FTX chief: Company appears to be using 'old fashioned embezzlement'

FTX's new chief executive answered questions about his efforts to recover client funds from the crypto exchange's collapse during a lengthy hearing before lawmakers on Tuesday , saying his team encountered an "unprecedented" lack of company record keeping.

John J. Ray III, a restructuring attorney company, testified for about four hours, saying he was in the early stages of sorting through the exchange to find money that could be used to repay creditors and consumers.

"Assets will take time to locate," Ray said. “The process, as I said, will take months, not weeks. But we try to do it as quickly as possible.

He described FTX as a company that kept few records of its business, including tracking invoices in email. Slack app and using QuickBooks commodity tax software, which is unusual for a multi-billion dollar company. He also said that while his team saved the company's Slack, they were also aware that the company was using "disappearing messaging".

Asked if customers would get their money back, Mr. Ray objected.

"It's too early to say what the final recovery will be for each particular customer. . At some point we will obviously find out, and we obviously hope to maximize that,” he said. really they're going to get their money back,” said Rep. Alma Adams, a Democrat from North Carolina.

Mr. Ray was asked to quantify the epic collapse of FTX and compare it to the collapse of Enron. Mr. Ray oversaw the breakup of the energy trading company after an accounting scandal in 2001.

He said they were separate situations and called the perpetrators of the Enron crimes "very sophisticated," while FTX executives appeared to have engaged in "really old-fashioned embezzlement" and were not sophisticated at all.

Nevertheless, Mr. Ray's responses suggested that he believed Sam Bankman-Fried, former chief executive of FTX, was well aware of fraud within the company. , he was asked if it would have been possible that Mr. Bankman-Fried was not aware of the mixing of funds between the FTX entities, as he previously claimed, especially in interviews with The New York Times.

"No," Mr. Ray replied.

On Tuesday, prosecutors charged Mr. Bankman- fried of defrauding investors. He also faces charges of civil securities fraud.

Lawmakers have called for new regulations on the crypto industry. Rep. Jake Auchincloss, Democrat of Massachusetts, said his "patience with crypto bulls is running out."

"It's been 14 years and the American public has heard a lot of promises, but he's seen a lot of Ponzi schemes," he said. "For crypto, it's time to shut up or shut up."

When lawmakers spoke directly about Mr. Bankman-Fried, who courted politicians on both sides of the aisle before FTX collapsed, they were critical.

Rep. Brad Sherman, a California Democrat and longtime crypto critic, reminded his colleagues of the big picture. "Don't throw out Sam Bankman-Fried and then pass his bill," said Mr. Sherman said, referring to Mr. Bankman-Fried's intensive lobbying in Washington and efforts to pass cryptography legislation hie that would work for FTX.

When asked about Mr. Bankman-Fried's role in the company going forward, Mr. Ray was succinct.

“The role he currently plays: zero,” he said.