US House Panel Holds Hearing at FTX Collapse Crypto Exchange Collapse

John J. Ray, the new CEO of FTX and the sole witness before the panel, informed legislators that FTX did not maintain records with the QuickBooks software to keep tabs on the billion-dollar portfolio.

The House Financial Services Committee organized a hearing on Tuesday, December 13, on the breakdown of the FTX cryptocurrency exchange after the detention of founder Sam Bankman-Fried Monday night in the Bahamas. The U.S. watchdogs published several criminal and civil allegations versus the erstwhile billionaire.

The Bahamian administration and Justice Department stated Bankman-Fried, who was earlier slated to be a witness before the panel, was detained founded on an accusation in the United States that was revealed soon following the commencement of the hearing.

What are the charges against Sam Bankman-Fried?

The U.S. Attorney’s Office for the Southern District of New York leveled the following charges against the shamed crypto baron:

Hatching plots to carry out securities fraud and wire fraud
Conspiracy and concealment to evade campaign funding rules
Separate allegations of wire fraud and securities fraud

On Tuesday morning, as stated by The Securities and Exchange Commission (SEC), the agency accused the one-time crypto “sweetheart” of “masterminding a plan to scam equity investors in FTX Trading.”

What has John J. Ray to say on this FTX collapse?

The new CEO of FTX and the sole witness to testify before the panel, John J. Ray, stated in his evidence that this was just an outdated misappropriation. It was all about collecting funds from investors and utilizing them for someone’s personal use. This was not a sophisticated fraud. JJ Ray’s testimony continued for over four hours and reiterated that it was an old-style scam resulting from the gross inexperience of the men at the helm.

Furthermore, John J. Ray informed the House Financial Services Committee that Sam Bankman-Fried, the originator of the cryptocurrency exchange misinformed when he tweeted that the firm has sufficient funds to underwrite all customer holdings.

Bankman-Fried posted the since-removed tweet on November 7, only days before his quitting as FTX CEO and the firm applying for Chapter 11 bankruptcy.

Once Rep. Ritchie Torres, D-N.Y., a member of the probe committee, questioned Ray whether that tweet was true. “So that statement was false?” Ritchie inquired. “Yes,” answered Ray.

JJ Ray, a veteran corporate restructuring professional, stated the state of affairs at FTX was poorer than what he witnessed at Enron about 20 years back. Enron ranked among the largest corporate scams in the chronicles of the U.S.

What led to the downfall of FTX?

FTX crumbled and applied for Chapter 11 bankruptcy in November after allegedly shifting FTX customer funds worth billions of dollars to Alameda Research, the hedge fund of Bankman-Fried.

Before his company’s collapse, Sam contributed nearly $40 million to drives, candidates, and political activity teams in the 2022 mid-term congressional polls, with the lion’s share of his publicly released donations moving toward Democrats. The Co-CEO of FTX Digital Markets, Ryan Salame, contributed a further $23 million, and most of his donations were directed toward Republicans.