FTX, one of the biggest crypto exchanges, recently faced bankruptcy due to lack of full corporate control. Sam Bankman Fried, the founder and former CEO of the exchange, was arrested today in the Bahamas. So, today at 10:00 AM ET/8:30 PM IST, there is a live congressional hearing on the FTX failure, which will answer many questions. Since Sam was arrested, current FTX CEO John J. Ray III will be present at the hearing.
This is a live article, and we will continue to add updates with timestamps.
10:58 AM ET: Sam’s disrespectful testimony
Mr. Clever asks John if he read Sam’s testimony. And then the witness is very ‘disrespectful’ and says that he can’t even read.
10:54 a.m. ET: Mr. Green: “Is this all really a big mistake?” he asks.
John said they are currently investigating the entire incident and are not pointing fingers or accusing anyone.
10:45 AM ET: Why is FTX the worst scam in history?
John Ray was asked why he described FTX as a complete failure of corporate control. He said:That opinion, of course, is, you know, something that we’ve found, you know, every case is different. The challenges of each case are different. The issue I’m talking about here is a record keeping problem I’ve never seen. Absolutely no internal controls. And, of course, this issue becomes difficult in that context when you’re dealing with technology.
John even said that FTX was a bigger scam than Enron, he controlled his losses. says, “FTX Group is extraordinary, you know, I’ve done probably a dozen big, you know, leveraged losses in my career, you know, including Enro of course. Each of these entities had some financial problem or other. They have some common characteristics. It’s unusual, and it’s unusual, actually, you know, there’s no record keeping. Lack of record keeping. Employees, you know, delaying invoices and expenses, which is, you know, basically a, you know, way of communicating. They use QuickBooks for the chat room, a multi-billion dollar company that uses QuickBooks. Nothing on QuickBooks. It’s a great tool, not just for a multi-billion dollar company. There is no independent board, right? We had one person who really handled this, There is no independent board.”
10:40 am: M. McHenry questions John Ray
Congressional hearings on the failure of FTX
John’s statement separates the businesses into four silos, Mr McEnry said. For those of us who don’t invest in crypto, it was again an international exchange called ftx.com. Alemeda was the only crypto hedge fund that made other investments, venture capital type investments. And there is a fourth element which is just investments.
So McHenry asks who owns the four silos? And John replies that all those entities were controlled by Sam Bankman Fried.
10:34 AM ET: Ms Waters questions John Ray
Congressional hearings on the failure of FTX
Mrs. Waters says. “Sam Bankman Fried seems to have tried to hide the connection between the exchange and the mutual fund. Have you seen evidence of such a cover-up? Have you seen evidence of independent management separate from Alameda and separate from the exchange?”
John answered. “The operations of the FTX Group were not divided; in fact, it operated as one company. As a result, there is no difference between the operation of the company and the one who controlled those operations.
Mrs. Waters says. “Well, another bankruptcy filing by Mr. Ray revealed that Mr. Bankman was personally exempt from a $1 billion loan from Alameda Research. In a meeting with committee staff, Mr. Banman was acquitted because he did not know the details of the interest payments and could not say for sure who approved the loan. He said he invested this money back into the exchange but knowingly chose to take out the loan. To avoid directly associating Alameda Research with FTX, you should take it instead of FTX. Can you elaborate on the significant findings related to this loan?
John answered. “The loans that were given and released to Mr. were not just one loan but many loans. Some are registered with private promissory notes. For example, there is no statement stating what the purpose of the loan is, he signed as both the lender and the borrower. We do not have information at this time as to the purpose and use of those funds and this is part of the investigation.
Ms. Waters asks. “Have you found any business or practice that you believe to be inappropriate or harmful to FTX? If so, can you give us an example?
John says so. “Thank you indeed. You know, Alameda’s practice is based on the way it works for the client’s money. That is the main downfall of the transaction from ftx.com.”
Mrs. Waters finished her question. “Did FTX have adequate risk management systems and controls in place to properly manage any leverage the business took and its relationship with businesses like Alameda?”
John answered. “There is almost no internal control and no differentiation.”
10:26 AM ET: John Ray’s testimony
Congressional hearings on the failure of FTX
As John began to investigate the problems with FTX, it became clear to him that Chapter 11 was the best course to protect the remaining value of FTX. So, my first job as CEO allowed Chapter 11 filings.
It also says: “The failure of FTX groups appears to have resulted from absolute control in the hands of a few inexperienced and unsophisticated individuals who did not have any systems or controls necessary for the company entrusted with other people’s money or property. He said.
Some of the accepted management practices include using computer infrastructure to provide individuals and senior management with access to systems that store client assets outside of security controls to prevent asset diversion. The private keys are worth hundreds of millions of dollars in crypto assets stored without effective security controls and encryption.
10:23 AM ET: Failure of SEC regulations
Congressional hearings on the failure of FTX
Mr. McHenry says: “I look forward to hearing from Mr. Gensler soon and often. And we’ll hear from him about how we can bring clarity to the application of securities laws to business platforms that he hasn’t.
10:13 AM ET: The court is live!
Congressional hearings on the failure of FTX
The Chairman, Ms. Waters, welcomed Mr. John, CEO of FTX. She also said today’s hearing will delve into Mr. Ray’s findings, the hosts piecing together the events that led to FTX’s collapse and the damage it caused to millions of customers who trusted the platform.
They also note FTX’s deep ties to Alameda. A crypto hedge fund that was primarily owned by the bank and misappropriated billions of dollars in client assets.
