Sam Bankman-Fried, founder and former CEO of the failed FTX, helped 1,500 Bahamian investors remove $100 million from their accounts while other customers around the world were locked out of the exchange, according to the company's new CEO.
FTX CEO John Ray III said that the company's collapse was one of the worst business failures he had ever seen.
Without a break, Ray told lawmakers about the lack of oversight and financial controls that he discovered when he took over FTX. Bankman- Fried was both the issuer and the recipient of the loan. The expenses were approved by the app. FTX didn't have accountants FTX used a pre-packaged software called QuickBooks to manage its finances.
Ray said there wasn't anything against the program. It is not a good tool for a billion dollar company.
FTX's market value reached $30 billion at one point.
Bankman-Fried was arrested in the Bahamas just hours before he was to testify at the hearing. Bankman-Fried was arrested at the request of the U.S. government.
Many committee members were frustrated by the timing of Bankman- Fried's arrest. As a former prosecutor, William Timmons couldn't imagine why anyone wouldn't want hours of congressional grilling for the target of an investigation.
The firm ran out of money after running out of coins. The collapse of the second-largest exchange has caused a lot of concern in the industry. About $8 billion of customer funds are missing, according to Ray.
Some customers in the Bahamas were able to recover money. Customers in other countries were not allowed to withdraw money from FTX because Bankman-Fried agreed to let them.
The committee was told by Ray that the problems at FTX were the result of months or years of bad decisions.
He said that it wasn't something that happened in a week.
There were many questions about what regulations could have stopped the collapse. He focused on how unusual FTX was, having no board of directors, having no real structure that prevented money invested by consumers in FTX to be shifted to Bankman- Fried's hedge fund for other investments or lavish purchases, without the original investors' knowledge.
Ray said that the company acted with little to no oversight.
The collapse of FTX Group appears to be the result of a very small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls that are necessary for a company that is trusted with other people's money.
Bankman-Fried denied any fraud had been committed, despite acknowledging that the company lacked proper financial controls.
Financial regulators disagreed with that assessment. Bankman-Fried is accused of playing a central role in the collapse of FTX and hiding its problems from the public. Bankman-Fried used investors' money to buy real estate for himself and his family, according to the SEC.
Ray supports the allegations.
He said that it was old fashion to take money from other people and use it for your own purposes. This is not technologically advanced.
Mark S. Cohen is a lawyer for Bankman- Fried.
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