John J. Ray III, a veteran of Enron, Fruit of the Loom and other bankruptcies, now must pick up the shattered pieces from Sam Bankman-Fried’s chaotic reign.
Ina scathing court filing on Thursday, John J. Ray III, the newly appointed CEO of failed crypto exchange FTX, said that he’d never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information.” Given his decades of experience in the rough-and-tumble world of corporate bankruptcies and restructurings, including in cases involving fraud, that was saying something.
Over the past two decades, Ray, 63, has worked on a laundry list of some of the country’s biggest and ugliest failures and restructurings, including energy firm Enron, the country’s seventh-largest bankruptcy in history; subprime mortgage issuer Residential Capital; telecommunications company Nortel Networks; underwear maker Fruit of the Loom; and a host of others. He’s tussled in court with charming former CEOs (Fruit), sorted through complex financial structures (ResCap), dealt with complicated international operations (Nortel) and garnered far-higher-than-expected funds back for creditors (Enron).
Ray, who works out of a Naples, Florida, firm called Owl Hill Advisory, is now at the center of the storm at FTX, which was valued at $32 billion before its collapse. He was appointed CEO in the early morning hours of November 11 as Sam Bankman-Fried, the 30-year-old known to all as SBF, resigned following a sudden liquidity crisis that resulted in an $8 billion shortfall. “I fucked up,” SBF tweeted as the company was failing. Multiple U.S. agencies, including the Securities and Exchange Commission and the Department of Justice, are now investigating.
“I think he’ll stick to the same playbook here as Enron, but it’s going to be harder for him than Enron because it’s more of a mess.”
Ray’s job is to delve into the messy details of FTX’s demise and unwind the maze of corporate entities to locate assets, including any funds that are missing or stolen, and maximize value for stakeholders by reorganizing or selling the complex array of businesses. Over the weekend, FTX said that it had retained investment bank Perella Weinberg Partners, subject to court approval, to prepare for the sale or reorganization of some of its businesses. “Based on our review over the past week, we are pleased to learn that many regulated or licensed subsidiaries of FTX, within and outside of the U.S., have solvent balance sheets, responsible management and valuable franchises,” Ray said in a statement.
Since taking over as FTX’s CEO, Ray has gathered his team of attorneys and advisors for twice-daily meetings, at 9:30 a.m. and 6 p.m., seven days a week. For his work, Ray will be paid $1,300 an hour, plus reasonable out-of-pocket expenses, according to a declaration by Edgar Mosley, managing director of restructuring advisory firm Alvarez & Marsal, filed Sunday in bankruptcy court. FTX’s first hearing in bankruptcy court is scheduled for Tuesday in Delaware.
“He’s one of the very best in this business,” says Jared Elias, a professor at Harvard Law School who focuses on corporate bankruptcy. “He has a real track record of parachuting into some of the worst situations and getting the best possible results for creditors.”
As perhaps befits someone in his role, Ray has kept a small online footprint. Rare public photos were taken of him 15 years ago as 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 must be like the corporate version of The Wolf from Pulp Fiction. You bring him in to clean up your corporate messes, you don’t ask any questions, and he disappears into the sunset.” Winston Wolf was the character played by Harvey Keitel.
Restructuring expert and FTX CEO John J. Ray III in a rare photo at his then office in Chicago’s Prudential Tower in 2007.
Zbigniew Bzdak/Chicago Tribune
That made Ray’s public declaration about the state of FTX’s affairs a particular shock—and perhaps a warning sign of what’s to come. “I was surprised that such a short period after the bankruptcy he would make such an explosive comment,” says Mark Lichtenstein, a partner in the bankruptcy practice at Akerman who worked on Enron with Ray but isn’t involved in FTX. “That was so uncharacteristic of such a cool customer like him.”
Though FTX’s press team declined to make Ray available to speak with Forbes, he’s well-known in the tight-knit world of bankruptcy and restructuring. Ray’s approach is to immerse himself in the details and to move fast with teams created specifically for the blowup he’s focused on. At FTX, he quickly divided the operations into four different buckets, or silos, each of which is now run by an independent director of directors with an illustrious pedigree, some of whom Ray appears to have worked with at previous assignments.
“John is a rare bird in the bankruptcy world. He’s had a lot of high-profile assignments and been extraordinarily successful, and he’s his own man,” says Jim Bromley, a partner at Sullivan and Cromwell and co-head of its restructuring practice, who has worked with Ray on multiple bankruptcies and is part of the team of lawyers on FTX. “He’s a real 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 mom, according to a 2007 Chicago Tribune story. A graduate of the University of Massachusetts at Amherst, he received his law degree from Drake University in Des Moines, Iowa, in 1982, and spent his early career in Chicago at law firm Mayer Brown, working on mergers and acquisitions, securities law and employee benefit plans. Then, as general counsel of Waste Management and its affiliates, he dealt with environmental remediation projects, including Superfund sites, and managed complex civil and criminal litigations and investigations.
“He has a real track record of parachuting into some of the worst situations and getting the best possible results for creditors.”
His first brush with messy bankruptcies came at Fruit of the Loom. In 1999, less than two years after he was hired at the underwear maker, deeply indebted Fruit filed for bankruptcy. As chief administrative officer and general counsel, Ray managed “all aspects” of the Chapter 11 proceeding, according to his resume. He also orchestrated the legal action against Bill Farley, the Chicago raider who had been the company’s chairman and CEO, in connection with a $65 million bank loan that Farley had obtained and the company had guaranteed.
Enron, the spectacular energy blowup that sent its CEO to prison for 12 years, was the biggest bankruptcy in Ray’s career. As chairman of the reorganized company after Enron’s bankruptcy filing, Ray oversaw the $23 billion liquidation of Enron’s operations. In that role, he led the prosecution of more than 1,000 cases, including fraud claims, and was charged with recovering money for creditors. Creditor recoveries surpassed 50 cents on the dollar, far better than had been expected at the time.
“He was a realist,” says Jim Latimer, a Dallas accountant who worked as an Enron director with Ray. “He had a good sense of what you could do, what the court would consider and how to make the best of the situation for the various creditor groups. He certainly projects confidence, but he doesn’t project I-know-everything-there-is-to-know and it’s-only-my-way-or-the-highway. That’s not John.”
In addition to Fruit and Enron, Ray also served as principal officer of defunct Canadian telecommunications company Nortel and its U.S. affiliates, beginning in 2010. In 2014, he became an independent board member for GT Advanced Technologies, which filed for Chapter 11 bankruptcy after it lost a supplier deal with Apple. And in 2016 he was appointed to manage a trust liquidating the assets of Residential Capital, which had once been one of the largest U.S. subprime mortgage companies. He also worked with Overseas Ship Management, Ditech Mortgage and Burlington Industries in their Chapter 11 proceedings.
As with FTX, many of these companies were once darlings of their industries, with assets spread across the globe until they ran into trouble. Nortel, for example, had been worth $250 billion at the height of the 1990s tech bubble, but collapsed following an accounting scandal and management missteps. After years of litigation and asset sales, the firm distributed more than $7 billion to creditors.
Unlike many turnaround CEOs and turnaround board members who juggle multiple engagements at the same time, Ray is known for focusing on one big mess at a time that typically takes years to sort through, says Harvard’s Elias. At FTX, Ray will need to first find the assets in order to create a viable picture of the company’s balance sheet, and then figure out how to get money back for the company’s creditors, a process that’s likely to involve lots of finger-pointing and litigation.
This kind of case, like Enron before it, may take years—perhaps a decade or longer—to sort out. “He did an exceedingly impressive job at Enron, and this is evocative of Enron to some degree,” Lichtenstein says. “I think he’ll stick to the same playbook here as Enron, but it’s going to be harder for him than Enron because it’s more of a mess.”
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