Although Sam Bankman-Fried was virtually unable to attend the congressional hearing due to his recent arrest in the Bahamas, US lawmakers did not mince words in criticizing the former FTX CEO and the company’s business practices.
As the sole witness before a US House Financial Services Committee hearing on Dec. 13, FTX CEO John Ray shed light on many of the exchange’s activities prior to his inauguration as head of the exchange. the company on November 11 and what subsequent investigations had revealed. According to Ray, Alameda Research relied on funds from FTX Trading – the international arm of FTX Group – with “no internal control or separation” between the two companies.
The FTX CEO stated that the owners of both Alameda and FTX – in reference to Bankman-Fried – could “run free” for most of the companies in the FTX Group, and that any separation was more of a distinction made to the public than the reality. In response to questions from Missouri Rep. Ann Wagner, Ray added that FTX’s financial difficulties differed from high-profile flops like energy giant ENRON in that there was “no record keeping whatsoever” with many invoices and expense receipts through Slack.
“FTX used Quickbooks, a multi-billion dollar company,” Ray said. “I have nothing against Quickbooks – a very good tool – but not for a multi-billion dollar company.”
Many House members who turned to the FTX CEO wondered if Bankman-Fried’s actions might have been intentional or due to gross incompetence. Wagner brought up Bankman-Fried’s “apology tour” in the media after FTX’s bankruptcy, in which he claimed he made “a lot of mistakes” in moving FTX users to Alameda.
“I don’t find those statements credible,” Ray said.
Texas Rep. Al Green quoted Martin Luther King Jr. in an apparent attempt to understand Bankman-Fried’s actions – “nothing in all the world is more dangerous than sincere ignorance and conscientious stupidity” – and whether there was “perversion” in FTX.
“Mr. Bankman-Fried has more or less indicated that he just made a big mistake, that he was doing the best he could to be a servant of great service to humanity,” Green said. “I find it hard to believe that we are dealing with conscious stupidity.”
Oklahoma Representative Frank Lucas added:
“Of course Bankman-Fried tried to put himself out there as the brightest of the bright, but being brilliant doesn’t make you honest or dumb, does it?”
Although Bankman-Fried was not present to testify before the commission, lawmakers confirmed the content of the written testimony that was leaked after his arrest. Missouri Rep. Emanuel Cleaver called Bankman-Fried’s immediate use of profanity in her opening statement a “disrespect” and an “absolute insult” to Congress. The legislator added that he would study the possibility of submitting a resolution to change the name “cryptocurrency” to “creepy dough coin” in light of recent events.
The House committee hearing was the second in which FTX’s bankruptcy was discussed, following the one held on December 1 in the Senate Agriculture Committee, in which the chairman of the US Futures Trading Commission Commodities, Rostin Behnam, was the only witness. The CFTC and the Securities and Exchange Commission subsequently filed separate lawsuits against Bankman-Fried, FTX, and Alameda for fraud.
The Senate Banking Committee has also scheduled a hearing for December 14, with Hollywood star Ben McKenzie, investor Kevin O’Leary, law professor Hilary Allen, and Jennifer Schulp appearing as witnesses. director of financial regulation studies at the Center for Monetary and Financial Alternatives of the Cato Institute. It’s unclear whether lawmakers will call Bankman-Fried to testify amid her ongoing legal troubles.
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