Bitcoin Forum

FTX’s bankruptcy-era CEO, John J. Ray III, appointed to shepherd the collapsed crypto exchange through Chapter 11 reorganization, testified on Tuesday that the company’s founder and former CEO, Sam Bankman-Fried, made multiple misstatements about his companies’ financials.

Ray, who oversaw Enron’s infamous corporate fraud, characterized FTX’s actions as “old fashioned embezzlement.”

“This is just taking money from customers and using it for your own purpose," Ray said. "Not sophisticated at all,” he said, explaining that what might have been sophisticated about the scheme was hiding it in plain sight.

Ray’s testimony may also have shed light on the theories that underlie the Justice Department's accusations against Bankman-Fried, who was charged with eight counts of wire fraud, securities fraud, and conspiracy in an indictment unsealed on Tuesday.

The agency’s criminal charges, which allege that Bankman-Fried misappropriated customer funds by allowing the funds to be used by his crypto hedge fund Alameda Research, require it to prove beyond a reasonable doubt that Bankman-Fried knew and intended to lie about the arrangement to customers or lenders.

The FTX chief's testimony came before the U.S. House of Representatives’ Financial Services Committee, where Bankman-Fried was also scheduled to testify via video conference. However, the public’s opportunity to hear testimony from the embattled founder foreclosed after he was arrested Monday evening by Bahamian authorities.

Bahamian authorities took Bankman-Fried into custody at the request of the U.S. Justice Department on Monday night, based on its indictment originally filed under seal.

In the indictment, the DOJ charged Bankman-Fried with wire fraud and conspiracy to commit wire fraud against FTX customers and lenders, conspiracy to commit commodities fraud and securities fraud, conspiracy to violate money laundering laws, and conspiracy to defraud the U.S. government through violations of campaign finance laws.

In separate civil actions filed Tuesday, the U.S. Securities and Exchange Commission, and the U.S. Commodity and Futures Trading Commission, respectively, alleged Bankman-Fried violated securities laws and the Commodity Exchange Act and the agency's regulations.

Asked if there's any way that Bankman-Fried and FTX’s senior managers wouldn’t have known that its entities had commingled customer funds, allowing Alameda unlimited access to FTX customer accounts, Ray III said, “No.”

In an interview at the New York Times' Dealbook Summit, Bankman-Fried said he didn’t “knowingly commingle [customer] funds.” He added that he “didn’t ever try to commit fraud on anyone,” that he “wasn’t “running Alameda,” and “didn’t know what was going on.”

Ray was also asked about contentions in Bankman-Fried’s leaked prepared hearing remarks which suggested FTX was solvent but for a run on the bank caused when Binance walked away from a planned investment in FTX, and that FTX US remains solvent and capable of paying off all of its customers. Bankman-Fried also tweeted the claim on November 10, the day before the exchange’s bankruptcy filing.

“Given the evidence you’ve gathered, is there any degree of truth to this claim,” Georgia Rep. Barry Loudermilk asked Ray.

“We still have a hole in the U.S., so as we sit here today it is not solvent. That's just inaccurate. And I'm not sure how he would even know that, quite honestly. We're hopeful,” Ray said.

“Prior to that episode, is your belief that FTX was solvent?” Ohio Rep. Anthony Gonzalez asked about Binance’s about-face. “No,” Ray replied.

Missouri Rep. Ann Wagner asked Ray if the transfer of FTX funds to Alameda could have been done by mistake, given that Bankman-Fried has publicly apologized for making mistakes in leading his companies.

“I don't find any such statements to be credible,” Ray III said.

Rep. Wagner went on to say that FTX’s international trading platform, FTX.com, held itself out as having a sophisticated risk management system commensurate with the size of his operations.

“I can say that it's absolutely false. There was no sophistication whatsoever,” Ray III said. “There was an absence of any management.”



https://finance.yahoo.com/news/ftx-ceo-says-company-engaged-in-old-fashioned-embezzlement-under-sbf-023334039.html

If I was planning to do something like what SBF did. I would be scared out of my mind and probably try hard to take steps to protect myself and those involved. I don't understand how SBF can taunt people on social media over the FTX crash. Then have no concerns or fear that some of his questionable choices might backfire on him. How could anyone be so indifferent and unaware of the deep hole he was digging for himself. Until it was too late.

I'd guess he'll at least end up serving over 30 years in prison if it proves he was complicit in the whole thing - and since he leant himself/stole $1bn+ as ftx went insolvent, that could be likely.

I don't know what repeating "ftx us remains solvent" says to anyone

This wasn't really a shocking thing to anyone, it was already obvious. The shocking part is the amount, I mean how did he managed to embezzle that much money without anyone noticing earlier? This company bankrupted with sooo much money from the funds of the users, which means that in order for this to be possible, a lot of people must have seen it and either not say a word, or they were paid to look the other way as well.

You can't just embezzle billions without anyone knowing, you can embezzle it, that part is possible, but you would have to pay a lot of people to shut up about it as well. I want to know who those were, and SBF to clearly give names to the court.

~ I don't understand how SBF can taunt people on social media over the FTX crash. Then have no concerns or fear that some of his questionable choices might backfire on him. How could anyone be so indifferent and unaware of the deep hole he was digging for himself. Until it was too late.

Is there a chance SBF receives a minor slap on the wrist and short prison time. Or did his luck wear thin here, with him due to receive a more severe penalty?

Is there a chance SBF receives a minor slap on the wrist and short prison time. Or did his luck wear thin here, with him due to receive a more severe penalty?

If there was embezzlement, I hope relevant people (including but not limited to Sam Bankman-Fried) will be held responsible. For me, though, the most important thing is for victims to get their money back, at least most of it if getting all of it is impossible. The second priority is proper legislation that would make such sudden bankruptcies impossible (in case it wasn't a direct violation of already existing legislation, of course, and unfortunately I suspect it might not have been): oversight of the work of exchanges that would allow monitoring how things are going with their funds, preferably in some form of public accountability.

It is not a surprise that FTX's current CEO had exposed everything, he needs to save his skin else he would be charged as guilty as SBF.  What is surprising, in this case, is that Kevin Oleary (spokesperson of FTX who is paid possibly more than $15m) keeps on insisting that Binance is the reason why FTX gets bankrupt.

Kevin Oleary stated that what he thinks triggered the collapse of FTX is when Binance forced FTX to buy back the 20% shares Binance is holding.  Surprisingly Oleary pointed out Binance as the reason for the FTX collapse and not the fraud SBF had done to the funds of FTX investors.  He even states that stuff during the house hearing when Oleary has been asked during the hearing, of course, SBF being absent due to the arrest prior that day.

It looks like they are pinning Binance for this massive loss that makes FTX collapse which now put Binance in the hot seat.

IF we are to judge SBF's case, he deserve jail time but let the due process go on and there will be intervention from powerful folks that he has given money before.

Kevin Oleary stated that what he thinks triggered the collapse of FTX is when Binance forced FTX to buy back the 20% shares Binance is holding.  Surprisingly Oleary pointed out Binance as the reason for the FTX collapse and not the fraud SBF had done to the funds of FTX investors.  He even states that stuff during the house hearing when Oleary has been asked during the hearing, of course, SBF being absent due to the arrest prior that day.

It looks like they are pinning Binance for this massive loss that makes FTX collapse which now put Binance in the hot seat.

It's like he's insisting that Sam Bankman-Fraud is the lesser of the two evils. Binance forcing them to buy back the stocks

I don't know how concrete this information is but it will be difficult for that to happen because the public is really watching to see the scenario that will finally play out in the case.. Those who have some criminal or embezzlement records with him would not show up because they will avoid the public from knowing their names and tracing their role in the crash.

Then have no concerns or fear that some of his questionable choices might backfire on him

he is like someone who is under the influence of drugs ,, usually people like this are very confident and not afraid of anything .. the police should immediately carry out a psychiatric examination and drug test ,, maybe while in the Bahamas he used many types of drugs to make himself more self-confident

This wasn't really a shocking thing to anyone, it was already obvious. The shocking part is the amount, I mean how did he managed to embezzle that much money without anyone noticing earlier? This company bankrupted with sooo much money from the funds of the users, which means that in order for this to be possible, a lot of people must have seen it and either not say a word, or they were paid to look the other way as well.

You can't just embezzle billions without anyone knowing, you can embezzle it, that part is possible, but you would have to pay a lot of people to shut up about it as well. I want to know who those were, and SBF to clearly give names to the court.

....


More negative press on SBF. No one's trying to sugarcoat anything, "old fashioned embezzlement" is what they're calling it.

If I was planning to do something like what SBF did. I would be scared out of my mind and probably try hard to take steps to protect myself and those involved. I don't understand how SBF can taunt people on social media over the FTX crash. Then have no concerns or fear that some of his questionable choices might backfire on him. How could anyone be so indifferent and unaware of the deep hole he was digging for himself. Until it was too late.

Is there a chance SBF receives a minor slap on the wrist and short prison time. Or did his luck wear thin here, with him due to receive a more severe penalty?