New FTX CEO says company's collapse worse than Enron, calls it 'paperless bankruptcy'

New FTX Group CEO John J. Ray III, who managed Enron's 2006 bankruptcy, said the cryptocurrency exchange's collapse was the result of "plain old embezzlement" but also described it as a "paperless bankruptcy" the likes of which he's never seen before. 

Ray was asked during a House hearing if the FTX collapse is worse than Enron.

"This one is unusual in the sense that literally there is no record keeping whatsoever," Ray said at the House Financial Services Committee hearing on Tuesday. "The multi-billion dollar company used QuickBooks."

Ray explained that there was no "independent board" governing FTX, but the company's infrastructure was sophisticated in the way they hid what they were doing for so long.

"This is really old-fashioned embezzlement," he said. "This is just taking money from customers and using it for your own purpose. Not sophisticated at all. Sophisticated perhaps in the way they were able to hide it from people."

Ray said the company's collapse was destined to happen but declined to opine on whether the Securities and Exchange Commission should have seen it coming and intervened earlier.

"This company was sort of uniquely positioned to fail," Ray said.

He mentioned that FTX was lacking an inventory of wallets, centralized accounting and risk management.

Estimating that more than $7 billion has been lost, Ray said his team is working to recover as much as possible. Over $1 billion in crypto assets has been secured so far he testified.

"Our main goal is to secure the cash and secure the crypto assets, and that is an ongoing venture," he said.

Ray explained there were multiple reasons for the losses, including passwords kept in "plain text format" as well as inadequate storage of keys for digital wallets.

Ex-CEO Sam Bankman-Fried was arrested Monday night in the Bahamas on fraud allegations at the direction of federal prosecutors before the hearing. Prior to the arrest, he had been scheduled to testify remotely at the hearing with Ray from his home in the Bahamas. 

Bankman-Fried faces a host of federal charges, including fraud and illegal campaign contributions.