New FTX CEO tears into Sam Bankman-Fried in Congress – hours after his arrest

The new CEO of crypto giant FTX criticized the company’s “inexperienced and unsophisticated” founder Sam Bankman-Fried’s handling of the firm at a congressional hearing on its implosion on Tuesday.

The House Financial Services Committee is investigating the billion-dollar crypto firm, which recently collapsed after a $5 billion “spend” the previous year, its new CEO told lawmakers in his opening testimony.

John J Ray III was appointed to lead the company through bankruptcy after its founder resigned in the wake of his implosion. Ray guided Enron through one of the largest American corporate bankruptcies in history.

He blamed the corporate destruction of FTX on the “absolute concentration of control in the hands of a very small group of extremely inexperienced and unsophisticated individuals.”

Ray told lawmakers that of the dozen bankruptcies companies have navigated, FTX stands out as “very unusual.”

“Literally no record keeping at all,” he described to the cryptocurrency giant.

The seasoned executive said employees communicated invoices and other financial documents through the Slack workspace chat app and used accounting software Quickbooks internally.

“It’s a very cool tool, not for a multi-billion dollar company,” Ray said.

The company’s founder, Bankman-Fried, was due to appear before the committee on Tuesday, but was arrested in the Bahamas the night before.

Ray said he has guided about a dozen companies through bankruptcy, but the FTX case was particularly “unusual.”

The 30-year-old billionaire is expected to be extradited to the United States. US federal prosecutors indicted him on eight counts including money laundering and fraud.

Ray leads a group of investigators working to recover clients’ digital assets, of which more than $1 billion has already been found, Ray told lawmakers. The company owes approximately $10 billion to customers.

He confirmed to lawmakers Tuesday that his team was sharing those findings with the Southern District of New York, where Bankman-Fried was charged.

Asked how FTX’s sister firm, Alameda Research, was able to access client funds, Ray said: “There was no oversight” and that “money could move” undetected.

Democratic Rep. Brad Sherman called the FTX founder “a great big snake in the crypto Garden of Eden,” but added that “cryptocurrencies are a garden of snakes.”

Democratic Rep. Brad Sherman said of FTX founder Sam Bankman-Fried: ‘My fear is that we will see Sam Bankman-Fried as a big snake in a crypto Garden of Eden. The fact is that cryptocurrencies are a garden of snakes.

During the hearing, Democratic Rep. Al Green criticized Bankman-Fried despite his absence for his claims that the mishandling of billions of dollars in digital assets was a “mistake.”

‘dr. King reminded us that nothing in the world is more dangerous than sincere ignorance and conscious stupidity,” Green said.

However, he added later, “I find it hard to believe that we are dealing with a stupidity of conscience.”

“It seems to me that you have to be pretty talented to do the things that have been done and do them successfully,” Green said. They just don’t emanate from ignorance and stupidity. And a lot of people have been hurt.

Ray was unable to identify any problems that led to the collapse, instead blaming a series of faulty decisions and a lack of sufficient political barriers.

It’s really just the unlimited ability of those in positions of control to borrow customer funds or take customer funds and use it for their own use,” Ray said. ‘Really misuse of funds, and it’s as simple as that.’

Committee chair Rep. Maxine Waters said at the opening of the hearing: “Just a few months ago, FTX was one of the largest cryptocurrency exchanges in the world… Today FTX is bankrupt and possibly looted.”

She said she was “concerned” to see “how common it was for Bankman-Fried and FTX employees to steal customers’ cash out of the cookie jar” to “finance their lavish lifestyle.”

The committee’s ranking Republican member, US Rep. Patrick McHenry (R-NC), and House Financial Services Committee Chair Rep. Maxine Waters (D-CA) speak before the start of the hearing on the Tuesday.

Democratic Rep. Al Green said of Bankman-Fried’s insistence that it was a “mistake”: “I find it hard to believe that we are dealing with conscientious stupidity.”

Lawmakers accuse company executives of embezzling $10 billion in client funds and owing creditors “at least $3 billion.”

The ranking member, Rep. Patrick McHenry, hailed Bankman-Fried’s arrest as “good news.”

“The Bankman-Fried game is nothing new, we’ve seen it before,” McHenry said. He likened the young billionaire to 19th-century railroad barons and the same Enron scandal Ray oversaw years earlier.

Ray said the company “failed to implement virtually none of the systems or controls” necessary for companies charged with handling client funds.

He stressed that his investigation was still in the preliminary stages, but he gathered enough information to know that FTX “exposed client funds to massive losses” with risky investments, and that “loans and other payments were made to insiders.” for more than $1.5 billion’.

When asked by Kentucky Republican Rep. Andy Barr why he didn’t trust the company’s own internal audits, Ray pointed out that $8 billion in customer funds is still missing.’

“I don’t trust a single piece of paper in this organization,” Ray said.

More than $1 billion has been recovered so far, he said, most of which was “currencies of a diverse nature.”

He told Republican Rep. Tom Emmer that one of FTX’s subsidiary companies, FTX.com, didn’t even have a human resources or accounting department.