On December 13th at 10am, FTX Group CEO John J. Ray III was present as a witness at a hearing entitled “FTX Collapse Investigation, Part I.”
Sam Bankman-Fried was scheduled to attend the hearing, but was unable to attend after being arrested. Late on Dec. 13, news broke that SBF had been denied bail after SBF’s attorneys argued that his history of depression and his ADD justified his release into custody. .
Addressing the committee, Ray described the FTX situation as a result of:
“A small group of highly inexperienced and unsophisticated individuals who have failed to implement virtually all of the systems and controls necessary for a company entrusted with the money and assets of others.”
Ray said it “quickly became clear” that he needed to apply for Chapter 11, and has since taken “meaningful steps” to regain “command and control” of the situation.
Ray’s testimony was revealed before the hearing and was covered by CryptoSlate earlier in the day.
Questions from House Highlights
Mrs. Wagner questioned Ray about past comments describing the FTX fiasco as “worse than Enron.”
Ray said, “Literally no record keeping. It’s a lack of record keeping.”
Ray elaborated that record keeping is managed via Quickbooks, using Slack for billing/expense processing.
“Quickbooks is a very good tool, but for a multi-billion dollar company it’s just fine. There’s no independent committee. There was one person really managing this.”
Wagner asked Ray whether SBF could have transferred the customer’s funds to Alameda as a “mistake”. Ray responded by stating that he did not consider “such statements to be credible.”
Perlmutter, a bankruptcy attorney and chairman of the Subcommittee on Consumers, Protection, and Financial Institutions, highlighted concerns that Ray’s work will:
“Collect as much wealth as you can, that is from very innocent people who have received the money, and distribute it evenly to those you consider to be the real creditors. .”
In response to concerns, Ray detailed the complexities of determining the ‘in and out’ situation due to the ‘intersection of assets’.
“It gets a little more complicated than just how much my coin is worth.”
Huizenga then asked whether the customer’s funds from FTX.com were transferred to Alameda Research. “Without a doubt, the customer assets in the .com silo were transferred to Alameda. There is no question about that,” Ray said.
Ray then highlighted concerns that are currently being investigated.
Huizenga then turned to family involvement and asked if SBF’s father, Bankman, was being paid by FTX. Ray confirmed that “the family received payment.”
Huizenga met with the SBF on December 8, 2021, accompanied by his father Mr Bankmann. As SBF noted that he was 15 minutes late for the meeting, Huizenga said:
“I asked and focused on what kind of regulation he was involved with with regulators and how it affected FTX, but it seems like there is still a lot to uncover here. .”
Mr. Emer then spoke with Ray about Gary Gensler and said:
“I know that Chairman Gensler has had more meetings with FTX than anyone in the cryptocurrency industry.”
Emmer said what is being negotiated is a “framework for digital asset exchange registration and token registration with the SEC that benefits both parties.
Emmer explained that the framework “expands the SEC’s jurisdiction in exchange for SEC preferential treatment for FTX over other industry participants.”
Explaining Chairman Gensler’s refusal to answer Commission questions or testify before the Commission, Emer told Ray that there was no communication between FTX and Mr. Gensler or others at the SEC. I asked if you would like to share an “internal document” about
“We can certainly work with your staff to get what you need.”
Ray later confirmed to Still that the assets had been transferred after the bankruptcy. Ray went on to reveal that the funds were transferred after the petition date and were done by Bahamian authorities as part of the hack and with the help of SBF.
“It is our view that it violated the automatic bankruptcy stay.”
When asked if SBF was working to undermine the bankruptcy proceedings, Ray replied, “It looks like it.”
“We have opened our doors to sharing everything we have with the Bahamian authorities.”
Ray also said he had never seen a similar level of transparency from the Bahamas.
While some new information was revealed at the hearing, several members of the House committee took the time to attack cryptocurrency, calling it a “garden of snakes” and “counting chewing gums.” ‘ he called.
Many of the hearings ignored the relevance of FTX.US, the only U.S. regulated entity with most of its customers being U.S. citizens. Instead, the conversation he focused on FTX.com and Alameda Research, plus his potential 2% of his FTX.com users residing in the United States.
Demonstrating a lack of understanding of blockchain, committee members did not understand basic terms such as “token minting,” Vargas declared: You are either a terrorist or someone who wants to hide your money. Cleaver even suggested that the industry should be rebranded to “CreepyDoCurrency” instead of “cryptocurrency.”
However, Ray chose not to throw the crypto industry under the bus by dodging questions about whether cryptocurrencies should be regulated by the SEC or CFTC.
The current CEO has often stated that he cannot comment on specific issues related to total losses or the timeframe for customers to make withdrawals. , said he was unsure whether he would receive 100% of the funds deposited on US-regulated exchanges.
Worryingly, Ray also revealed that he had yet to find every private key for every identified FTX wallet, but that his team is discovering new funds every day.
Full coverage of the hearing was streamed live at CryptoSlate’s YouTube Channel.