What you need to know: FTX CEO John Ray testimony before Congress

On Dec. 13 astatine 10 americium ET, John J. Ray III, CEO of the FTX Group, sat arsenic a witnesser connected a proceeding entitled “Investigating the illness of FTX, Part I.”

Addressing the committee, Ray described the FTX concern arsenic the effect of the following:

“A tiny radical of grossly inexperienced and unsophisticated individuals who failed to instrumentality virtually immoderate of the systems oregon controls that are indispensable for a institution entrusted with different peoples wealth oregon assets.”

Ray said that it “immediately became clear” to him that helium needed to record for Chapter 11, and helium has since taken “meaningful steps” to regain “command and control” of the situation.

Ray’s grounds was revealed earlier the hearing, which was covered by CryptoSlate earlier successful the day.

Questions from the House highlights

Mrs. Wagnar questioned Ray connected his past comments describing the FTX debacle arsenic “worse than Enron.”

Ray responded by saying that “literally there’s nary recordkeeping whatsoever. It’s the lack of recordkeeping.”

Ray elaborate that the recordkeeping was managed using  Slack for invoicing/expenses and via Quickbooks.

“Nothing against Quickbooks, precise bully tool, conscionable not for a multi-billion dollar company. There’s nary autarkic board. We had 1 idiosyncratic truly controlling this.”

Wagner questioned Ray connected whether SBF could person transferred lawsuit funds to Alameda arsenic a “mistake.” Ray responded, stating that helium did not find “any specified statements credible.”

Bankruptcy lawyer and seat of the subcommittee connected consumer, protection, and fiscal institutions, Mr. Perlmutter, highlighted a interest that Ray’s occupation is to:

“Gather arsenic galore assets arsenic you tin and that could beryllium from immoderate precise guiltless radical who got paid wealth to past dispersed it retired arsenic among who you deliberation the existent creditors are.”

In effect to the concern, Ray elaborate the complexity of determining the “ins and out” concern owed to the “comingling of assets.

“That makes it a spot much analyzable than simply however overmuch is my coin worth?”

Mr. Huizenga past questioned whether lawsuit funds from FTX.com were transferred to Alameda Research. In response, Ray said, “definitely, the assets of customers successful the .com silo were transferred to Alameda, nary question astir it.”

Ray past highlighted the interest presently being investigated: “whether oregon not determination is comingling betwixt the .com silo and the U.S. silo exchanges.”

Huizenga turned past towards household engagement successful the case, enquiring whether SBF’s father, Mr. Bankman received outgo from FTX. Ray confirmed that “the household did person payments.”

Huizenga met with SBF connected Dec. 8, 2021, accompanied by his father, Mr. Bankman. Noting that SBF was 15 minutes precocious to that meeting, Huizenga said:

“I asked and focused connected what types of regularisation helium was nether his engagemnet with regulators and however that affected FTX but it seems that there’s a batch much to uncover here.”

Next, Mr. Emmer discussed Gary Gensler with Ray, stating:

“We cognize that Chair Gensler had much meetings with FTX than anyone other successful the crypto industry.”

Emmer said that what was being negotiated was a “framework for integer plus speech registration and token registration with the SEC that would payment some parties.

Emmer elaborate that this model would “expand the SEC’s jurisdiction successful speech for the SEC’s preferential attraction of FTX implicit different manufacture participants.”

Explaining that Chair Gensler has refused to reply committee questions oregon attest earlier the committee, Emmer questioned Ray whether helium would stock “any interior documents” regarding connection betwixt FTX and Mr. Gensler oregon others of the SEC.

Ray said:

“We tin surely enactment with your unit to get you what you need.”

Ray past confirmed to Mr. Steil that assets were moved retired aft the bankruptcy. Ray continued to uncover that funds were transferred aft the petition day and were done some arsenic a portion of a hack and by the Bahamian authorities with the assistance of SBF.

“It is our presumption that it violated the automated enactment of bankruptcy.”

Under questioning whether SBF was moving to undermine the bankruptcy proceedings, Ray responded by saying, “it appears so.”

“We person opened up to stock everything we person with the Bahamian authorities.”

Ray besides stated that helium had not seen a akin level of transparency from the Bahamas.

Overview

While immoderate caller accusation was disclosed during the hearing, respective House Committee members utilized their clip to onslaught crypto, calling it “a plot of snakes” and “like counting chewing gum.”

Much of the proceeding ignored the relevance of FTX.US, the lone entity regulated successful the United States, with astir customers being U.S. citizens. Instead, the speech focused connected FTX.com and Alameda Research, on with the imaginable 2% of FTX.com users who reside successful the U.S.

Members of the Committee showed a deficiency of knowing of blockchain arsenic they failed to comprehend basal terminology specified arsenic “token minting,” with Mr. Vargas adjacent declaring, “I don’t get the constituent of cryptocurrency, to statesman with…other than if you’re a violent oregon idiosyncratic that wants to fell money.” Mr. Cleaver adjacent suggested that the manufacture should rebrand to “CreepyDoCurrency” alternatively of ‘cryptocurrency.’

Ray, however, chose not the propulsion the crypto manufacture nether the autobus by dodging questions astir whether crypto should beryllium regulated by the SEC oregon CFTC.

The existent CEO often stated that helium was incapable to remark connected circumstantial matters related to totals of losses oregon the timeframe for customers to beryllium capable to marque withdrawals. He besides said that helium was unsure whether FTX.US customers would person 100% of the funds they deposited onto the U.S.-regulated exchange.

Worryingly, Ray besides revealed that helium had not yet been capable to find each the backstage keys for each the FTX wallets that person been identified but that his squad is discovering caller funds each day.

Complete sum of the proceeding was live-streamed connected CryptoSlate’s YouTube channel.

The station What you request to know: FTX CEO John Ray grounds earlier Congress appeared archetypal connected CryptoSlate.