John J. Ray III, a extinct of Enron, Fruit of the Loom and diversified bankruptcies, now must gain up the shattered pieces from Sam Bankman-Fried’s chaotic reign.
Ina scathing court docket submitting on Thursday, John J. Ray III, the newly appointed CEO of failed crypto alternate FTX, stated that he’d by no procedure seen “such an entire failure of corporate controls and such an entire absence of honest financial data.” Given his a protracted time of trip in the tough-and-tumble world of corporate bankruptcies and restructurings, including in circumstances fascinating fraud, that used to be saying something.
Over the last two a protracted time, Ray, 63, has worked on a laundry checklist of about a of the country’s ultimate and ugliest mess ups and restructurings, including vitality agency Enron, the country’s seventh-greatest financial damage in history; subprime mortgage issuer Residential Capital; telecommunications company Nortel Networks; underclothes maker Fruit of the Loom; and a bunch of others. He’s tussled in court docket with charming extinct CEOs (Fruit), sorted via advanced financial constructions (ResCap), handled subtle world operations (Nortel) and garnered a long way-increased-than-anticipated funds aid for creditors (Enron).
Ray, who works out of a Naples, Florida, agency called Owl Hill Advisory, is now on the guts of the storm at FTX, which used to be valued at $32 billion sooner than its give procedure. He used to be appointed CEO in the early morning hours of November 11 as Sam Bankman-Fried, the 30-one year-extinct acknowledged to all as SBF, resigned following a unexpected liquidity crisis that resulted in an $8 billion shortfall. “I fucked up,” SBF tweeted as the company used to be failing. A pair of U.S. companies, including the Securities and Change Commission and the Division of Justice, are now investigating.
“I comprise he’ll stick with the identical playbook right here as Enron, however it no doubt’s going to be more difficult for him than Enron on myth of it’s more of a giant quantity.”
Ray’s job is to delve into the messy diminutive print of FTX’s demise and unwind the maze of corporate entities to detect sources, including any funds which may perchance also very well be lacking or stolen, and maximize price for stakeholders by reorganizing or selling the advanced array of companies. Over the weekend, FTX stated that it had retained investment bank Perella Weinberg Partners, subject to court docket approval, to prepare for the sale or reorganization of about a of its companies. “In response to our evaluate over the last week, we’re tickled to learn that many regulated or licensed subsidiaries of FTX, within and launch air of the U.S., have solvent steadiness sheets, responsible management and treasured franchises,” Ray stated in an announcement.
Since taking on as FTX’s CEO, Ray has gathered his team of attorneys and advisors for twice-day to day meetings, at 9: 30 a.m. and 6 p.m., seven days every week. For his work, Ray will be paid $1,300 an hour, plus cheap out-of-pocket expenses, in conserving with a declaration by Edgar Mosley, managing director of restructuring advisory agency Alvarez & Marsal, filed Sunday in financial damage court docket. FTX’s first listening to in financial damage court docket is scheduled for Tuesday in Delaware.
“He’s one in every of the very easiest on this industry,” says Jared Elias, a professor at Harvard Law College who focuses on corporate financial damage. “He has an actual monitor file of parachuting correct into about a of the worst cases and getting one of the effective conceivable results for creditors.”
As maybe befits anyone in his role, Ray has stored a diminutive on-line footprint. Rare public photos were taken of him 15 years ago as a part of a profile by the Chicago Tribune. As Autism Capital, a chronicler of the FTX downfall on Twitter, jokingly mighty: “John J. Ray III must be love the company model of The Wolf from Pulp Fiction. You bring him in to beautiful up your corporate messes, you don’t quiz any questions, and he disappears into the sunset.” Winston Wolf used to be the character played by Harvey Keitel.
That made Ray’s public declaration relating to the declare of FTX’s affairs a particular shock—and maybe a warning signal of what’s to return. “I used to be bowled over that this kind of temporary duration after the commercial damage he would win such an explosive issue,” says Mark Lichtenstein, a partner in the commercial damage observe at Akerman who worked on Enron with Ray however isn’t eager with FTX. “That used to be so uncharacteristic of this kind of groovy buyer love him.”
Although FTX’s press team declined to win Ray readily accessible to sing with Forbes, he’s well-acknowledged in the tight-knit world of enterprise damage and restructuring. Ray’s procedure is to immerse himself in the info and to pass like a flash with teams created specifically for the blowup he’s centered on. At FTX, he rapid divided the operations into four diversified buckets, or silos, every of which is now bustle by an just director of administrators with an authorized pedigree, about a of whom Ray appears to have worked with at old assignments.
“John is a rare rooster in the commercial damage world. He’s had barely about a excessive-profile assignments and been terribly winning, and he’s his maintain man,” says Jim Bromley, a partner at Sullivan and Cromwell and co-head of its restructuring observe, who has worked with Ray on a complete lot of bankruptcies and is a a part of the team of lawyers 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 care for-at-dwelling mother, in conserving with a 2007 Chicago Tribune myth. A graduate of the College of Massachusetts at Amherst, he got his law level from Drake College in Des Moines, Iowa, in 1982, and spent his early career in Chicago at law agency Mayer Brown, working on mergers and acquisitions, securities law and employee earnings plans. Then, as total counsel of Extinguish Management and its associates, he handled environmental remediation initiatives, including Superfund web sites, and managed advanced civil and criminal litigations and investigations.
“He has an actual monitor file of parachuting correct into about a of the worst cases and getting one of the effective conceivable results for creditors.”
His first brush with messy bankruptcies got right here at Fruit of the Loom. In 1999, lower than two years after he used to be hired on the underclothes maker, deeply indebted Fruit filed for financial damage. As chief administrative officer and total counsel, Ray managed “all functions” of the Chapter 11 proceeding, in conserving along with his resume. He furthermore orchestrated the authorized motion against Invoice Farley, the Chicago raider who had been the company’s chairman and CEO, in connection with a $65 million bank mortgage that Farley had got and the company had assured.
Enron, the spectacular vitality blowup that sent its CEO to detention center for 12 years, used to be the final word financial damage in Ray’s career. As chairman of the reorganized company after Enron’s financial damage submitting, Ray oversaw the $23 billion liquidation of Enron’s operations. In that role, he led the prosecution of more than 1,000 circumstances, including fraud claims, and used to be charged with recovering money for creditors. Creditor recoveries surpassed 50 cents on the buck, a long way higher than had been anticipated on the time.
“He used to be a realist,” says Jim Latimer, a Dallas accountant who worked as an Enron director with Ray. “He had a authorized sense of what you may perchance well maybe live, what the court docket would comprise and techniques to win one of the effective of the disaster for the a famous quantity of creditor groups. He no doubt initiatives confidence, however he doesn’t project I-know-the entirety-there-is-to-know and it’s-fully-my-procedure-or-the-motorway. That’s no longer John.”
Apart from Fruit and Enron, Ray furthermore served as necessary officer of defunct Canadian telecommunications company Nortel and its U.S. associates, initiating put in 2010. In 2014, he grew to became an just board member for GT Evolved Applied sciences, which filed for Chapter 11 financial damage after it lost a vendor contend with Apple. And in 2016 he used to be appointed to manage a belief liquidating the sources of Residential Capital, which had once been one in every of the final word U.S. subprime mortgage companies. He furthermore worked with In another country Ship Management, Ditech Mortgage and Burlington Industries in their Chapter 11 lawsuits.
As with FTX, barely about a these companies were once darlings of their industries, with sources spread across the globe till they bumped into disaster. Nortel, as an instance, had been charge $250 billion on the height of the 1990s tech bubble, however collapsed following an accounting scandal and management missteps. After years of litigation and asset gross sales, the agency disbursed more than $7 billion to creditors.
No longer like many turnaround CEOs and turnaround board contributors who juggle a complete lot of engagements on the identical time, Ray is acknowledged for focusing on one mountainous mess at a time that in total takes years to form via, says Harvard’s Elias. At FTX, Ray will want to first win the sources in relate to accomplish a viable characterize of the company’s steadiness sheet, and then determine techniques to win a repayment for the company’s creditors, a course of that’s more seemingly to involve a range of finger-pointing and litigation.
This more or much less case, love Enron sooner than it, can also merely settle on years—maybe a decade or longer—to form out. “He did an exceedingly spectacular job at Enron, and this is evocative of Enron to a pair level,” Lichtenstein says. “I comprise he’ll stick with the identical playbook right here as Enron, however it no doubt’s going to be more difficult for him than Enron on myth of it’s more of a giant quantity.”
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