to become an impartial board member for GT Superior Applied sciences, which filed for Chapter 11 chapter after it misplaced a provider take care of Apple. And in 2016 he was appointed to handle a belief liquidating the property of Residential Capital, which had as soon as been one of many largest U.S. subprime mortgage corporations. He additionally labored with Abroad Ship Administration, Ditech Mortgage and Burlington Industries of their Chapter 11 proceedings.

As with FTX, many of those corporations had been as soon as darlings of their industries, with property unfold throughout the globe till they bumped into bother. Nortel, for instance, had been value $250 billion on the peak of the Nineties tech bubble, however collapsed following an accounting scandal and administration missteps. After years of litigation and asset gross sales, the agency distributed more than $7 billion to collectors.

In contrast to many turnaround CEOs and turnaround board members who juggle a number of engagements on the identical time, Ray is thought for specializing in one large mess at a time that usually takes years to kind by way of, says Harvard’s Elias. At FTX, Ray might want to first discover the property as a way to create a viable image of the corporate’s stability sheet, after which determine tips on how to get a refund for the corporate’s collectors, a course of that’s more likely to contain plenty of finger-pointing and litigation.

This sort of case, like Enron earlier than it, might take years—maybe a decade or longer—to kind out. “He did an exceedingly spectacular job at Enron, and that is evocative of Enron to a point,” Lichtenstein says. “I believe he’ll follow the identical playbook right here as Enron, nevertheless it’s going to be tougher for him than Enron as a result of it’s extra of a multitude.”

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