FTX committed ‘old fashioned embezzlement,’ CEO tells lawmakers in blistering hearing

The House Financial Services Committee held a hearing Tuesday into the collapse of cryptocurrency exchange FTX following the late Monday arrest of founder Sam Bankman-Fried in the Bahamas as U.S. regulators released a series of civil and criminal charges against the former billionaire.

The Justice Department and Bahamian authorities say Bankman-Fried, who was previously scheduled to testify before the panel, was arrested on the basis of an indictment in the United States that was unsealed shortly after. the start of the hearing.

The United States Attorney’s Office for the Southern District of New York charged the disgraced crypto executive with eight counts: conspiracy to commit wire fraud and securities fraud, individual charges securities and wire fraud, money laundering and conspiracy to circumvent campaign finance regulations.

John J. Ray, the company’s new CEO and the panel’s only witness, told lawmakers the company had “no record keeping,” using QuickBooks accounting software to track its multibillion-dollar portfolio. .

“It’s really just old-fashioned embezzlement. It’s just taking customers’ money and using it for your own purposes. Not sophisticated at all,” Ray said in a scathing testimony that lasted more than four hours. “Sophisticated, maybe in the way they’re hiding something, frankly, right in front of their eyes. It’s just plain old embezzlement. Old school, old school.”

The company imploded and demanded Chapter 11 Bankruptcy last month after apparently transferring billions of dollars in funds from FTX clients to Bankman-Fried hedge fund Alameda Research.

The Securities and Exchange Commission has also accused the former crypto “dear” Tuesday morning with allegedly “orchestration of a scheme to defraud stock investors of FTX Trading”, according to the agency.

The Senate Banking Committee had also asked Bankman-Fried to testify at a Wednesday hearing that he had previously declined to attend.

Prior to his company’s implosion, Bankman-Fried had donated nearly $40 million to candidates, campaigns and political action committees in the 2022 congressional midterm elections, most of his contributions made public being intended for the Democrats. Ryan Salame, co-CEO of FTX Digital Markets, donated an additional $23 million, with the majority of his contributions directed to Republicans.

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