Who is John J. Ray III, the man who comes to fix the FTX mess and Sam Bankman-Fried

A scathing court filing on Thursday, John J Ray IIIthe newly appointed CEO of the failed cryptocurrency exchange FTXHe said he had never seen “such a complete absence of reliable information.” Whoever arrives with the hero cape adds decades of experience in the world of bankruptcies and company restructuring, even in cases of fraud.

Ray, 63, worked on a list of some of the biggest and nastiest cases in the country, including the Enron energy company, the seventh-biggest bankruptcy in the country’s history; subprime mortgage issuer Residencial Capital; the telecommunications company Nortel Networks; the Fruit of the Loom underwear brand, and a host of others. He has fought in court with lovely exes from Fruit Company, solved complex financial structures (ResCap) and managed to repay creditors more than expected (Enron).

Sam Bankman-Fried, known to all as SBF, resigned after a sudden liquidity crisis, which resulted in a deficit of $8 billion. “I screwed up,” SBF tweeted, while multiple US agencies, including the Securities and Exchange Commission and the Department of Justice, are investigating the case.

The Commission’s job is to delve into the messy details of the disappearance of FTX and untangle the maze of entities to locate assets, including missing or stolen funds, and maximize value to stakeholders by reorganizing or selling the complex set of companies.

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Sam Bankman-Fried, known to all as SBF, resigned after a sudden liquidity crisis, which resulted in a deficit of $8 billion.

Over the weekend, FTX said it had hired investment bank Perellainberg Partners, subject to court approval, to prepare the sale or reorganization of some of its companies. “Based on our review last week, we are pleased that many of FTX’s licensed or regulated affiliates have strong balance sheets, responsible management and valuable franchises,” the company said in a statement.

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The new CEO gets to work

FTX’s first hearing in bankruptcy court is scheduled for Tuesday in Delaware. Since he took over as CEO of FTX, Ray has assembled his team of attorneys and advisors seven days a week. For his work, Ray charges $1,300 an hour. “He’s one of the best in this business,” says Jared Elias, a Harvard University professor who focuses on corporate bankruptcy.

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Ray’s approach is to get into the details and move quickly with teams built specifically for the business he is focused on. At FTX, he quickly divided the operations into four groups, each headed by a director, some of whom Ray appears to have worked with before.

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Over the weekend, FTX said it had hired investment bank Perellainberg Partners, subject to court approval, to prepare for the sale or reorganization of some of its companies.

John J Ray III is a rare bird in the world of bankruptcy. “He’s had a lot of high-profile assignments and been extraordinarily successful,” says Jim Bromley, a partner at Sullivan and Cromwell, who has worked with and on multiple bankruptcies and is part of the FTX legal team. “He’s a real shooter. There’s no pretense in John.”

a man with history

John J. Ray III Grew up in western Massachusetts, the son of an industrial plumber and a stay-at-home mother, according to a 2007 Chicago Tribune article. He graduated from the University of Massachusetts at Amherst, with a law degree from the Drake University, Iowa, in 1982, and spent the early years of his career in Chicago with the law firm of Mayer Brown, developing mergers and acquisitions, securities law, and employee benefit plans.

The first brush with disorderly bankruptcies came at Fruit of the Loom. In 1999, after being hired at underwear manufacturer, deeply in debt, Fruit filed for bankruptcy. As Administrative Director and General Counsel.

Then, as president of the company reorganized after the Enron bankruptcy, Ray oversaw the liquidation of $23 billion of Enron’s operations. In that position, he directed the processing of more than 1,000 cases, including creditors, and was responsible for recovering money for creditors. The recovery from creditors exceeded 50 cents on the dollar, much better than was expected at the time.

Sam Bankman-Fried, FTX, cryptocurrencies
John J. Ray III grew up in western Massachusetts, the son of an industrial plumber and a stay-at-home mother, according to a 2007 Chicago Tribune article.

“It was realistic,” says Jim Latimer, a Dallas accountant who worked with Ray. “He had a good sense of what could be done, what the court could consider and how to make the best of the situation for different groups of creditors. He projects confidence, but he doesn’t project ‘it’s all there is to do’ and ‘it’s just my way or the way’. That’s not John.”

He has a real track record of parachuting into some of the worst situations and getting the best results for creditors, he adds.

In 2016 he was appointed to manage a trust that liquidated the assets of Residential Capital, which had been one of the largest subprime mortgage companies in the United States. He also worked with Overseas Ship Management, Ditech Mortgage, and Burlington Industries on their after 11 proceedings.

The challenge with FTX

As with FTX, many of these companies were once the darlings of their industries, with subsidiaries spread all over the world, until they ran into trouble. Nortel, for example, had more than $250 billion at the height of the 1990s tech bubble, but it went under after a scandal and management missteps. After years of litigation and asset sales, the company distributed more than $7 billion to creditors.

Sam Bankman-Fried, FTX, cryptocurrency
At FTX, Ray will have to create a viable picture of the company’s balance sheet, and figure out how to recover the money for the company’s creditors, a process that can lead to many prosecutions and litigation.

Like many CEOs and board members who juggle multiple companies, Ray is known for focusing on one big issue at a time that often takes years to resolve.

At FTX, Ray will have to create a viable picture of the company’s balance sheet, and figure out how to recover the money for the company’s creditors, a process that can lead to many prosecutions and litigation.

This type of case, like Enron’s, can take years, perhaps a decade or more. “He did an impressive job at Enron, and this is somewhat reminiscent of Enron,” says Lichtenstein. “I think he’ll stick to the same playbook here, but it’s going to be more difficult for him than at Enron because it’s more complicated.”

*With information from Forbes US.


The article is in Spanish

Tags: John Ray III man fix FTX mess Sam BankmanFried

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