New FTX CEO to tell Congress about spending binge, loans to insiders

FTX CEO John J. Ray III told the House Financial Services Committee on Tuesday that cryptocurrency exchanges under Sam Bankman-Fried are “spending” $5 billion and his hedge fund We plan to inform you that it is being confused with the assets of Alameda Research, which isexecutive’s memorandum.

These are among the five things Ray and his team have discovered since replacing Bankman-Fried last month. filing for bankruptcyCrypto Trading Firms Collapsed In The Next Epic Way run on assets Similar to a bank run.

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Ray said there are “a lot of unknowns at this stage,” but the new team knows:

• Customer assets from FTX were mixed with assets from Alameda.
• Alameda used customer funds to trade on margin, exposing them to “massive losses.”
• FTX estimates that in the second half of 2021 and into 2022, “almost $5 billion has been spent to buy countless businesses and investments, many of which are likely to represent only a fraction of the amount paid.” I continued to “waste” that there is a possibility.
• The company made more than $1 billion in “insider loans and other payments.”
• Alameda’s role as a cryptocurrency market maker has inspired it to pour money into other exchanges that are “intrinsically unsafe.”

comments are valid Some details about the collapse As previously reported by media outlets such as CNBC, bloomberg, new york times, wall street journal.

The commission released Wray’s opening testimony on Monday, the day before the hearing focused on FTX’s demise.

Bankman-Fried said in an interview on Twitter Spaces on Monday that he plans to testify at the upcoming House hearings via video from his location in the Bahamas.

Ray only mentions Bankman-Fried by name twice in his opening remarks on page 7, but it’s clear that much of his initial criticism of the company was directed at the organization’s former leaders. .

“…in my career, I have never seen a total failure of corporate controls at any level of the organization, from lack of financial statements to total failure of internal controls and governance,” Ray said in a statement. said in repeat similar statements He filed for bankruptcy of the company.

Other issues with FTX, per Ray’s opening remarks:

• Use of computer infrastructure that enables senior management individuals to access systems that store customer assets. No security controls are in place to prevent redirection of these assets.
• Storage of specific private keys to access hundreds of millions of dollars in crypto assets without effective security controls or encryption.
• Alameda, a cryptocurrency hedge fund within the FTX Group, can borrow funds held on FTX.com and use them for its own trading or investments without practical restrictions.
• Lack of audited or reliable financial statements.
• Understaffing in treasury and risk management functions, which is typical for companies of similar size to FTX Group.
• Lack of independent governance across the FTX Group.