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Collapsed Crypto Exchange FTX’s CEO Says Firm Had Was Engaged In ‘Old Fashioned Embezzlement’

Collapsed Crypto Exchange FTX’s CEO Says Firm Had Was Engaged In ‘Old Fashioned Embezzlement’
The US House Financial Services Committee held an hearing on the collapse of cryptocurrency exchange FTX on Tuesday, following the arrest of founder Sam Bankman-Fried in the Bahamas on Monday night, as US regulators announced a slew of civil and criminal charges against the one-time billionaire.
According to the Justice Department and Bahamian authorities, Bankman-Fried was arrested based on an indictment in the United States that was unsealed shortly after the hearing began.
The disgraced crypto executive was charged with eight criminal counts by the United States Attorney's Office for the Southern District of New York: conspiracy to commit wire fraud and securities fraud, individual charges of securities fraud and wire fraud, money laundering, and conspiracy to avoid campaign finance regulations.
The panel's sole witness, John J. Ray, the company's new CEO, told lawmakers that the company had "no record-keeping whatsoever," relying on bookkeeping software QuickBooks to track its multibillion-dollar portfolio.
“This is really just old fashioned embezzlement. This is just taking money from customers and using it for your own purpose. Not sophisticated at all,” Ray said in blistering testimony that lasted more than four hours. “Sophisticated, perhaps in the way they are hiding something, frankly, right in front of their eyes. This is just plain old embezzlement. Old school, old school.”
After transferring billions of dollars in FTX customer funds to Bankman-hedge Fried's fund, Alameda Research, the company imploded and filed for Chapter 11 bankruptcy last month.
The Securities and Exchange Commission charged the former crypto "darling" with allegedly "orchestrating a scheme to defraud equity investors in FTX Trading" on Tuesday morning.
The Senate Banking Committee had also invited Bankman-Fried to testify at a hearing on Wednesday, which he had previously declined to attend.
Bankman-Fried gave nearly $40 million to candidates, campaigns, and political action committees in the 2022 congressional midterm elections, with the majority of his publicly disclosed contributions going to Democrats.
Ryan Salame, co-CEO of FTX Digital Markets, contributed another $23 million, with the majority of his funds going to Republicans.
According to FTX CEO John J. Ray, cryptocurrency exchange founder Sam Bankman-Fried lied when he tweeted that the company "has enough to cover all client holdings."
Bankman-Fried posted the now-deleted tweet on November 7, just days before stepping down as CEO of FTX and filing for Chapter 11 bankruptcy.
“Absolutely not,” Ray said after committee member Rep. Ritchie Torres, D-N.Y., asked whether that tweet was accurate. “So that statement was false?” Torres asked. “Yes,” Ray replied.

Christopher J. Mitchell

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