Tuesday, the current FTX CEO John Ray III testified before the House Financial Services Committee to give results of what his investigation discovered about the money mishandlings of the now collapsed cryptocurrency company FTX. Not present during the hearing was former CEO Sam Bankman-Fried. Bankman-Fried was arrested Monday night in the Bahamas after being indicted by New York prosecutors on eight counts of conspiracy and fraud.
Ray blames FTX’s collapse on Bankman-Fried and his top execs’ failure to put in place any safeguards to protect customers’ investments. Customers lost a total of about $10 billion in customer funds. The new FTX CEO says he found “unacceptable management practices.” Here are a few practices Ray says were used to handle customers’ money.
- Customer assets were merged with assets from the Alameda trading platform.
- Alameda used client funds to engage in margin trading, which puts investors at risk of massive losses.
- Between late 2021 through 2022, FTX went on a spending binge. That spending binge included $5.2 billion spread across bout 474 companies.
- Loans and other payments were made to insiders.
The current FTX CEO does acknowledge that his findings remain in the beginning phases. He cites poor record-keeping as a reason for the difficulty of the investigation. Bankman-Fried reportedly used Quickbooks for record keeping. There was also no knowledge of an accountant on the payroll. Ray calls Bankman-Fried and his team “grossly inexperienced and unsophisticated individuals.
This was only part one of the hearing. During the closing of the hearing, it was mentioned part two would resume next year.
In addition, Bankman-Fried is facing charges from federal prosecutors in New York and another fraud complaint from the SEC.
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