Poor management practices and inexperienced leaders led to FTX's implosion, the crypto exchange's new chief executive told lawmakers on Tuesday, shortly after U.S. regulators charged founder Samuel Bankman-Fried with defrauding investors, Reuters reported. "The FTX group's collapse appears to stem from absolute concentration of control in the hands of a small group of grossly inexperienced, non-sophisticated individuals," said John Ray, who was named CEO of FTX after Bankman-Fried stepped down and the company filed for bankruptcy on Nov. 11. Ray also said there was virtually no distinction between the operations of FTX and Alameda Research, Bankman-Fried's crypto trading firm, which maintained close ties with his exchange. "I've just never seen an utter lack of record keeping — absolutely no internal controls whatsoever," Ray told the U.S. House of Representatives Financial Services Committee. A representative for Bankman-Fried did not immediately respond to a request for comment on Ray's testimony. He said he was shocked to learn FTX was using Quickbooks — software geared toward small and mid-size businesses — for accounting and approving invoices via Slack messages. Asked why he had testified that he did not believe the audited financial statements were reliable, Ray said: "We've lost 8 billion dollars of customer money. So by definition, I don't trust a single piece of paper in this organization." It will take weeks, perhaps months, to secure all the group's assets, Ray said, warning it would be a lengthy process. "At the end of the day, we're not going to be able to recover all the losses here," he said. Read more.
To view a replay of yesterday's hearing and access Ray's prepared testimony, please click here.
The Senate Banking Committee will hold a hearing today at 10 a.m. ET titled "Crypto Crash: Why the FTX Bubble Burst and the Harm to Consumers." Witnesses currently scheduled to testify include Prof. Hilary J. Allen of the American University Washington College of Law, Kevin O’Leary, an investor, Jennifer J. Schulp Director Of Financial Regulation Studies at the Cato Institute's Center for Monetary and Financial Alternatives, Cato Institute and actor and author Ben McKenzie Schenkkan. Click here to access the live web stream for today's hearing.
