After the collapse of Sam Bankman-FTX Fried’s crypto empire, the chairman of the Senate Banking Committee stated that legislators do not need to start from scratch when considering new laws.
The congressional hearing on Wednesday is the second time this week that Congress has looked into the effects of FTX’s bankruptcy. The company’s bankruptcy in November sent shock waves through the industry and led to increased criticism of Washington’s lack of oversight. Monday, Bankman-Fried was arrested in the Bahamas. The government of the United States had filed criminal charges against him, and there were multiple investigations into his alleged wrongdoing.
Tuesday, the new CEO of FTX, John J. Ray, testified before the House Financial Services Committee. He claimed that former executives, including the founder and former CEO of the company, Sam Bankman-Fried, stole customer funds.
“This is nothing more than old-fashioned theft. Simply using the customers’ money for your own benefit. Lacking in sophistication “Ray testified in front of the House Financial Services Committee for four hours. “Perhaps because they are attempting to conceal something in plain sight, they are sophisticated. This is just plain old embezzlement. Traditionalist, traditionalist.”
U.S. prosecutors and securities and commodities regulators allege that Bankman-Fried used billions of dollars of FTX customer funds for his own personal use, to invest in other businesses, to give money to politicians and political action committees (PACs), and to repay billions of dollars in loans owed by his cryptocurrency hedge fund, Alameda Research.
“That’s the major breakdown, here. Funds from FTX.com, which was the exchange for non-US citizens, those funds were used at Alameda to make investments and other disbursements,” Ray told House Financial Services Committee Chairwoman Maxine Waters, D-Calif., that Bankman-Fried was scheduled to testify on Monday night, but was instead arrested in the Bahamas. FTX filed for Chapter 11 bankruptcy protection last month.
Federal prosecutors in the Southern District of New York charged Bankman-Fried with a variety of offenses, including wire fraud, securities fraud, and campaign finance violations. The Securities and Exchange Commission also stated that Bankman-Fried “from the beginning” perpetrated a “brazen” and “years-long” fraud at his now-defunct cryptocurrency exchange FTX. Thus, he was able to steal billions of dollars from his customers’ accounts and utilize them to construct a vast empire.
When the indictment was made public, U.S. Attorney Damien Williams issued the following statement: “This was not a case of inadequate oversight or incompetence. It was straightforward deception.”
Ray and Bankman-Fried will not attend Wednesday’s Senate Banking hearing. Instead, there will be four cryptocurrency specialists, including Kevin O’Leary, who has been paid to speak for FTX for years.
The fact that the opening statements of the witnesses have already been made public suggests that the hearing will not just focus on FTX, but also on how the company’s demise may influence the industry as a whole.
In his introductory remarks, O’Leary states,”We need to get to the bottom of what happened at FTX, but we can’t let its collapse cause us to abandon the great promise and potential of crypto.”
Ben McKenzie Schenkkan, an actor who frequently comments on crypto, states in his prepared evidence that the market is a “huge speculative bubble.”
“I submit to you today that the entire cryptocurrency industry resembles nothing more than a massive speculative bubble built on a foundation of fraud,” Schenkkan said. “In my opinion, it is the largest Ponzi scheme in history by an order of magnitude.”
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