This is what kind of legal trouble FTX and Sam Bankman-Fried could now face, based on details from the crypto exchange's latest bankruptcy filing

• FTX's bankruptcy filing shed new light on potential legal trouble for the crypto exchange and its former execs.
• New CEO John J. Ray III delivered a blistering assessment, calling FTX's implosion "a complete failure of corporate controls."
• Read some of the most incendiary parts of the bankruptcy filing and what experts say it all might mean.

FTX's explosive new bankruptcy court filing revealed new potential legal landmines for former CEO Sam Bankman-Fried and his associates.

The crypto exchange's new CEO, John J. Ray III delivered a blistering assessment in a filing with the bankruptcy court of the chaos that led to FTX's implosion; financial documents may have been altered, corporate funds were allegedly used to purchase homes for employees and advisors, and workers had expenses approved via personalized emojis.

Michael K. Lowman, who served as senior counsel of the SEC's Division of Enforcement, said that while there is no crypto-specific regulatory framework in the US, Sam Bankman-Fried and FTX may have a lot of legal trouble on their hands, "both potentially from an SEC perspective and from a federal criminal perspective," he said.

J.W. Verret, chairman of the SEC subcommittee of the American Bar Association, echoed that sentiment.

"If all the statements on Twitter that have been attributed to Sam are true, then there's quite a bit there to be used in a fraud case against him," he said.

Here are some of the most incendiary parts of the filing by Ray and what experts say it might mean:

"Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here... this situation is unprecedented."

Matthew Gold, a bankruptcy partner at Kleinberg Kaplan, said that this statement, beyond offering a severe rebuke of the management at FTX, also serves as a note of caution to the public about the original bankruptcy filing's reliability.

"This is uncharacteristically blunt in a filing of this type," he said. "These things tend to be more caged, lawyerly discussions of things."

"Unacceptable management practices included… the use of software to conceal the misuse of customer funds, the secret exemption of Alameda from certain aspects of FTX.com's auto-liquidation protocol, and the absence of independent governance..."

Lowman said that if the SEC can successfully argue that crypto assets are securities, then FTX misusing customer funds opens up the possibility for a securities fraud case.

FTX would be "subject to SEC regulation about customer handling of assets and safeguarding. Not only would they deal with securities fraud, but just a straight up regulatory violation that could obligate them to recover all that money," he said.

"In the Bahamas, I understand that corporate funds of the FTX Group were used to purchase homes and other personal items for employees and advisors..."

While this detail in the filing may seem irresponsible, Verret said US regulators likely couldn't go after Sam Bankman-Fried for this practice.

"That activity occurred in the Bahamas so that it would be subject to Bahamian law, not US law," he said.

"Those are things that a publicly traded company in the United States would not be allowed to do, but this isn't a publicly traded company," he added.

"...because this balance sheet was produced while the Debtors were controlled by Mr. Bankman-Fried, I do not have confidence in it, and the information therein may not be correct as of the date stated."

This line also suggests the haste with which the bankruptcy was filed. Traditionally, large bankruptcy cases are the result of weeks or months of planning and start with detailed proposals about how the company plans to reorganize. This shows the opposite, according to Gold.

"There's a continuum between very well-organized bankruptcy petitions and those that are less organized — this one is all the way on the end of the scale of not prepared," he said.

"The appointment of the Directors will provide the FTX Group with appropriate corporate governance for the first time."

Ray indicated that the company has brought on five independent members of the board, which had been apparently primarily controlled by Bankman-Fried without the sort of typical CEO-board accountability, said Vincent Indelicato, a partner at Proskauer Rose.

"The appointment of independent directors may very well help the debtors maintain credibility with the bankruptcy court and their creditors in these early days of the case," he said.