New FTX CEO Testifies In Front Of Congress Amid SBF’s Arrest• December 13, 2022 4:20 pm • Comments
The bankrupt cryptocurrency exchange FTX’s new CEO just testified in front of Congress this week to address matters related to the company’s recent collapse.
The new CEO, John Ray III, stated that the collapse was basically a “paperless” bankruptcy where the company had completely misused customer funds.
At the same time, former founder Sam Bankman-Fried has been arrested in the Bahamas a few hours before he was scheduled to testify.
So far, the government is attempting to charge SBF with the criminal charges of wire fraud and money laundering.
News of the founder’s arrest and the revelation of FTX’s financial situation has certainly shocked the crypto industry amidst the current bear market.
The former CEO of the failed cryptocurrency firm FTX will testify before a Congressional committee Tuesday, his first appearance under oath since FTX filed for bankruptcy roughly a month ago.
— NEWSMAX (@NEWSMAX) December 13, 2022
FTX filed for bankruptcy protection on Nov. 11, when the firm ran out of money after the cryptocurrency equivalent of a bank run.
The collapse of crypto’s second-largest exchange has garnered worldwide attention, and prompted worries in the crypto industry that the pain could become widespread. Estimates are that FTX customers could wind up losing billions of dollars.
Ray, who took over FTX on Nov. 11, told the committee that the problems at FTX were a cumulation of months or even years of bad decisions and poor financial controls.
“This is not something that happened overnight or in a context of a week,” he said.
Ray, a long-time corporate restructuring expert, said the situation at FTX was worse that what he found at Enron two decades ago. Enron was one of the biggest corporate frauds in U.S. history.
Many crypto investors and speculators are comparing the FTX collapse to the collapse of Enron in the past.
One of the main reasons that made this such a disaster was due to the fact that there was a lack of financial documentation in the first place.
As a result, the new CEO basically admitted that the company had committed old-fashioned embezzlement where it took its client’s capital and used it for its own personal benefits.
The fact that this could go on for so long has certainly shocked Ray as there were clear signs of this such as the fact that FTX had transferred billions of dollars of client funds to SBF’s own fund.
Whether or not the crypto industry will recover from this quickly or not is still to be determined, but it is quite likely that regulators have now been incentivized to create more regulation for the space.
He's in a bit of a spot.
Former FTX CEO Sam Bankman-Fried refuses to testify before Senate, committee says https://t.co/N8nRT9bbqL
— Badd Company (@BaddCompani) December 12, 2022
The company imploded and filed for Chapter 11 bankruptcy last month after reportedly transferring billions of dollars in FTX customer funds to Bankman-Fried’s hedge fund, Alameda Research.
The Securities and Exchange Commission also charged the former crypto “darling” Tuesday morning with allegedly “orchestrating a scheme to defraud equity investors in FTX Trading,” according to the agency.
The Senate Banking Committee had also asked Bankman-Fried to testify at a Wednesday hearing that he previously refused to attend.
Prior to his company’s implosion, Bankman-Fried donated almost $40 million to candidates, campaigns and political action committees in the 2022 congressional midterm elections, with most of his publicly disclosed contributions going toward Democrats. Ryan Salame, the co-CEO of FTX Digital Markets, donated another $23 million, with the majority of his contributions heading toward Republicans.
I’m at the House Financial Services Committee where FTX CEO John Ray is preparing to testify. Notably not present is former FTX CEO Sam Bankman-Fried, who is currently in custody in the Bahamas pic.twitter.com/w9Wyyive1o
— Leo Schwartz (@leomschwartz) December 13, 2022
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