In a particularly eyebrow-raising moment, one politician asked John Ray whether he would support proposals to change the name of cryptocurrency to "creepydoe."
Listen to the CoinMarketRecap podcast on Apple Podcasts, Spotify and Google Podcasts
FTX's financial troubles began months and possibly years ago, the bankrupt exchange's new CEO has told Congress.
John Ray III said $8 billion of customer money has been lost — and "by definition, I don't trust a single piece of paper in this company."
He told U.S. politicians that there was virtually no distinction between FTX and sister trading firm Alameda Research.
Ray confirmed that, in some cases, Sam Bankman-Fried was both the lender and recipient of loans given to him personally — and it's unclear what these funds were used for.
Grilled by members of the House Financial Services Committee, Ray said that the operation of Alameda Research "depended on the use of customer funds."
During his testimony, he said that FTX could be broken down into four silos — the international exchange, the U.S. exchange, Alameda Research, and investments.
When asked whether Bankman-Fried was running Alameda — something that the 30-year-old entrepreneur has denied — he said:
"I will note that he owned 90% of Alameda. There's no distinction in governance between the two. The owners of the company could have free reign across all four silos."
Ray said that more than $1 billion in funds have been recovered so far, and they're being securely stored in cold wallets. However, he stressed that this is an ongoing process that will take weeks and perhaps months.
Answering a flurry of quickfire questions, Ray confirmed that most creditors are based outside of the U.S.
And expanding on why he claimed that the collapse of FTX is worse than Enron, he said this exchange was unusual because there was no sense of recordkeeping.
"Employees would communicate invoicing and expenses on Slack … they used QuickBooks."
Politicians Have Their Say
Some of the most enlightening parts of the hearing came when committee members were asking their questions.
Rep. Brad Sherman said he had been trying to ban crypto for five years — and expressed fears that Bankman-Fried would be seen as "one big snake in a crypto Garden of Eden."
"Crypto is a garden of snakes. Crypto just looks like an NFT — a pet rock for the 21st century."
Congressman Al Green said that he found it hard to believe that investigators were dealing with "conscientious stupidity," adding:
"We have to send a message to others who would take advantage of people that this is not going to be tolerated."
And his colleague Emanuel Cleaver attacked Sam Bankman-Fried over the testimony that he was preparing to give before his arrest in The Bahamas on Monday.
Text of that testimony shows that SBF was planning to say "I f***** up" — a common motto over the past month — with Cleaver describing this as "disrespectful" and "absolutely insulting."
In a particularly eyebrow-raising moment, Cleaver went on to ask Ray whether he would support proposals to change the name of cryptocurrency to "creepydoe."
One of the most enlightening questions came from Rep. Ed Perlmutter, who mentioned the fact that some of Bernie Madoff's victims were only receiving payouts 14 years on. He told FTX's new CEO:
"I want you to add 100 to your age before you untangle all of this."
Perlmutter went up to ask (while struggling with the pronunciation of Dogecoin) how FTX would evaluate what stakeholders should get out of the bankruptcy when the value of cryptocurrencies is regularly chopping and changing.
Ray said that the guiding compass would be looking at a snapshot of customer accounts on the day of the bankruptcy — and working backwards from there.
