Transcripts For CSPAN3 FTX CEO Testifies On Collapse Of Company 20230103

exchange john wray testifies before the financial services committee which is investigating the ftx crash. the company reported problems in early november, from liquidity issues. and shortly after, filed for bankruptcy. this runs three hours and 50 minutes. the committee will come to order. without objection, the chair is authorized to declare recess of the committee at any time. this hearing is entitled, investigating the collapse of ftx, part one. i now recognize myself for five minutes to give an opening statement. first, i would like to welcome mr. john ray the third. who has been appointed ceo of ftx to oversee its bankruptcy to testify before our committee for the first part of our investigation into the fall of ftx. i am hopeful that the arrest of mr. bankman-fried, founder and former ceo of ftx means he will be held accountable for the fraud he has committed and the harm he has caused. he was scheduled to testify, under oath, before this committee today. unfortunately, the timing of his arrest denies the public the opportunity to get the answers that they deserve. rest assured, this committee will not stop until we uncover the full truth behind the collapse of ftx. just a few months ago, ftx was one of the largest cryptocurrency exchanges in the world. with a valuation of 32 billion dollars in just three years since its founding. today, ftx is bankrupt, possibly looted. ftx misused approximately ten billion dollars of customer funds and owes creditors at least three billion dollars. today, as many as 1 million people, many of whom are here in the united states, are locked out of their ftx accounts and may recover only a fraction of their hard earned investments, if any at all. this failure is not just noteworthy for it's size, but for the company's total disregard of standard business practices, governance, risk management, and criminal conduct. mr. ray, who also oversaw one of the largest corporate bankruptcies in the united states history, enron, declared that he had never in his career seen such, quote, complete failure of corporate controld and such a complete absence of trustworthy financial information that has occurred here. end of quote. i am so deeply troubled to hear how common it was for bankman-fried, and ftx employees, to steal from the cookie jar of customer funds to finance their lavish lifestyles. today this committee will dig deeper into mr. ray's findings in the hope of piecing together the events that led to the collapse of ftx and the subsequent harm to millions of customers who put their trust on the platform. we will also look at ftx's deep ties with alameda, a crypto hedge fund predominately owned by bankman-fried, that gambled away billions of dollars in assets that were illegally transferred from ftx. importantly, we will hear how mr. ray and his team are trying to recover funds for customers by piecing together bankman-frieds broken record keeping. and by identifying potentially unlawful transfers to himself, as well as his friends and family. under my leadership over the past 4 years, this committee has closely focused on the growth and popularity of crypto precisely because of the many concerns that the failure of ftx has highlighted. last year, i created a digital assets working group comprised of democratic members of the committee with the goal of learning more about the underlying technologies, applications, finance, and the risk that they posed to customers, consumers, and the economy. when the presidents working group on financial markets urged congress to safeguard the economy from stablecoin risks. i and ranking member mchenry jumped into action and we continued to work on a bill with the members of this committee. ongoing failures of crypto firms like terrausd, celsius, blockpi, and most significantly, ftx and alameda research, only serves to strengthen the importance for congress, and the public, to understand the harm caused to customers. what laws have been broken or flaunted? and how congress and the regulators can prevent this from happening again. i want to say that i'm pleased that the committee's effort to push agencies across the country to take greater action against bad actors who misuse customers funds. i also applaud the sec for authorizing separate charges relating to mr. bankman-fried. i look forward to additional actions to hold him accountable and make customers more whole again. i yield back. i now recognize the ranking member of the committee, the gentleman from north carolina, mr. mchenry for five minutes. >> thank you, madam chair. we have heard everything but the truth. tweets, dms, and interviews are no substitute for the fact. that is why chairman waters and i worked together to get this hearing together. the first bipartisan hearing of this committee in the past four years. we have worked together to invite two witnesses. one, mr. ray, who has proven to be a reliable witness. second, well, frankly i look forward to getting his lies here on the record under oath. nevertheless, the arrest of sam bankman-fried is welcome news. it still does not get to the bottom of what happened at ftx, why it happened, and who else may be responsible. we need to understand the flow of funds between ftx and alameda research and the other 130 related entities. we need to examine the action of those who may have contributed to what has been called a, quote, complete failure of corporate controls end quote. that quote comes from mr. ray, the newly appointed ceo. we need answers for the u.s. platform customers stuck in limbo. our work does not stop there. we have an obligation to do everything in our power to ensure this never happens again. let's face it, there is an old saying, nothing new under the sun. it is safe to assume fraud and fraudsters have been around just as long as that phrase has been around. bankman-fried's play is nothing new. we have seen it before. in the late 1800s, when the union pacific purposely inflated the price of railroad construction to line its executive pockets. or in the 1920, when the con man, george c parker, was arrested for illegally, quote unquote, selling the brooklyn bridge, madison square garden, and the statue of liberty. in the 2000s, when it was revealed that enron engaged in a massive corporate fraud and corruption sending shockwaves throughout the corporate world. there are many comparisons you can draw between each one of these portenders and the alleged actions of mr. bankman-fried. it appears to be the same old school fraud, just using new technology. it is important to know -- i think it is important to know, we still use railroads. we still buy and sell real estate. we still rely on businesses to provide services. we have to separate out the bad actions of individuals from the good created by an industry and an innovation. let me be clear, i believe in the promise of digital assets. and those around the world building on block chain technologies. that is why i have worked and continue to work to provide clear rules of the road for the digital asset ecosystem here in the united states. that is how we protect american consumers and investors in this marketplace. allow innovation to occur here in the united states. i will finish with this, we know the securities exchange commission chair gensler's regulation by enforcement approach is not going to stop bad actors. next year, i look forward to hearing from mr. gensler early and often. we will hear from him on how we can provide clarity on the application of our securities law to trading platforms, which he has failed to do. the financial services committee has an important role to play in this fact finding mission, which we will start today. we will continue as we work towards a legislative outcome to prevent this from happening again. thank you, madam chair. i yield back. >> i want to welcome our witness for this hearing, john j ray the third. the chief executive officer of ftx group. without objection, your written statement will be made part of the record. you will have five minutes to present your oral testimony. you should be able to see a timer that will indicate how much time you have left. i would ask you to be mindful of the timer so we can be respectful of everyone's time. mr. ray, you are now recognized for five minutes to present your oral testimony. >> chairwoman waters, ranking member mchenry, distinguished members of the committee, thank you for your invitation to appear here today. i truly appreciate your interest in this matter. i hope my testimony can be helpful to you as the committee continues its inquiry into the collapse of ftx, and the efforts that are underway to help those who have been harmed. i accepted the position of chief executive officer of ftx of the early morning hours of november 11th, it immediately became clear to me that chapter 11 was the best course available to be able to preserve any remaining value available at ftx. my first acts as a ceo was to authorize the chapter 11 filings. i have implemented a five-part bankruptcy plan which is detailed in my written statement. our overarching objective is to maximize value for ftx customers and creditors some of that we can mitigate, to the greatest extent possible, the harm suffered by so many. the ftx groups collapse appears to stem from the absolute concentration of control in the hands of a small group of grossly inexperienced and unsophisticated individuals. they failed to implement virtually any of the systems or controls are necessary for a company entrusted with other people's money or assets. some of the unacceptable management practices identified so far include the use of computer infrastructure that gave individuals and senior management access to the system that stored customer assets, without security controls preventing them from redirecting those assets. storing of certain private keys to access hundreds of millions of dollars in crypto assets without effective security controls or encryption. the availability of alameda to borrow funds held ftx.com, to utilize for its own trading or investment, without any affective limits, whatsoever. the co-mingling of assets. lack of complete documentation for transactions involving nearly 500 separate investments made with ftx group funds and assets. in the absence of audited or reliable financial statements, lack of personnel in financial risk management function. the absence of independent governance throughout the ftx group. the fundamental challenge that we face are in many respects we are starting from near zero in terms of the corporate infrastructure, and record keeping that one would expect from a multi billion dollar corporation. still, in just over four weeks we have instituted meaningful steps to gain control. every week, we gain a better understanding of what occurred. a path forward, all of which will be shared throughout different parties. and affecting parties throughout the chapter 11 process. the scope of our investigation is truly enormous. it involves detailed tracing of money flows, asset transfers the time of ftx's founding and complex technological efforts to identify and trace crypto assets. we are in the process of collecting and reviewing dozens of terabytes of documents of data. billions of individual transactions. leveraging sophisticated technology and expertise to identify and trace additional transactions and assets. while many things are unknown at this stage, a very preliminary stage, many questions remain. we know the following. first, customer assets at ftx. com were comingled with assets from the alameda training platform. that much is clear. second, alameda use client funds to engage in margin trading. which exposed customer funds to massive losses. third, the ftx group went on a spending binge in 2021 and 2022, during which five billion dollars was spent on a myriad of businesses and investments. many of which may only be worth a fraction of what was paid for them. fourth, loans and other payments are made to insiders in excess of 1. 5 billion dollars. fifth, alameda's business model as a market maker required funds to be deployed to various third-party exchanges, which were inherently unsafe. further exacerbated by the limited protections offered in certain of those foreign jurisdictions. the resolution of the chapter 11 process as well as the investigation, the cause of the ftx groups elapse, as shown keen interest to your committee into your constituents. although there are many who may deserve answer. customers, creditors, investors, employees and regulators. we are positioning ourselves to provide answers to these constituents with the answers that they do. there an unprecedented nature it will take its time to make its course. i'm committed to working as quickly as possible to instigate what happened. formulate conclusions, and hopefully inform the committee's work here. i should note that my ability to comment on certain matters to may will be inherently limited by the state of ftx records, ongoing banker proceedings. of course, the ongoing numerous investigations with u.s. law enforcement regulators. i look forward to answering your questions to the best of my ability. thank you, again, for allowing me to present in front of committee. thank you. thank you mr. ray. it has been wildly reported how ftx shifted customer funds held at the exchange to alameda research, which was ahead for on owned almost entirely by mr. bankman-fried. this allowed the firm to effectively gamble with customer money without their knowledge or consent. if ftx was registered and the security exchange, several laws would be requiring the segregation of customer assets and prevented such clear conflict of interest. mr. bankman-fried, also appears to have trying to hide to linkages between the exchange and his hedge funds. have you seen evidence of such a cover-up? have you seen evidence that there was any independent governments of alameda, separate and apart from that of the exchange? >> [inaudible] the operations of the ftx group were not segregated. they were really operated as one company. as a result, there is no distinction, virtually between the operations of the company and he who controls those operations. >> well, mr. ray, another bankruptcy filing revealed that mr. bankman-fried personally received one billion dollar loan from alameda research in a meeting with committee staff, mr. bankman-fried was unaware of the terms of the repayment, interest details, and could not confidently state who authorized alone. he claimed that he reinvested this money into the exchange. knowingly chose to have the low issued to him rather than ftx -- connecting alameda research the ftx. can you elaborate on any recent findings in connection with this lone? >> the loans that were given to mr. bankman-fried or not just one lone, they were numerous loans. some of which were documented by individual promissory notes. there is no description of what the purpose of the loan was. in one instance, he signed both as the issuer of the loan as well as the recipient of the lone. we have no information at this time of what the purpose for the use of those funds were. that is part of our investigation. >> did you find any business or operational activities that the entities jointly engaged in that you would consider inappropriate, or detrimental to ftx? if so, could you give us an example? >> certainly. thank you. the operation of alameda really depended, at least on the way it was operated, for the use of customer funds. that is the major breakdown here. funds from ftx. com, which was the exchange for non-u.s. citizens -- those funds were used at alameda to make investments and other disbursements. >> did ftx have sufficient risk management systems and controls appropriately monitor any leverage the business took on? and the interconnections it's had with businesses, like, again, alameda. >> there were virtually no internal controls and no separations whatsoever. >> with that, i am going to call on the gentleman from north carolina, mr. mchenry. a ranking member of the committee. you are now recognized for five minutes. >> thank you, madam chair. mr. ray, thank you for your testimony. we had your predecessor, mr. sam bankman-fried before this committee a year ago. given where we are, can we just start from there? you have in your declaration some clear out. alonso on to make sure we have this in the record. there are different groups and businesses under the ftx platform. or umbrella? you decoration separates the businesses into four silos, would you describe that. >> yes. before structural purposes, for either presentation we tried to take the over 100 entities and put those under for silos. to demystify that, it is very simple, there is a u.s. silo. the ftx u.s. exchange for u. s. investors. there was i international exchange, called ftx. com. again, for non-u.s. persons that invested in crypto. there was alameda, purely a crypto hedge funds. it made other investments, the venture capital type of investments. there is a fourth entity, purely investments. although our investigation is not complete, those investments were not likely meet with either alameda money or money that originally came from ftx. com. that fourth island is purely investments. >> who owned those for silos? >> all of those entities were owned and controlled by sam bankman-fried. >> okay. can you describe the differences between ftx. com and ftx u.s. silos? >> yes. very simply, ftx u.s. was for u.s. citizens who wanted to trade crypto. ftx. com was for -- u.s. citizens were not allowed to trade on that exchange. very simple, i will make one other comment, which is separate and apart from any of those other silos, those ledger acts. they are regulated by the scc. solvent and separate from the f. u.s. silo. >> that is a distinct company? >> that is a distinct company within the u.s. silo,. yes >> alameda research, the venture capital businesses, what did alameda research do? >> essentially made crypto investments. engaged in margin trading. against the long and short positions are crypto. essentially invested in crypto. of course, we now know, invested over five billion dollars of other assets in a variety of sectors. >> what was the practice between alameda research and ftx. com. have you established any anything you can disclose to us today? >> in essence, alameda was a user. effectively a customer of ftx. com. that was how it was essentially structured. >> was that a distinct set of capital between those two companies? >> well, we now know that the answer to that is no. >> okay. with the information you have right now, when, approximately, did ftx begin experiencing financial trouble? it was first disclosed to the public beginning around november 2nd. when this began was months, if not earlier years. our investigation is continuing. this is not something that happened overnight or in the context of a week. >> okay. he said the distinction between ftx u.s., ftx. com, alameda research. what was the relationship between f t acts. com, and ftx u.s.. is it thinks in between the two? >> there was a public distinction between the two. what we are seeing now is the crypto assets for both ftx. com and ftx u.s. were housed in the same database. it is the a. w. s. islam. it is an acronym for amazon web services. it is all housed in the same web format. >> is that distinct from alameda's assets? >> yes, it is. >> in your testimony you said, quote, an absence of independent governance throughout the exchange, end quote. mr. bankman-fried said, quote, he wasn't running alameda or making decisions on the alameda side. and quote. is this an accurate statement? is mr. bankman-fried's statement accurate? >> i don't know the basis for his comment. i will note that he owned 90% of alameda. >> but, you have seen no distinction in governance between the two? >> absolutely not. there was no distinction whatsoever. the owners of the company could run free reign across all for silos. >> thank you for your testimony. >> the gentlewoman from new york, mrs. velasquez, off of the chair of the house committee on small businesses, is now recognized for five minutes. >> good morning, mister ray. you have had a long career working on several high profile bankruptcies, most notably the enron de blasio. mr. ray, you were recently quoted in the new york times as saying you have never seen such a complete failure of corporate control. and the level of dysfunction was the worst you have ever seen. and you expand on the statements? what have you seen since taking over as a ceo to make such a remark? >> yes, thank you. that comment went to, really, one thing that we found. every case is different. the challenges of every case are different. the issue here that i was speaking to is i have never seen such another lack of record keeping. i absolutely no internal controls whatsoever. of course, this case is now made difficult in that context when you are dealing with technology. >> mr. wright, a number of the debtors in the ftx group are located in offshore jurisdictions. will this complicate the efforts to retrieve the assets of those who -- >> no, i don't think it will be complicated at all. the various jurisdictions, historically in bankruptcy -- i have been in a number of cross border situations. the jurisdictions will cooperate with each other. regulators in all of these jurisdictions realize that everyone is there for a common purpose. to protect the victims and uncover assets for the victims of the situations. >> how much have you been able to secure? where are most of these assets located? >> we have been able to secure over one billion dollars of assets. we have secured those two cold wallets in a secure location. it is an ongoing process though. which we'll take weeks and perhaps months to secure all of the assets. >> our most creditors located in the u.s. or foreign jurisdictions? >> the majority of the creditors trade through the dot com silo and are outside of the jurisdiction. although there are some foreign customers who were in the u.s. asylum, and vice versa. >> it is my understanding give established for silos. can you explain why you believe establishing the silos, taking this approach, we'll maximize asset recovery for creditors? do you think this approach could help determine what happened to the one billion dollars that has gone missing? >> yes, so, one of the reasons we set up to silence the way we did it is to first focus on the ftx island for the u.s.. a relatively smaller trading volume. fewer users. it was truly meant to be for the u.s. customers. the dot com silent was truly for a non-u.s. customers. there was a logical reason why we separated these two out. the alameda fund. that is the fund that drew resources from the exchanges. it is really separate. not for customers, per se. it was just simply a hedge fund. >> and we hear in congress consider the possibility of legislation in this area, what is the one thing that you have seen in your short amount of time at ftx that you will urge us to keep in mind or what is needed the most? >> i don't want to speak to argue lay shuns or make observations about regulations. that is certainly not an area of my expertise. however, dealing with people's money and their assets, my basic observation is, you need records. any controls. you need to segregate people's money. >> thank you, thank you. madam chair, i yield back. >> the gentleman from missouri, mrs. wagner, is now recognized for five minutes. >> hi, thank you madam chairwoman. i thank you mr. for ray being here and the role that you are doing. mr. ryan, you have compared ftx as worse than an. can you please elaborate on some of the specific ways that ftx is worse than one of the largest corporate frauds in history? >> the ftx group is unusual in the sense -- and i have done probably a dozen large-scale bankruptcies over my career, including enron, of course. every one of those entities had some financial problem or another. they had some characteristics that are in common. this is unusual it is unusual in the sense that, literally, there is no record keeping whatsoever. the absence of record keeping -- employees would communicate influencing, expenses, on slack. which is essentially a way of communicating from chat rooms. they used quickbooks a multi billion dollar company using quickbooks -- >> quickbooks? >> quickbooks! nothing against quickbooks. a very nice tool. just not for a multi billion dollar company. there is no independent board, right? we had one person controlling this. no independent born. that is highly unusual on the size company. this is made all the more complex because we are not dealing with wages or something tangible. we are dealing with crypto. in the technological issues are made worse when you are dealing with an asset such as crypto. >> mr. ray, mr. bankman-fried has apologized. i will sub quote here for mistakes he has made. based on your review, is there a way to know if the transfer of ftx customer funds to alameda it was done by mistake? >> i don't find any such statements to be credible. >> reports suggest that ftx dot com transferred more than a half of its customer funds, roughly ten billion dollars, to alameda research. is that accurate, sir? >> our work is not done. we do not have exact numbers for you today. i will say it is several billion dollars in that range. we know the size of the harm was significant. >> mr. ray, ftx. com held itself out as having a sophisticated risk management system, commensurate to the side of its operations. you have touched on this a little bit. based on your work today, is this accurate? and you explain the, quote, sophistication of its risk management system? >> i can say that is absolutely false. there was no sophistication whatsoever. there was an absence of any management. >> mr. ray, mr. bankman-fried has been able to confuse interviewers by talking in circles around the multiple business activities of ftx. com. mr. ray, would you breakdown for us the different business, quote, activities of ftx. com? >> as much as i've and, essentially they had to exchanges. it allowed users to trade crypto. then there was the hedge funds. it's a simple as that. the users were allowed to make a variety of investments. they had a more expansive ability to trade crypto. if you are non-u.s. citizen on a. com exchange. i know it has been described publicly as very complex. it is, to some extent. but essentially you had to exchanges. you had a hedge fund. inside both the u.s. silo, as i mentioned, and inside the silos for dot com, there were regulated entities. we have regulated entities, for example, in japan who are solvent. or in the uk, which are solvent. those are distinct from the other operations that we had, which are the exchanges. >> i thank you, mr. ray. madam chairwoman out like to submit an op-ed for the record, describing an existing scc rule that could have prevented customer athletes from being misused. i appreciate my constituent, ron krish fc -- president ceo of stiff old nicholas. for his comments. i would like to enter these for the record. i thank, you and i yield back. >> thank you very much. the gentleman from california, mr. schumer. also the chair of the subcommittee on investment protection, entrepreneurship, in capital markets, is now recognized for five minutes. >> for five years i have been trying to ban american investments in crypto. i'm the only member of the house to get an f from the only crypto promoting organization the rates members of congress. my fear is we will view sam bankman-fried as just one big snake in a crypto garden of eden. the fact is, crypto is a garden of snakes. from the outside crypto just looks like a non-fungible token. and electronic pet rock for the 21st century. something that might be good to invest in although it has no invent value -- you might be able to get someone to buy from you for even more. in reality the hope of crypto is to be a currency. to compete with the u.s. dollar and two announce its advantage over the u.s. dollar in that competition. it puts the advantage right in the name. crypto. hidden currency. is there a big market for that? is there a big advantage that crypto has over the u.s. dollar evidently became a currency, which it has not yet? drug dealers, human traffickers, sanction evaders who would find it to be a good feature. as sam bankman-fried would tell you, there is a heck of a market for bankruptcy evasion. the big market is tax evasion! i know there are some on the other side who sheer every time a billionaire escapes taxes. the other purpose, the other announced purpose of crypto is to be the u.s. dollar as a world reserve currency, they are by enriching the corporate billionaire boroughs and taking thousands of dollars of advantage away from every american family. we benefit from being a reserve currency. sam bankman-fried, or should i say in may 14 eight 72, had one purpose for all of his efforts here in congress. he was a well-known figure. only one wearing shorts. his one purpose was to keep the fcc out of crypto. to provide a patina of regulation, baby regulations from the cftc. one comment from my colleagues. do not trash sam bankman-fried and then pass his bill. i fear that could happen. same is not the only crypto bro with packs and lobbyist. there are no paxton obvious here to work for efficient tax enforcement. or sanctions enforcement. now, i have heard from some on the other side criticizing the fcc. in july in this room i criticize the head of the sec. -- the head of enforcement of the sec for not going after crypto exchanges. the change -- the fact is, without objection i would like to put into the record a letter signed by 19 republican members designed to push back on the fcc. a brush back pitch if you are familiar with baseball. >> without -- so ordered. >> firm attacking the fcc for the purported risks of digital access. i would like to put in the record, without objection, comment from eight members made in this room that were designed to design the scc and being a luddite and anti-innovation. for their efforts. mr. ray, you are going to be looking at after. we know that sam bankman-fried is already facing criminal charges. he did have help. will you be looking for, and turning over to u.s. law enforcement attorneys, the information about possible criminal action by ryan sala maine, caroline olson, and the other folks in the fancy apartment? >> we are doing a thorough investigation we have been cooperating with u.s. regulators and operate to turn over any operation that would be relevant i will point out in particular that one of the accounts in the complaint or indictment's violation of campaign finance laws. i hope that what you will turn over is a list of the major bonuses or loans it was reported that ryan salame got a 55 million dollar loan. we can piece together when those loans were made. we can proceed to discuss the campaign decisions. when i count on you on? that >> yes i can confirm that. >> yes. the gentleman from oklahoma, mr. lucas, is now recognized for five minutes. >> thank you, madam chairman. thank you, mr. ray, for appearing before the committee this morning. particularly in thy in the recent arrest of bankman-fried. i expected you to be very cautious this morning in your answers. in fact, i suspect you have been but you have been very thorough and methodical. my committee and i appreciate that, indeed. first i would like to discuss the bank rips the process. it is my understanding that some of the ftx communities are not included in the bankruptcy it -- why were these not included? and what might ultimately happen with them? >> ledger acts is a perfect example of the attorneys we kept out of bankruptcy. it was a regulated entity. it was fully solvent. the customer friends were segregated. we believe there has been no harm there whatsoever. there's no reason to put it into bankruptcy. ultimately, we move look to sell ledger acts. put it in the hands of a good steward. >> would you expand on how u. s. bankruptcy proceedings interact with international proceedings? for instance, like those in australia? >> a system is really designed to have a cooperatively shun ship with liquidators and other jurisdictions. we share information, we hold lab rate with each other, relative to maximizing customer value. ultimately facilitating distributions. overall, facilitation of the completion of the scheme in order to render cost as little as possible. >> and we have all seen, of course, fcc has charge mr. bankman-fried with defaulting investors as well as charges with the cftc and the southern district of new york. in your testimony, you described the ftx group as having in a manageable amount of practices. you made that graphically clear. in particular in what mr. bankman-fried is accused of. the fcc particularly -- one-way the bankman-fried rated funds to amateur research was encouraging customers to deposit cash in alameda control bank accounts. mr. ray, could you explain how ftx was able to conceal that? >> it is still somewhat early in our investigation but i can confirm that funds were deposited directly into alameda, as opposed to ftx bank accounts. unfortunately, obviously, this courage. >> well a question on the bankruptcy, it has been reported that ftx digital and ftx australia were not included in the bankruptcy filing because local regulators had already initiated their own proceedings. is it true that they could not have been included because of that? >> yes, our filing occurred on november 11th. there were other filings that had occurred shortly before. >> one last saw, mr. wray, clearly your profession is cleaning up messes that other people have made. is that a fair way to describe it? not messes that you made but they made. how does this compare, in your experience, magnitude wise? >> well -- >> the worst, or the worst by magnitude? >> it is one of the worst from a documentation standpoint. even in most fail companies we have a fair roadmap of what happened. we are dealing with literally a paperless bankruptcy in terms of how they created this company. it makes it very difficult to trace and track assets, particularly, as i said, in the crypto world. it is really unprecedented in terms of the lack of documentation. >> bankman-fried clearly tried to exhibit himself as the brightest of the bright. being bright neither makes you honest nor a fool, does a? thank you, mr. ray. >> i thank you. the gentleman from texas, mr. green, also the chair of the subcommittee on oversight investigations, it's now recognized for five minutes. >> thank you, madam chair. i thank the witness for appearing today. sir, i have in my left hand a sealed indictment from a grand jury as it relates to mr. samuel bankman-fried. and my right hand, the security and exchange commission's complaint that have been filed against the same defendant. let's put aside the civil complaint. i have one question, but first i would like to lay a predicate by going to the charges in the criminal complaint. why fraud, on customers, conspiracy to commit wire fraud on lenders. conspiracy to commit commodities fraud. conspiracy to commit securities fraud. conspiracy to commit money laundering. the list goes on with a few others. i mentioned these things to you, sir, because dr. king, reminded us that nothing at all in the world is more dangerous than sincere ignorance, and on conscientious stupidity mr. bankman-fried have pre-match indicated that he made a big mistake. he was doing the best that he could to be a servant of great service to humankind. he did attend canada usa math camp, a summer program for mathematically talented high school students. he also has a degree from m. i. t. from 2014. a bachelors degree in physics with a modern mathematics. it is all of this just one big mistake? that was made by this gentlemen, sir? as you see it, based upon what you have seen so far. looks to me like the maybe some malfeasance here? >> we are certainly investigating everything that happened relative to the circumstances at this stage did you not try to lay judgment or labels. not trying to lay -- we are focused on accumulating in maxman the assets for the victims. that is a nominal priority. in doing so, we will also investigate potential action to maximize action. that does require us to get into the underlying facts and motivations we fully expect to explore that. >> thank you. would you consider this to be sincere ignorance? >> again, i don't want to put labels on it. obviously there has been a failure here of a massive proportion. ultimately there are others who will judge him by his actions i find it difficult to believe that we are dealing with conscientious stupidity. it seems to me like you have to be rather talented to do all of the things to the extent that they were done. and to do them successfully for as long as he has been able to accomplish these things. they just don't emanate from ignorance and stupidity. a lot of people have been hurt. aside from the civil actions, i think that we have to send a message to the others who would take advantage of people. this is not going to be tolerated. i thank you for what you have done. you have been very direct. i read your testimony. based upon your testimony, it seems to me that we have more than sincere stupidity. i am back the balance of my time. >> thank you, gentleman from texas mr. sessions? >> mr. ray, thank you very much for being here. i think these members have been sincere in saying thank you for your professionalism. adding this to your career of other restructuring that you have not only been experienced in but brought to bear. i've got several questions. perhaps you can answer them, which would help me. at its best the largest point of investor exposure by an american investor, what amount of money do you think that was that was held in ftx? >> i'm not in a position, really, to give you individual numbers at this point. we do know that with the u.s. it was hundreds of millions of dollars that were at stake. of course the dot com that were the international stage where there are billions of dollars. one of the difficulties that we had -- there are millions of accounts. some of those accounts could be by multiple users. we are in the process of analyzing how those accounts rolled up to individual customers. >> are you aware of the fcc at any point asking questions, coming to visit, providing paperwork about these hundreds of millions or billions of dollars? that it drew some attention from the scc about this american investment? or, what i would say, exposure? >> i'm not, you have to recognize that i parachuted in on november 11th. i have no history with the company whatsoever. >> you do not know about any questions, interactions, have you heard about whether there was an attempt to avoid any of this? was any of it ever discussed by any of the people that you have gained information from? >> i'm not privy to anything on a pre-petition basis >> thank you. do you have an idea about the value of assets lent to ftx, or alameda, to mr. bankman-fried. the amount of money that they loaned him? >> we know that the size of the loss measures, essentially, at this period of time with several million dollars. asset values fluctuate. how much the assets were worth at the time when they were transferred, could've been transferred to ftx. com may be a different number than the loss and they have a particular date. we do course know that we have several billion dollars in losses. there are of course billions dollars lent out. billions of dollars and other investments. we essentially have a roadmap to figure that out. >> the roadmap that you are speaking about, in your past, i don't proclaim that you to really know now. irs forms that were filled out by the company. were they properly filled out? have you looked at those to see they were compliant with the irs law? >> we are looking into that very thoroughly. we have hired ernst and young. they are doing a very comprehensive review. they are going backward starting with the earlier years. we are starting with a filing that dates to 2020, 2021, and of course they are looking at all the transactions that took place in 2022. we will look at that in detail. >> as an expert, i consider you an expert in this arena, would you think it would be important that the sec -- i don't know the law but, it would have access to, as part of its due diligence that they were looking at that irs filing? to determine, perhaps, someone was or was not following the law? with that be part of a due diligence? >> and we certainly would make anything like that available to any of the regulatory agencies, whether it's the fcc or the irs. we will be fully collaborative within. anything that would aid in the investigation would be available to them. >> do you think it would be pertinent for this committee to be able to receive that irs information going back, so we can make a determination about whether proper utilization of oversight was being done? >> we want to be collaborative with the committee, as well. we can certainly work with your staff to address what you may need. >> thank you very much. thank you chairwoman. >> thank you, the gentleman from missouri, mr. cruger, also the chair of the subcommittee on housing and community development and insurance, is now recognized for five minutes. >> thank you, madam chair mr. ray thank you kindly for being here today. have you read the full testimony that was planned by our missing guest? >> i have not read his full testimony. some pieces of it have been relayed to me. but i have not read one word of it, actually. >> i don't know him personally, i probably don't want to but, his testimony is so disrespectful. there is not a person up here who would like to show this to their children. line two of this -- this missive. he says, and i quote, i would like to start out by formally stating, under oath, -- >> you can't say it. >> i can't even say it, publicly, the next two words. absolutely insulting. this is the congress of the united states. what. i would like to submit the, madam chair, for the record. >> without objection, if you are inserting that into the record. without objection, so ordered. i want to follow up on mr. sessions discussion. mr. sessions was having with you. one requirement that you are supposed to submit to each customer and the irs, the form, 109 b, right? what else are you required to do? >> i have to defer to the tax folks, they are experts in the field. i'm sure they would do a thorough review of what should have been submitted. >> no, what do you know now that you are supposed to submit other than the 190 b--every customer when they enter into the internal review service. >> i don't personally at this point know what was required to be submitted. that is part of our review with our independent accounts. >> well, could you expand or, maybe even update us on the extent of the poor controls in the area previously identified in your november 17 operation? >> you know, it is an extensive list. it really crosses the entire spectrum of the company. lack of lists of bank accounts. hundreds of bank accounts, dispersed all over the world. a lack of a complete list of employees or their functions by a group or name. extensive use of independent contractors, as opposed to employees. lack of insurance that you would normally see in certain businesses. either inadequate insurance or complete gaps in insurance. for example, the alameda silo had no insurance whatsoever. those, i mean, the list goes on and on. you could spend all day on that. >> if we have time -- well, i wonder if you would support a resolution that was thinking about introducing, changing the name of cryptocurrency to creepy dough currency. i'm gonna discuss this with my colleagues. i think it's an appropriate name. i just wanted to know whether you would support changing it to creepy dough. >> i will leave those decisions to the committee. >> all right, thank you. i yield back. >> thank you. the gentleman from missouri, mr. luetkemeyer, is now recognized for five minutes. >> thank you madam chair. mr. ray, it has been reported that ftx could not get a bank account for sometime. as a result, ftx years alameda researches bank accounts. does this use any red flags for you? the fact that they couldn't find a bank account? >> there are a few red flags. obviously, the banking situation should have been a real red flag. someone being asked to deposit money into an account that was not the exchange account. it certainly should have been a red flag for customers. >> is alameda and u.s. chartered bank or is it offshore? one of the bank that they're using i should say. >> it's really not a bank, per se. most of the entities and the structure -- i mean, it's just unregulated entities. >> it's just an entity that passes money as a hedge fund. it doesn't have a bank account, per se? >> it has bank accounts, absolutely. >> in the u.s.? >> yes. >> okay, so -- here we have a company that is offshore, can't get a bank account offshore. they have to come into the u. s. to be able to do the banking business. the important part of this comment is that, in order for these companies to exist, they have got to be able to change their digital assets to hard u.s. dollars at some point. they needed a bank account, they needed alameda to be able to do that. is that roughly correct? >> any of the silent of, any bank account, it certainly exists. the separate bank account to exist. i think the real issue here for us is when he was transferred from one account to the other, seemingly, without limit. that is the issue. >> okay, you've talked about the counting issues. you know, it's interesting. from the standpoint of we are talking today about a problem with these cryptocurrency firms, security firms. we cannot have an accounting system that really works. this should be a really big red flag for all of us who are in the financial service world in a guard to chinese investment that we are making. we are not able to get the accounting information on those firms. what else is going on with those firms, similar to the debacle that we have here with ftx. that is just a side comment. when the question to have is with regard to conforming to the state bank. this is an investment that alameda made -- it's a little bit of a bank according to the new york times article, the state of washington, the 26th smallest bank at a 4200 in the country. in 2020 in net worth of 5. 7 million. they dropped 11 and a half million representative the ownership. you know off the top of the head what the percentage ownership of the bank they purchased? >> believe the ownership was approximately 10%. >> that's what i've heard too. roughly they pay 20 times the book, which is off the charts outrageous. so it should be a red flag. yet they were able to purchase that, even though it's a minority interest, at 20 time the fdic allowed them to have it, they were able to change the name to moonstone bank. -- have you looked at this relationship at all yet to see what's going on here? and whether there are any irregularities at all? >> we are certainly looking at as one of the things that came to our attention. we are looking at what the dollar is -- that went from the ftx group to that bank. and we're looking at the connections of that bank to the bahamas. >> the way this all transacted here, is this common by the wave of the purchase businesses and dump excessive amounts of money based on the fact they had it, whether it was a good investment or not annals of the companies? these were actually good investments a -- is there money laundering going on here? is there somebody stuffing something away in their back pocket to be able to take off with the down the road? there's a lot of questions here. >> there are a lot more questions than there are answers. -- certainly it is highly irregular and that has gone our attention. >> i thank you for your comments this morning. it's concerning when you see this lack of accounting and you see somebody dealing with this level of money and there's lots of different companies, where money shifts back and forth. and you wonder by living offshore in the bahamas, that there's not so faraway bank account being stuck with stuffed with money that we will never find. i hope you do your job and do it well. mr. ray. thank you for being here this morning. >> thank you, the gentleman from colorado all, mr. perlmutter, who's also the chair of the subcommittee of consumer protection and financial institutions. -- >> i've so many questions it is hard to figure out what questions to ask. let's start with some easy ones. how long you've been on this job? >> four weeks. >> four weeks. do you know when the madoff bankruptcy was filed? >> probably circa 2008. >> say 2008. >> and you know-they just made a distribution out of that bankruptcy last week? >> how old are you? >> is that a permitted question? >> i want you to add 100 to whatever your age is when you finally untangled all of this. the reason i say that is, we watched this ftx, but a bunch of other cryptocurrencies start thrashing about nine, ten, 12 months ago. as a house of cards started falling down, the thrashing became more. we had something like that in colorado back in the 80s, when the savings and loans were failing. everybody was trading their funny money. we called it trading cats for dogs, to hide lousy loans, to not show the failures of those particular banks. here, your job i think, the bankruptcy trustee your conservator or whatever you are, is to go gather as many assets as you can, and that could be from some very innocent people who got paid money. to then spread it out equally among who you think the real creditors are. is that sort of a fair statement? >> it's a general statement. it's not far off. >> because we, on this committee, a number of us have had to deal with the madoff stuff, one of the things you're gonna faces, some guy saying i'm more innocent than that guy. i should get to keep my money, even though i got paid yesterday, but i am an innocent guy. you're gonna be dealing with so many preferences, so many fraudulent transfers. have you any idea what the total money in and the total money out of ftx was? >> we don't have a full accounting at this early stage, no. >> do you know how much was in tokens. let's say i have dogecoin, but i have ten of those which a year ago, is a dogecoin? i have ten dogecoins. a year ago ten dogecoins was worth $1, 000, so 100 bucks a point a coin, so i put that in there, but that coin today is worth not nearly that much. how are you can evaluate that? as to what i should get out of the bankruptcy? >> well, at first it starts with doing an accounting and the tracing of all the assets, both the ins and the outs. that's made difficult of course by the comingled of assets. perhaps you may have invested in a certain coin or an all coin, we'll have to trace what happened to that coin. again, what we have to explain here today, is that there's a co mingling of assets that makes it a bit more complicated than simply how much is my coin worth? we it is going to be a painstaking process of looking for the ins and outs, what happened to your crypto. of course at the time of the bankruptcy, we know when that occurred, it was a very specific timeline that bankruptcy occurred, and we will look at customer accounts as of that date, and that will be determined essentially what your tone position was. assets very, in terms of fluctuating in value, and again, because of the circumstances we find ourselves in, and the lack of documentation, the potential comingling between silos, and what happened with alameda taking funds from ftx. com, it is not as simple as how many coins did i have in my account. >> if i put $1,000 in and it's gone, and i put ten dogecoins in, and they're gone, i guess you're gonna have to figure that out. i think you'll be back here in a year when you have a better handle on the numbers to be talking to this committee. thank you for doing this. i yield back. >> as you know mr. perlmutter is a bankruptcy attorney. you could tell by's question. i would like to enter into the record the indictment of sam bankman-fried -- by the southern district of new york that was unsealed this morning. in a separate filings from the securities and exchange commission, and the commodity futures trading commission, both of which were filed this morning. with that, the gentleman from michigan mr. huizenga will be recognized for five minutes. >> thank you. i'm gonna get my colleague to shift a little bit, or get up. thank you. one quick question. have you've been sharing your findings with the sec at all? as you've been going through? this >> yes. >> how about the southern district of new york? >> yes. >> okay. i'm going to get to a couple of practical questions. these were the things i was gonna ask you and ask mr. bankman-fried. in your declaration, you said the quote ftx. com platform was not available to users, how earlier this month, the cftc chairmen -- 2% of funds house that ftx. com were from us individuals. can you confirm whether there were u.s. individuals or persons, customers of ftx. com? >> yes, we found there's a small number of u.s. customers that engaged in us customers. >> it's 2% small in your estimation? >> we don't have those kind of numbers, we have it on a customer basis not an investor basis. but we're talking about less than a couple of hundred. >> but it could amount to billions. you said earlier, there were billions of dollars that were in their, or at least it could be millions or hundreds of thousands. do you know that number? >> i don't know that number. but billions would sound very correct. >> i'm giving you the range. >> we don't have an accounting of what those particular customers had, u.s. customers. >> will determining this be part of your work through this bankruptcy process? >> absolutely. >> will part of your work be determining which assets belong to which customers, most specifically u.s. customers of ftx. com? >> yes will be tracing analysis, trying to identify the sources and uses of all the funds. >> so whether it's ten customers that have a lot of money or thousand customers that at some. money >> absolutely. >> can you provide some indication of whether customer funds from ftx. com were in fact transferred to alameda research? >> definitely assets of customers in the. com silo were transferred to alameda, no question about it. we have not seen this at this stage from the u.s. silo. of course, we have one concern, and that is we are chasing down whether or not there is comingling between the dot silo with the u. s. silo exchanges. the reason for that is, we know there was -- control and access of authorized users, at the most senior management level, amongst all of the assets. it's something we have to focus on. we have not seen evidence right now that, but something that certainly we need to investigate and trace. >> and my remaining two minutes, i want to turn to operations. is there any evidence of his parents involvement? >> we are investigating that, as well as any other players. >> emails, slack, signal. >> it's billions of records. it's a very fine print environment. >> so, i hear that you haven't discovered that? it seemed interesting that they didn't either give legal advice to distance advice or parental advice maybe? >> certainly, we indicated on the first day that mr. bankman-fried had been given legal advice. >> -- >> i don't know if a v access employee status, but the family certainly did receive payments. >> that sounds like employment to me. you got a payment for -- okay, i raise, that because on december 8th, 2021, i met with sam bankman-fried in my office, just immediately before he came down to the hearing. he was 15 minutes late and his father accompanied him in that meeting. i asked if he focused on what type of regulation he was under, and is in range met with regulators and how it affected ftx, but it seems to me that there's a lot more to uncover here. certainly, mister bankman-fried has, let's say, wooed many in new york, silicon valley, around the world, yes certainly here in d. c.. he was, they loved everything, the exciting idea of a politically progressive, smart, entrepreneur, who's gonna reimagine capitalism and change the world, feeling better about themselves, all while making them gobs of money. i'm glad to see it's finally unraveled. my time is up. i yield back. >> thank you. the gentlewoman from ohio, mrs. beatty, who, is also the chair of the subcommittee on diversity and inclusion is now recognized for five minutes. >> first of all, let me just say thank you to chairwoman waters and our ranking member, to you mr. ray. we have heard a lot, a lot of this has been difficult to digest, by merely what has happened to so many people and so much money involved. mr. ray, you mentioned in your testimony that one of your primary goals is to limit the harm suffered by ftx customers. hundreds and hundreds of millions of dollars have been removed from crypto wallets, and in its estimates, about 1 million people have money frozen in the exchange. can you -- [silence] [muted] >> mrs. beatty, would you repeat the question. you were interrupted there. >> basically hundreds of dollars have been removed for crypto wallets and it's estimated that about 1 million people have money frozen in their exchange. can you tell us, how many users have lost money? when will they get their money back? >> well, our process is such that we are securing our assets every day, we are out looking for wallets and the keys to those wallets, to maximize the recovery of value. it's an ongoing process. we have secured all of the cash in the bank accounts, to the extent that we can at this point. we secured crypto assets. we are still in the process of doing that. ultimately, that is a question of months. the little litigation has been pointed out by other members, will certainly take a longer timeframe. but, that is our number one focus, is to generate value to repay those customers. i don't have a customer count for you today. we do know that there was 2. 7 million users in the u.s. silo, which again, overstates the customer relationships, because people have multiple trading accounts in the. com cycle. we had over 7. 6 million users. again, overstating the actual customer relationships due to the multitude of accounts by any particular customer. we need to get to the bottom of those customer numbers. >> thanks mr. ray. let me ask you this, despite the fact that ftx told customers it would not trade customers funds, we know now that ftx loaned out, i think about $10 billion in assets for proprietary trading. mr. ray, do you know how it was possible for ftx to ask access clients funds and violations of its own terms of service that noted, with out clients permission, and exposed its customers to such massive loss? >> as i indicated, there were no corporate controls, no corporate oversight, no independent board. the owners of the business, the senior management, had a control of the accounts of each of the silos. could move money or assets as they desired, undetected by customers. to the extent that there were rules, and they were very few, obviously they were made to be broken. >> i think what i'm hearing you saying is there was no one person approved this. let me ask you last question. can you tell us what regulatory changes could prevent the unauthorized-, or un-authorizing customer funds in the future based on your wealth of experience? >> without speculating about what regulatory fixes could be, i've senator testimony, the critical thing in the segregation of customer funds and transparency. >> okay. and lastly, in your five points that you outlined, i'm sorry if you said it before, is there a timetable that you think you can get to that? that could be a yes or no. i think i'm close to my time. >> there's no particular timeframe, but it is as quickly as possible. in my experience, with enron -- >> is that months? is that weeks? quickly as possible? >> it certainly is not weeks. it definitely is months. and the causes of action could take longer. we will marshal assets on a weekly basis, a monthly basis, and we'll do that as quickly as possible. >> thank you so much for taking the time to try to help us out. i yield back. >> thank you. the gentleman from kentucky, mr. barr, is now recognized for five minutes. >> thank you madam chair. in your declaration mr. -- did not have appropriate corporate governance in the situation is unprecedented. you also said the ftx collapse stems from the lack of the independent board and a complete failure of any internal controls of government whatsoever. can you elaborate by combining the government structures for ftx. com the legitimate those comments. >> first, well there's no independent board of directors. so one of the first things i did was put out an independent board of directors, that by our chairperson, former u.s. attorney, the honorable joseph foreign, a u.s. district court judge. we put in the corporate structure of the independent directors. we put in separate officers. the new officers in the company. we put a new cfo, a new chief information officer, all with some background and experience in these sectors. none of the employees, there's a lot of titles, but no experience to back it up. >> can you explain how the ftx .com structure differs from the government structures a differing from ftx u.s.? >> did you examine the government structure the flow of assets to the ftx foundation or its affiliates, including ftx community, ftx climate, or the future fund? >> we are digging into that. we have not completed our review >> i'm curious in your work, whether or not you will determine whether those entities were established properly or whether or not the funds received were improperly transferred customer counts? you have any visibility into that yet? >> we are looking at that right now. -- ernst and young to look at the tax side of it. we are investigating the money transfers. you can be sure we'll dig into those details. >> was the ftx foundations and those other not for profit entities, were they completely separate from any of the for profit entities? >> they were owned by sam bankman-fried, i can't tell you they were separate, because they got funds from alameda. we know the source of their funding west from the ftx group. their separate ownership, not separate funding. >> comingling of assets in that case as well. >> absolutely. >> at least one esg rating firms gave ftx a higher score for governess than exxon global. giving your testimony that ftx this collapse stems from, the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals who failed to implement any of the systems or control necessary for a company interested with other people's money or assets. what would you say about this esg governance rating, which rated ftx higher than exxon global? >> i'd get my money back. >> can you identify which entities had audited financial statements? >> yes. i can. there was no audit at alameda, no audit at the venture silo. there was audit at the u.s. asylum and audit at the.com silo. i can't speak to the integrity or quality of those audit. we are reviewing the records. as i said earlier, much of those books are records were maintained on fairly unsophisticated ledger. >> you testified the lack of record keeping. there is a whole lot of financial statements that are not audited are not available. is that fair? >> that's fair. >> you do not believe that those audited financial statements were reliable, can you elaborate? >> we lost eight billion dollars of customer money. by definition, an interest to single piece of paper in this organization. >> sam bankman-fried, in his testimony on december 8th of last year, said that -- to be sure, there are responsible actors in the digital asset industry, and those actors attract the headlines, but ftx was not one of them. was that statement incorrect? >> it was false. >> thank you. let me conclude by what's going on here by a popular crypto commentator. if you set up an exchange when you are the market maker, you're the issue, where you're the prime broker, and then you trade against your own customer, you have a vested interest in creating the assets, promoting the assets, manipulating the price of the assets, what you has is the crypto casino. i yield back. >> thank you. the gentleman from california, mr. vargas is now recognized for five minutes. >> thank you for holding back actors accountable and pursuing transparency in the cryptocurrency space. i also want to thank you mr. ray for being here today to testify. i think i start off a little bit like -- i don't get the point. i really don't get the point of block chain and cryptocurrency. it's like keeping track of how many times you chew gum. who cares? there's other ways, i think less fraudulent to make transactions. that being said, how many times have we talked here about the potential for abuse, of fraud in the crypto market, quite a bit? we've had a lot of cheerleading from other people, especially on the other side of the aisle. -- how wonderful it is and how it shouldn't be regulated by the sec and how theyr are too tough on them. i imagine we're not gonna hear that today. but we do want to see order and transparency in this industry throughout the financial markets, if you are an issue or cryptocurrency or manager of cryptocurrency exchange, you can talk business with you ask us, rumors consider this ftx collapse as your public service announcement. -- the securities act of 1934 and all of their applicable federal and state laws. you don't skirt the law mishandled u.s. citizens funds and then claim innocence. -- citizens need to be informed, regulators need to uphold the laws, the company needs to comply. that was not happening was that mr. ray under this particular company? >> no sir. >> why wasn't it? >> again, you have control of a small group of individuals, without any oversight whatsoever. from an independent board or experienced managers. it's just a recipe for problems. >> what government entity is responsible for this fiasco? >> that's not for me to say. >> it is for you to say. you're right there. i'm asking. if you had to opine, that's why you are there in the hot seat, should the sec have been more aggressive? i know we have some friends on this other side saying this shouldn't. events should be sec have been? >> i'm not experienced on. this on not a regulatory lawyer. i'm not here to express views on who should be regulated. i've said very clearly we need transparency. customers need to have segregated accounts. we need to have ownership of its money and its assets. it's really no different than a bank. you'd expect the same level of scrutiny of any funds that you deposit with someone else. that is a minimum. >> i agree with everything you've said, but, at the same time, i just say that the product they give is a hybrid product, is it not? >> it's certainly a currency, an alternative currency, yes. >> so who should regulate it? >> i don't have an opinion on that. >> okay. well that's the whole problem i think. i don't get the point of cryptocurrency to begin with. other than, if you're a terrorist or someone who wants to hide money, then i get the point. other than that, i don't get the point myself. but, if we are going to have it, we have to regulate it. someone has to be in charge. we have to make sure that we don't continue to defraud the american people. that's when the government comes in. somebody's gotta take charge of this. i think it's the sec. i've always thought it's the sec. i got a lot of pushback from my friends on the other side. they're -- not pushing back as they normally do. i would love to see that. but again, someone has to regulate this. don't you agree? >> i certainly think there has to be more controls in the sector. as regulators, i defer to this committee. >> with that madam chair, i yield my time back. thank you. >> thank you. now, the gentleman from texas, mr. williams is now recognized for five minutes. >> thank you madam chair. thank you mr. ray for being here. there's been many comparisons that have been made as people examine what happen ftx, from the bernie madoff to enron, it looks like this will go down as one of the largest frauds in history. mr. ray, you have a unique perspective on the fact that you worked on the enron bankruptcy, i'd be interested to hear you talk a little bit about how it compares. we got cut off earlier, like you hear a little bit about. >> enron was a different company, the crimes that were committed there were highly orchestrated, financial machinations, while the sophisticated people to keep transactions off balance sheets. this is really old-fashioned embezzlement. this is taking money from customers, and using it for your own purpose. not sophisticated at all. sophisticated perhaps in the way they were able to hide it from people. frankly, right in front of their eyes. but this isn't sophisticated whatsoever. this is plain old embezzlement. >> old school? >> old school. >> there you go. it seems like bankman-fried has some interesting ideas of how we can stay relevant in the -- i have read that he wants to be retained out as an outside consultant, and has been very critical of your own appointment quite frankly in this position. after his arrest last night, all of his wishes seem even more unlikely. what role, if, any should he play in ftx moving forward? >> the role he's currently playing. zero. >> you stated that ftx was a platform allowing for users to trade digital assets. were users engaged in simple as a actions transactions are complex --? >> sorry could you repeat your question? >> sure, you stated that ftx was a platform allowing for users to trade digital assets. where users engaged in exchange of simple assets are engaged in leveraging complex transactions? >> yes. >> you also said you recovered over one billion dollars in assets. can you give an idea of the nature of the assets you recover to date? >> we have recovered over a billion dollars of crystal assets, coins of various nature. and we have secured those. that's been our primary focus. we've also certainly secured cash and all the bank accounts, there were all frozen. we've got control over those accounts with new authorize users, including myself. our main goal is securing castro, curing cryptoassets, that is an ongoing. >> thank you for being here. i yield my time back. thank you very much. the gentleman from guam, mr. san nicholas is recognized for five minutes. >> there is a lot of us trying to understand what happened, for a variety of reasons. your primary responsibility will be to make sure that the creditors are made whole as well as the depositors and anybody else who has a stake in varying degrees in the company. my first question is, have we been able, have you've been able to pinpoint the specific cause for ftx this collapse? >> i know that there is all kinds of stories about loans to the owner, and no internal controls, loans to alameda combing going, but is there a specific trigger point or specific costs that has resulted in the ftx collapse? >> i think i've described. it's really the unlimited ability of those in control positions to borrow customer funds, or take customer funds, and deploy them for their own use. it involves margin trading, which is inherently risky. and, of course, they have spent enormous amounts of money beyond that, but it's really the misuse of funds. it's a simple as that. >> what is the big picture balance losses as a result of this bankruptcy? how much is that he has lost? >> we don't have exact numbers, but we know there several that several billion dollars, an excess of seven billion. >> in excess of seven billion dollars, we are saying that sam bankman-fried and company basically took her misallocated seven billion dollars and that's why ftx collapsed? >> right. so the funds were taken from customers, funds were invested, trading losses occurred in alameda, and then funds were deployed that will never be valued at the same dollar amount. there was over five billion dollars of investments may. certainly, there is some value there. we will try to get that value and sell those assets. but oftentimes, even when he made those sorts of investments, whether it was directly or through others and management, sometimes he would do that really without any performer or evaluation, and that really, i'm not really quite sure how some of the purchase price numbers were derived. it gives you a worry that the purchases were overvalued. there is a concern there as well. >> so, alameda lost seven billion dollars as a result of investment decisions and --? >> there's a multitude of reasons that caused the gap and assets between the customer balances and what's there today. and what we hope to gain. it can't not be pinpointed on lawsuits on trading activity. >> the reason i'm asking, and i'm narrowing it down because mountains expiring, but it's important for us to very clearly understand what caused this collapse. when we have the 2008 financial crisis, and -- collapsed, and we could have gone under and pointed to all these reasons that could potentially have contributed to it, but the underlying reasons were there was say -- and lack of liquidity in these institutions. that allowed us to have a policy response, to prevent that kind of thing from occurring in the future. the ftx got right now just ftx, for these lack of controls and environments that resulted in ftx its collapse, or those existing today and are the same things happen in similar operations, such as we binance, for example? -- >> three points of light to make. first of all, we are going to detail the sources and uses and what happened to all the funds. that will tell us exactly how the losses were incurred. some of those may be lessons learned, some of those will just frankly payments that were made from other people's money. >> just going back to my question mystery, the circumstances that led to ftx's collapse, do those circumstances still exist in the crypto space and can other companies collapse in the same under the same circumstances? >> it could happen at other companies, i can't speak to, them because i don't know each of these companies operated. our company operated in a very distinct way that lets the losses. but i think every company is different. >> my time has expired. >> the gentleman from arkansas, mister hill is recognized for five minutes. >> thank you chairman. i appreciate you being here mr. ray. -- working constructively in the digital assets bait for the last four years. and one of my my colleagues, that mr. mchenry talked about bond -- leading us down the primrose path in the early 2000s on housing ownership's in the secondary markets, and they were frauds, and fraudulent actors. but it didn't mean we didn't want to invest in railroads in the united states for the history of the country. and it doesn't mean we don't need a vigorous vigorous single family housing market in the country. that's not confused enough seasons and disgusting activity of ftx with the fact we need a proper, thoughtful, regulatory oversight's of digital assets. so i think -- 14 years ago this week, bernie madoff was charged and arrested with operating the largest >> three points of light to make. first of all, we are going to detail the sources and uses and what happened to all the funds. that will tell us exactly how the losses were incurred. some of those may be lessons learned, some of those will just frankly payments that were made from other people's money. >> just going back to my question mystery, the circumstances that led to ftx's collapse, do those housing ownership's in the secondary markets, and they were frauds, and fraudulent actors. but it didn't mean we didn't want to invest in railroads in the united states for the history of the country. and it doesn't mean we don't need a vigorous vigorous single family housing market in the country. let's not confuse the disgusting activity of ftx with the fact we need a proper, thoughtful, regulatory oversight's of digital assets. so i think -- 14 years ago this week, bernie madoff was charged and arrested with operating the largest ponzi scream in american history. -- lead to major reforms at the securities and exchange commission under oversight. bankman-fried was arrested in the bahamas last night, and in many, ways the fall of ftx dwarfs that of bernie madoff -- over 1 million creditors or somewhere in the lurch in the ftx silo. americans were hurt, and i want everyone listening to know, that this is just the first step that congress is taking an understanding what happened and how to create the appropriate regulatory environment. we want to understand the events and decisions that led to the collapse and the impacts on our customers and other market participants and how to prevent it from happening again. thank you mr. ray for stepping up in your leadership capacity. -- their website says they are the first ever cpa firm in the metaverse. so, looking at their website, they have 24 offices, 600 staff, 100 partners, principally in california, new york, and new jersey. you stated you are not familiar with them, is that correct? >> that is correct. >> are they cooperating with, in your role of bankruptcy trustee? >> we're reaching out to both firms -- and we certainly have tools available if they don't cooperate. everyone seems to be cooperating at this point. >> do you anticipate it will actively participate in the forensic accounting work you're doing with ernst and young? >> absolutely not. we are taking information that we get from prior auditors and accountants and tax professionals and then we will take our investigation from there on an independent basis. >> can you tell us who the partner in charge of the audit at the firm? >> i can't tell you off the top of my head. >> is a jerry eaton? brian cole black? michael williams? do those names ring a bell? >> no it's not. i can get that to your staff. >> thank you. the second auditing firm -- you are familiar with them. they are part of a london-based, firms that right? >> that is correct. >> do you feel the same way about their performance based on the books and records that you've seen, that they were inadequate in serving as an auditing firms? >> i don't want to disparage that firm. we do have to look through the books and the records and look at the audits themselves and see how comprehensive they were. see if the audit would've picked up anything we see. certainly will look at the related parking disclosures in those, with many footnotes and exceptions. we need to go back and look at all those audits, just from a look back perspective, just to determine what could've been done that wasn't done. >> do you anticipate the united states being a creditor in these proceedings for tax purposes? >> it's premature to tell. we are certainly looking at ourselves of the extent that we find any irregularities in the tax area, we are certainly going to notify the irs. nothing we have seen at this point, but our investigation is so early. >> you state the internal controls were the weakest you have seen your experience. but ftx u.s. and ftx. com essentially there is no distinction between those. whether you are an international investor or domestic investor it's all the same pot. is that fair to say? >> that is certainly our worry. there's a limited amount of customers in the. com exchange. we are focused on comingling and we are worried that the silos with -- >> the gentleman's time has expired. i >> yield back. >> the gentleman from connecticut, mr. himes, is now recognized for five minutes >> thank you mister chair. thank you mr. ray for being here and for undertaking this remarkably complicated task. at the end of the day our job here is to learn from the mistakes that were made, who made them, what we can do going forward. like it or not, we are moving into a crypto assets, crypto world. we really do need to learn. this whole thing has the feeling of a hollywood blockbuster. that's why the cameras are here. we have a 30-year-old millionaire who raised millions of dollars living in a condo with young people, exotic's products, tokens, and crypto assets. it feels to me, as i look through the s t ny unsealed this morning, a lot of what we're seeing here is oldest the hills. as wire fraud. it's misleading investors. it's comingling of funds. this is as old as the hills. there's something you want to ask you about when. all the good work you've done with other companies, you were dealing by and large with money in banks or in other financial institutions. here we've got tokens, which evidently were things of, quote, value. valued in some way or another that was used as collateral living in places like wallets, not banks my question for you, that feels like to me what's exotic and different about. how much more challenging is your job going to be because you are now operating in worlds of tokens and wallets, as opposed to dollars and banks? i know you're hesitant to get into regulatory questions, but what should we be thinking about, if nothing else, with the help with more smooth on winding's of inevitable bankruptcies that will occur in this industry moving forward? >> the principal issue, the companies facing, in the crypto area, it is from a technology perspective it is different from the other bankruptcy, because it's not a plane, it's on a boat, is this crypto asset and inherently has some difficulties the assets can be taken or law, we how assets that are in what are called hot wallets, and others in cold wallets. hot wallets are very vulnerable. if you've done any research on the internet, you see that hacking is almost any norton -- courses in this business. -- this company had a very challenging record here. for some transfers, there was no pathway for it. there were keys that were not stored in a centralized location. we don't know where all of our wallets are? passwords were sometimes kept in just plain text format. this company was uniquely positioned to fail. the lack of discipline on the control of the wallace there's storage the storage of passwords allowing multiple users to set up accounts almost create an environment where there is not a complete inventory of wallets. you can learn some lessons from that. you need to have more controls, more discipline, centralized accounting functions, oversight management, that's not to say nothing zone happen i might occur. >> thanks. one more question. i >> thanks. one more question. i appreciate that. the other thing that i can't stop thinking about here is, again, 30 year old bazillionaire, i get it. all sorts of attractive things but some of the supposedly smartest money on the planet, venture capitalists pay tens of millions of dollars to invest money. maybe it wouldn't care if it was the money of the wealthy, but they're investing pension money, university endowments. company like lightspeed, sequoia, greylock, the best of the best invested in this. you told us, you made a statement that this was the worst governance, the worst you had ever seen. do you see any evidence of any appreciable due diligence on the part of these entities that gave sam bankman-fried hundreds of millions of dollars? >> i'm not aware of what these parties may have done insurance of their due diligence. it is surprising in light of all the circumstances, but i don't know what they did internally to verify these investments. obviously, only they know that. >> thank you. thanks very. i yield back. >> the gentleman from minnesota, mr. emmer is now recognized for five minutes. >> thank you, mister. chair. thank you mr. ray. like everybody else, we are appreciative of you being here to testify. i will start for my part with a series of quick questions that hopefully will assist this committee's investigation. then i want to move on to some additional points, time permitting. mr. ray, there were over 100 corporate entities in the ftx group. some had board of directors, others did not. was there a group level board of directors overseeing the entirety of ftx? >> no, there was not. >> would you agree that it was a bad decision for complex firm, like ftx, to not have a top level board of directors? >> yes. >> do you have concerns about the concentration of power in a small group of inexperienced individuals with no oversight? >> yes. >> did ftx. com have basic corporate functions, like an accounting or human resource department? >> no. >> was there a legal department as ftx. com? >> yes, there was. >> was there a compliance department? >> there were people with titles. >> fair enough. >> thank you. finally to assist the committee's investigation. would you agree a financial firms of size of ftx needs accounting, human resources, legal compliance and risk departments to prevent something like this from happening? >> absolutely. >> in early april, 2022, ftx, and iex announced a strategic partnership. last week, the financial times reported on alameda's venture capitol portfolio, which listed ftx tradings $270 million investment into iex as a quote, acquisition. did f t x trading acquire iex? and if not, what type of investment did ftx make into iex? >> i would have to get back to the committee on that specific investment. i'm not sure that was completed. >> can you provide us with some information? >> absolutely. i can get back to you. >> we know that chair gensler had the more meetings with ftx and anyone else in the crypto industry. we understand that what was being negotiated was a framework for digital asset exchange registration and token registration with the sec that would benefit both parties. it would expand the sec's jurisdiction and exchange for the sec's preferential treatment of ftx over other industry participants. we understand there was a lot of activity to move this idea forward, including the circulation of draft, short form, disclosures, that would enable filers to get tokens listed on this newly formed, bespoke exchange. mr. ray, i know your handicapped with the information you currently have obtained, but chair gensler refuses to answer our questions or testify before this committee. will you committee to sharing with this committee any internal documentation you come across regarding communication between ftx and mr. gensler, or others at the sec? >> we will fully cooperate with the committee and the regulatory authorities with respect to our investigation. >> again, specifically, this committee will want copies of those communications to the extent they exist. >> we can certainly work with your staff to get you what you need. >> thank you. mr. ray, i appreciate you mentioning your concerns about the concentration of power in a small group of individuals with no oversight. that is the exact problem of openness and permission-less technology that crypto and block chain solves. it solves the problems of centralization. you stated in your testimony, you have never seen, quote, such an utter failure of corporate controls at every level of an organization, from the lack of financial statements, to a complete failure of any internal controls or governance whatsoever. close quote. ftx had disastrous, or even nonexistent, systems for accounting, audit, cash management, cyber security, human resources, risk management, and other unacceptable management practices that are currently make your job to uncover the facts quite difficult. fortunately, the immutable characteristics of public block chains, that some people would care not understand in this committee, allowed the crypto community to reveal sam bankman-fried's fraud. the on chain public record will assist law enforcement moving forward. i encourage my colleagues to understand sam bankman-fried's con for what it is. a failure of centralization. a failure of business ethics and a crime. it is not a failure of technology. i worked across the aisle since i came to congress to ensure the future of crypto reflects american values, the same way the internet just us today. for the most engaged members of congress on crypto policy, the ftx collapsed reminds us of why we care so deeply about this technology, decentralization is the point. i yield back the balance of my time. >> the gentleman from illinois, mr. casten, who is also the vice-chair of the sub-committee on investor protection, entrepreneurship, and capitol markets is recognized for five minutes. >> thank you mister chair. mr. ray, thank you so much for this. i'm struck by a lot here. but not least mr. perlmutter comment that it's going to take a long time to untangle. maybe your comment to mr. lucas that this is a paperless bankruptcy saves you time because you run out of paper but i thank you for your service. a bunch of questions. one i just want to clarify, it has all been implicit, all of this bankruptcy is dollar denominated, correct? >> yes. >> i asked that because we talked about comingling, we talked about customer losses. there's been some public reporting suggesting there may have been some inflation or misrepresentation of value of f tt tokens. is that, i'm not asking you to opine on that right now, but to the extent that there is some customer loss claim from the, is that also one of the categories of losses you are going after? >> ftt was on the balance sheet of alameda and certainly served as effectively as collateral. it was largely controlled by alameda so it was a very illiquid token. it was effectively a token created by the company itself, with a limited float. inherent in that token itself was the illiquidity, certainly the size of the position, its own token, contributed to this problem. >> but if a customers were buy that token at some value, because of it's illiquidity could be manipulated, would the customer not effectively be sitting on, for lack of a better word, a four x risk? >> certainly, all the crypto, like any asset, has a certain volatility to it. some are more volatile than others. ftt was very volatile. >> sure. to the extent the volatility's natural it's fine. it the extent it's manipulated -- let me move on because we are close on time. in a number of the public conversations that sam bankman-fried has had, when asked about comingling, he often responds by talking about open margin positions. i just want to give you the chance to react to difference between an open margin position and the co-mingling you've observed. >> i'm not sure exactly, i tried to follow some of the statements, but it was hard to understand what he was really trying to say. we do know that they had an open march in position at various times in alameda, and alameda was a customer if you will of the exchange. it was through that customer relationship, plus other relationships, that allowed alameda to require those funds -- he had unusually large positions of course. sometimes they were wrong in those positions, and they resulted in big losses. but ultimately, the cooling issues was the same in a different issue. they took the money from ftx to cover those positions. ultimately, when customers went to get their money from. com bank there was are -- >> one of ember 12th, the first day you are there, there was a hacker that stole -- there was a number 29th, interview with mr. bankman-fried, with tiffany fong, who said he's narrowed it down to eight people. if you have to have you had any discussions with him? do you have more visibility sensitive ember 12th on that hack? have you had conversations with him about of those eight people might be? >> i've not had any conversations with him. we are relying on forensic and cybersecurity experts who are tracking the crypto, there is an open interface you can see ultimately you can find where the crypto ends up. we've had law enforcement involved so we are tracking it i think we've got all help we need in the south. >> okay. as i get close to the end of my time here, so far, it seems like most of the losses have been within these four silos, and 2. 7 million customers, whatever that means. are you worried about in a broader contagion issues we should worry about from our perspective here, and certainly other bankruptcy on the scale have spoken to other sectors?. i think the industry we made a number, of investments in the crypto sector i think if you look at this portfolio you'll find $5 million -- so, it's a very trying time for the crypto sector. what i worry about is the impairment to the portfolio five billion, because that's recovery for our customers. >> i yield back. >> the gentleman from new york, mr. zeldin is recognized for five minutes. >> -- i had a question that i want to ask and i was just gonna read you something that he had included in his remarks. in late 2021, and i believe that alameda research had a net the asks value of 50 -- one that is that had corresponding assets for roughly 90% first position, borrowing the remaining 10%. that was roughly one 20th of the maximum leverage that lefty allowed, and roughly one third of the leveraged a soon by the ftc merchant trader. in early november 2020, to the over three-day, period in market value of assets of alameda research had held declined dramatically, i believe by more than 50%. have you yet seen any evidence of a market value drop in alameda's as sets before developer 2022? we have not gone back to trace -- to compare his statements what actually happen. clearly, there was volatility. usually a drop in crypto over a 12 month period. they wouldn't surprise me that his levers numbers change perhaps evenly dramatically during the time period. i think the problem at the heart of this is his position he didn't have the auto liquidation provision before the account normally have -- you can't use the structure properly, you can't lose more than your capital. otherwise the petition closes out, there is no harm in the brokerage form. there is a brokerage account. it wouldn't be short gaps. they would not have to get the money from you. they were glad that your positioned. know that existed with the alameda positions. they had almost a complete ability to use money beyond the collateral. >> are you in a position to describe, summarize, the assets that i want me to happen? >> we do have an inventory of investments we made. and it's pretty clear that we have those in the hands of our investment bankers. we are trying to understand those investments. ultimately, we will mark it those investments. you will see this week that some of those investments will be put up for sale. the crypto assets are a little bit different. what's on the exchange that we can see. there are about two dozen exchanges across the world where we know we have crypto assets. they are in our name. we are securing those moving those in the cold storage. we have other position in cold wallets and hot wallets. we have visibility with them. the question really is are their wallets that we don't know about? certainly that is the potential. the way the company was organized, there may be wallets that don't have our names. we don't know where they are. that is going to be a difficult task ahead of us. but we can see, what we have visibility to we are grabbing control -- >> and we will learn more this week. the documentation earlier we don't have -- 30 share what documents you don't have to transfer the funds from fdr asked alameda? >> it is voluminous. it is -- the record keeping was not very clean in the company. we should be able to trace the movement of crypto assets. and heron nature of crypto, we should be able to see the movement. where it started, where it ended up. we will obviously track banking information. we do have bank information. sometimes we have to go right to the source, right to the bank, to get historical records. they are not in hand, if you will, at the company. one way or another we will get the banking records. maybe we will trace the sources of cash. how that was analyzed -- by assets. once we can identify the assets we concentrate the at that from transfer of other currencies or ultimate payment outside of the company. it is a very intense forensic process. we will have the records, ultimately, to do that. >> we would be interested in receiving more detailed explanation of the documents that you have. well last question, could you explain which documents you identified in respect to internal controls and governance? >> look, there isn't any to speak of. the company is virtually void of any internal controls or documentation. resolutions are absent. authorizations improving massive loans, for example loans of insiders, i haven't seen any resolutions approving those. when sam bankman-fried silent on behalf of the company, and then he signs his old loans. that should tell you lower there. >> gentleman's time has expired. >> the gentleman from new york, mr. meeks, also the chair on the house committee on foreign affairs is never enough for five minutes. >> thank you, mister chairman. and mr. wray, thank you for your testimony here today. if you have been a member of congress was long to have, it just seems annually it's you that had to take over enron one hour sitting here at that particular time. we were looking at that being one of the biggest scandals we had ever seen. now, listening to your testimony today, you say this might be even bigger. it is really concerning to me. particularly since i do believe that block chain technology have a role in financial inclusion, corresponding transactions, what we didn't have -- what we don't have a lot of the real safeguards against misuse by bad actors. as a result of that, i know you have been involved in new york stay. new york state was one of the first nations to create a virtual license and supervisory framework. in your testimony, you were very frank about the total lack of internal controls and ftx. and critical of their governing structure. i guess my first question to you -- how much did the lack of a board of directors a tribute to the failure of ftx. do you believe it would have been an opportunity to change course, if this defunct structure have been identified early on. >> yes, i do. i think the lack of an independent board was a critical aspect of the failure. >> also, in new york state, there are capitalization requirements for licensing holders to have highly liquid capital to ensure the financial integrity and to protect against outside shots. how would a capital require a change the outcome of the fda's failure? >> i'm not a regulatory expert. what i have set forth in my testimony is i think it's important for customers house to be segregated. for there to be transparency in what people can visualize in their accounts. to have some strict rules relative to using customer assets. that is the extent to my views on the regulatory scheme. i defer to others who are, obviously, more experience in the regulatory system. >> that is one of the issues that we are trying to deal with here. how do we get the appropriate and proper regulation, to ensure the individuals are protected. for example, do you know to what extent were u.s. persons trading on the ftx exchange? do you believe the controls were adequate in restricting access for u.s. persons? ftx. com was listed in the chapter 11 bankruptcy despite it being publicly reported that the u. s. subsidiary was stronger than its parent -- because of the narrow offering an oversight, there seems to be this direction toward u.s. persons. what do you think? do you think that there should be a restricting access of control? >> certainly there is a limited number of people invested in the dot com which is not the intended use of that exchange. how that happened, obviously, we will have to investigate. where the breakdown was internally in our controls that would allow that to happen. >> i would like at some point, i know you are not a regulatory export but to have a conversation with you about looking at some of the rules and regulation that we put in place in the state of new york. of course the debate that we've had here are ceilings, floors, what would be appropriate to make sure that people are protected. you have already stated that f t exes lack of internal control of their own like anything you've ever seen in your control. obviously we have had a devastating impact on people who trusted ftx with their savings and investments. i also chair the house foreign affairs committee. i'm also concerned with these untrue failures could've led to illegal transaction on ftx's platform in a time when sanctioning compliance is critical in times when -- ukraine or slowing down putin's war machine. have you or your team investigated this since taking the helm at ftx? >> we are certainly in receiving all the aspects of the failure throughout these coming weeks we will learn more. i think we will be working with the community to understand, fully, what has happened. to share with you the full extent -- >> sediments time have expired. the gentleman from mr. -- mr. loudermilk, if now are in. i thank you, chairman. thank you for being here today. unfortunately, we are not able to question sam bankman-fried. i was looking forward to that however i was concerned that you're going to testify first i would rather have him testify for so we could qualify some of the statements however. since you have been in here there has been a leak to what would have been his testimony that has come out. i would like to ask you about something that he has related in his testimony. he said if he had not been arrested -- he alleges that ftx u.s. has been and remained solvent. it could've paid off all of his customers tomorrow. given the evidence that you have, what you gather. is there any bit of clues -- >> we still have a hole in the u.s.. and it is not solvent, that is not accurate i'm not sure how you would even know that. how would you even announced that we are hopeful because the number of customers and the volume of trading on the u.s. exchange was much smaller than the dot com. some are driven by the number that took place within the u.s. silo. right now we have a field million dollar value. again, you have to look at value, as i was saying today, it's still missing we have not, ultimately the, found all of the keys to the wallets as we find and open those wallets, hopefully we'll be able to find more assets. if we can attribute both the u.s. silo, certainly there is a pathway to recovery there. really the case is not closed yet. it is just premature to make a determination such as this. >> there is a potential that what he's claiming is true? i guess that would be the reason why all the assets in those laws have been frozen on the u. s. side? my follow-up question would be, if they are solvent, how would be unfreeze the? along with that, is there any evidence of coal mingling of funds between ftx. com, ftx, or alameda, and any of the three together. >> that is what we are looking at right now. i cannot give you a clear answer on that today. we are looking, when we open up all the wallets, to look what the sources. worm -- we will have the answer to you. it is much too early to tell you that right now. >> i appreciate that. summarizing, there is not evidence right now that his statement would be true that ftx u.s. is completely solvent? >> clearly, not. >> okay. something else that he did previously stay, the bahamian regulator one day advance warning to allow investors and bahamas to or remove their funds. no one else in the bahamas was lantern with the funds before the bankruptcy was filed. mr. freed said he allowed withdrawals because, quote, it was critical to the exchange to have a future, because that is where i am right now. he did not want to be in a country with a lot of angry people with it. is this explanation accurate? >> here's what we know. i cannot speak to his words. we do know that the liquidation proceeding in the bahamas was filed effectively 24 hours before our chapter 11 proceeded. during that time period, we have documented this in our court filings, as of last night, the accounts were unfrozen just in the bahamas, over $100 million was released to approximately 1500 customers in the bahamas -- >> 100 million, to 1500 customers. these are approximate numbers. then the door was closed about the time of our chapter 11 filing. there were communications between mr. bankman-fried and the bahamian government, specifically related to this leakage of assets. >> mr. freed would've known that the bankruptcy filing was imminent when he did this? >> yes. well, he was certainly in discussions with his counsel. was in discussions with the debtors council. >> i see my time is quickly running out thank you for what you are doing in trying to recover what assets you can mister chairman i yield back the gentleman from new jersey mr. gottheimer who is also the sub chairman -- now arenas for five minutes. >> thank you chairman for this hearing. since 2019, i have raised concerns about the security exchange commission approach visual assets. as you can see, chairman johnson has repeatedly claimed that most cryptocurrencies are -- despite, that the fcc has not created it doesn't rule to pose a digital guard rail for headsets. and it's not -- it has been a lack of certainty and clear markers in the road. we are seeing the impact of that front and center today. they failed to do their job, they failed to protect consumers, in my opinion. i'm calling on other members and financial writer seders to step up and create clear guardrails for financial assets. -- to prevent stabilizing runs that we saw in the so-called terror that failed earlier this year. i invited -- chairman to my district to further conduct but a regulatory possibilities to protect americans from snake oils and i've been participating with market participants and regulators to provoke promising responsible, all with a clear eye to protect consumers. instead of writing clear guidelines, the fcc has created a patchwork of and how policies for crypto firms clearly through spotty enforcement policy and random letters. a enforcement that has missed the worst defenders. you cannot regulate through a patchwork of random letters. you have to write clear rules to the world which is what i have been stating for years now. -- the authority he needs to oversee this industry, and yet the fcc has yet to write rules. hadas failed to foresee disasters in the industry and protect consumers from tara luna to ftx. it's time for the fcc to step up and do his job or not allow -- mr. wray, thank you for being here. do you think the u.s. financial regulators would have been satisfied with the accounting respond against practices that were in place at ftx international to prevent its failure from spilling over to ftx u.s. in american investors? >> as i said on the record, i cannot speak to what the regulatory fixes here. obviously, oversight is needed. obviously, we need to have -- customers need to have control over their accounts. clearly, there are some needs here. i can't really specify what they might be. i leave that to the committee. to obviously work with agencies -- >> ftx's group, the u.s. base crypto derivative and clearing platform, ledger, acts which has been overseen by the fcc by 2017 was not included in the water bankruptcy filing. including your initial review, in the ftx assortment. according to the agriculture committee last week, arguing that the oversight of his agency that ftx was provided throughout the legislation of fta firms. what provided the broader ftx ecosystem, why can u.s. regulators, including the scc, done to have done to protect americans using ftx u. s.? >> the ledger acts, it is a regulated again -- it is solvent. customer counter segregated. obviously, that goes a long way to protecting our customers. >> do you believe mr. bankman-fried when he says all ftx u.s. users will receive $1 on the dollar fund at the end of this bankruptcy proceeding. >> that is very speculative at that point. >> what are some of the biggest questions you still have for mr. bankman-fried and his associates now they've been through this in some periods? >> i think the questions we have are not necessarily questions for mr. bankman-fried. the questions are, where are these acids? how do we locate these assets? it is a mining exercise at this point. look, at the end of the day we are not going to be able to recover all of the losses here money was spent that will never get back. they will be losses on the international side, we are hopeful on the international side. he will answer to others in relation to what is happening here. here our job is to just funny acids, find the money for our customers as quickly as possible. >> when you expect that to be? >> the bankruptcy's take time, the assets will take time -- the process will, as i said, will take months, not weeks. we try to do this in the most expeditious way possible. >> thank you for being here, i yield back. the gentleman from ohio, mr. davidson, is now recognized for five minutes. >> mr. ray, thank you for what you are doing to recover funds that are missing. for helping us to build the evidence to help us find out what is happening. i think a lot of people look at your initial statements and say, i know the following. -- we are gonna comingle from the alameda trading platform. second alameda use funds to -- expose customer funds to massive losses. based on the review of the records, is a transfer of customer funds from ftx ockham, to alameda research, in conflict with the ftx dot com in terms of service? >> yes, that is my view. >> right, they claim they were not supposed to be able to trade those funds. clearly, they traded the funds. >> i think that the difference in what you may be hearing is, unlike general customer accounts, the alameda county had no trading limitation. virtually unlimited position they could take. >> when customers deposited funds into their ftx accounts, where did the cash go? >> sometimes the money wasn't deposited into the ftx account. it was sent to alameda to begin with. >> it was misdirected from the start strait alameda? >> certainly there was a time period where there was no banking activity at the. com. ultimately, if you look at the structure of this, alameda was essentially a customer on that dot com exchange. effectively borrowed money or just transferred money from ftx customers to take its own position on the alameda hedge fund. >> right. at times it was going straight to alameda. at other times did you uncover a pass where there was some sort of cellmate in stock? there is settlement back and forth between ftx and alameda? >> ultimately, when you look at this there is going to be, i'm sure, thousands and thousands of threads. we are gonna have to go back, we are gonna have to do a very detailed analysis -- >> they didn't have a structured settlement framework, at all, in any of their software or counting systems? >> who doesn't appear, so. no >> heavy ever done bankruptcies where you had to deal with custody of stocks? >> yes. >> so, obviously, you say you own shares you don't own shares. you take us through the shares, only after two days of the month period. there's a netting period when firms are traded to let out. they said of the position at the end of the day. it does not seem any of this kind of thing existed for ftx. >> that's one of the findings. there was no reconciliation of the ledger on the day-to-day basis. was there anything -- have you detected a point in time where the assets on hand for this enterprise matched the amount of customer deposits? >> we have to go back and look at that. we are looking at a timeline -- of all back up from the petition day. i guess we have to back up for more than a year. then we will look at a day-to-day basis. we have to now reconcile the ledger on a day-to-day basis to answer your question. >> custody seems to be one of the big issues here. they did not have a way to reconcile custody on behalf of their customers. sometimes some people were saying, boy, i don't know about the. maybe i'm gonna take my funds out. let's say someone bought bitcoin and we may want to exit and have self custody of bitcoin. is that the time when ftx or some part acquired the bitcoin today could say -- >> i think there's a certain amount of liquidity at a certain time. i think the problem was when there was effectively iran on the bank. there was less assets than what the depositors would've needed to be drawn out. undergoing that is a coal mingling of the assets, even amongst the customers themselves. it's really just one pot of crypto, if you will. >> no control, no custody. the only real safeguard the individual consumer had at this wasn't winding was the hope they could somehow be one of the lucky people that decided to say, i'm going to take possession and self custody of my own digital asset. those people, if they had exited and they had custody of the assets, other assets now safe? >> you are exactly on point. we can only be as lucky is the customers or got their money out. >> thank, you my time is expired. >> the gentlewoman from massachusetts, miss pressley. also the vice chair of the subcommittee on consumer institutions. is now recognized for five minutes. >> thank you, mister vice chair. thank you to our chairwoman for making this -- an absolute priority. thanks to the collapse of the cryptocurrency exchange ftx, over 1 million people have not been made whole, including consumers in my district, the massachusetts seven. mr. wray, in a bankruptcy filing a few weeks ago you stated, quote, never in my career have i seen such a complete failure in corporate controls, and such a complete absence of trustworthy financial information as has occurred here, end quote. as we continue to get a better sight line into this value, can you elaborate on the internal failures and the inadequate policy that occurred in ftx leading to the collapse? >> it is virtually unlimited in terms of the lack of controls. no centralized records on banking. no daily reconciliation's of crypto assets. silos there is no insurance inadequate insurance no independent board. no safeguards that limit who controls an asset. senior management could get access to any of the accounts in any of the silos. no separateness between customer money and other customer money or other assets. it is virtually unlimited in terms of the lack of controls. that is really the point of the unprecedented comments. i've just never seen anything like it in my 40 years of doing restructured work. even deported legal work. it is just a dearth of information. >> thank you very much, mr. ray. for enumerating that for the purposes of the record, to better understand the depth of the incompetence here. again, really just egregious -- and really criminal. can you tell us how customer funds were handled at ftx, including the exact amount that ftx misused? >> we don't we don't have totals today. on the law says. we do know that customer funds existed, effectively, in a pool. we are going to have to do an accounting, a trace analysis really determine the number of customers affected. and now we have a number of accounts but again users have multiple accounts. for example, if they had a different trading position, they may have opened multiple accounts. you know it's a big number. millions on the customer accounts and several billion dollars in losses. signing those losses to customer counts will be our next challenge. >> i saw one rip or putting it out about eight billion. in light of what is ftx's planned to return everything $1 return to the customer, and you have an estimate on the amount of funds ftx flash to be able to repay? >> not at this time. the one thing i want to express to the committee's every day we find more assets, we lock more assets. we find keys that we can then unlock wallets. we have signed up to the proper silos. every day we are more and more encouraged. we have to anticipate some massive losses here. it is too early for us to speculate what that could be. hopefully in the coming weeks we will get a burn a handle on the. and make more information available to the public. the one thing about the bankruptcy process, which should be comforting to the committee, is there is absolute transparency disclosure in the. there is reporting in the bankruptcy process. everyone will know, every step of the way, exactly what is happening with this bankruptcy. >> thank you. without question, this collapse has been demonstrating across the world are constituents in the massachusetts seventh is included. that is why it's really essential that we understand the anatomy of this collapse so we can not only ensure we are made whole, but where mitigating the damage cost here. we are maximizing the value return to customers. that we ensure, with strength regulation and procedures in place, that this does not happen in the future. thank you, mister vice chair. i yield back. the gentleman from north carolina, mr. budd is now recognized for five minutes. >> the story of ftx is the story as all this time. it has engaged in fraud, plain and simple. sam bankman-fried lied to his investors, violated his own terms of service. he knowingly in improperly tone loans millions of dollars from customers to his own hedge funds. this is a kind of stuff that would make mr. bernie sanders cringe. bankman-fried is where he belongs. -- the bankruptcy filing denotes several an acceptable practices, such as the use of software to -- two alameda's certain exemption -- can you expand on these practices and what you've learned since the bankruptcy filing? >> the basic concept is that alameda was able to borrow on an unlimited basis, or transfer. i'm not sure borrowing is almost a technical term. transferring of assets, boring of assets, on an unlimited basis. then it was allowed to take massive positions with other people's money. because they had no auto liquidation feature, ultimately those losses could exceed the value of that account. that's essentially what happened in a nutshell. >> thank you. another question. if ftx stockham was domiciled here in the u.s., do you think the outcome would've been the same? >> the extent of the lack of controls in the way this business was operated, i don't think it would matter where this company was located. >> here is what i'm getting a. i've been a long time supporter of the block chain technology in the digital assets industry. i view them as uniquely american innovations that have the potential to help and revolutionize financial services. but what happened it ftx was fraud on a massive scale, not an not unlike other scams throughout our country's history. -- other disgraced leaders such as enron have been prosecuted to the full extent of the law. what i want to protect his innovation. i want to see it flourish right here on our shores under proper regulatory oversight. it's clear now more than ever that regulatory ambiguity, coupled with the practice of regulation by enforcement, used by agencies such as the scc, has that to companies moving offshore, where they are often out of reach of proper american oversight, which puts all investors that risk of another ftx type scam. what we need is for congress to take a lead and establish clear rules for this industry. from the very beginning of our time in congress, i have introduced and supported countless bills that have led to just that. my hope is that we can work together to establish these rules to protect u.s. investors and the future of american innovation. thank you. i yield back. >> the gentleman from new york, mr. torres is now recognized for five minutes. >> thank you mister chair. to read the bankruptcy filing, you get the feeling that -- had the governments of a college fraternity. -- remain dispersions of fun were made via an online chat with specific emojis. it seems to me that corporate governance with emoji seems to be a recipe for -- tied together more substantially than i wanted to be. mr. bankman-fried speaks as if the conflict of interest came as a shock to him, as if it erodes by a mistake rather than by design. but it seems that mr. bankman-fried set up a mutually beneficial relationship between alameda and ftx. -- and that incestuous relationship was neither accidental or incidental. that incestuous risavy relationship with central to the crypto empire that mr. bankman-fried built. do you agree with that analysis? >> i cannot take any exception to what you said. >> do you think mr. bankman-fried knew or should have known that the conflict of interest was would for c oblique comingle culminated in the coal mingling of funds? >> i think he should've known his actions should have resulted in the circumstances that we find ourselves in. up sullenly. >> -- a balance sheet, whose largest assets were tokens that ftx itself had invented. the largest asset on the balance sheet with 2. 2 billion dollars in serum tokens. the serum token is the creation of ftx. needless to say, the value of the serum token is depends on the value of ftx as the country. if that's the ex-collapses, the token is worthless. it's no different than monopoly money. do you think there's something potentially fraudulent by counting your own tokens as assets on your balance sheet? >> clearly, the way the token is created and the liquidity, it's a very risky position to use your own acid effectively as collateral. >> when i think of an acid, i think it's something that has value independently of the company. just like a corporation would not count its own stock as it as an asset. it seems to me that equipped accompany would not count its own token as an asset. because of the company collapse, the sodas the token. >> in terms of tokens generally, i'm not making a judgment of homegrown tokens, certainly out there in the marketplace, they trade. limitations on the use of your own assets as collateral, certainly seems inherently risky. i suspect the customers themselves did not realize that. those are at least two problems. >> ftx reportedly holds $900 million in liquid assets against nine billion dollars in liabilities based on media reports. it's been reported of the liquid assets, love the largest among them is half 1 million dollars in robinhood stopped. according to the financial's times, the robinhood shares are controlled by a foreign entity -- which is said to be personally controlled by sam bankman-fried. so the largest liquid asset, the robinhood stocks, who controls them? you as the ftx eo or sam bankman-fried? >> sam bankman-fried does not control that asset. that's the acid of the estate. >> the new york times, sam bankman-fried said they knew there was a problem on november six, yet despite knowing what he knew one of mi6, on november 7th he proceeded to tweet the following statement quote, fps has enough to cover all client holdings, leading the public to believe that there was no problem. in your view, was he telling the truth or was eli? >> i don't want to give any dignity to his comments. he also said he had ten billion dollars to invest in the company that day, so. >> at the time a letter sent out the tweet, leading the public to believe we have enough to cover all client holdings, did ftx actually have enough liquidity to cover the liabilities? >> absolutely not. >> so that statement was false? >> yes. >> i will leave it at that. thank you. >> the gentleman from ohio, gonzalez, is now recognized for five minutes. >> thank you madam chair and mr. wray. i want to start with alameda and some of the loans. alameda took out loans from various counter parties, is that's correct, not just ftx? >> yes. >> do you knowledge, were any of those loans called? >> you know, we're going through the corporate history of what was repaid, and some of those loans in fact were repaid. they had counter party positions when a lot of those companies loan. >> -- >> that is certainly possible. we need to investigate that further. that is certainly one of the -- >> thank you. in your testimony, you described the use of computer infrastructure that give seniors and senior individuals and senior managements access to the systems, the clothes back door that we've heard about. one of the things that sam bankman-fried has said is he had no knowledge of comingle-ing of funds. he said that multiple times. that back door, which you have said allowed for unlimited access of alameda into the ftx customer accounts to fund their investments, in your eyes, is there any way that sam bankman-fried or senior management wouldn't know about the sort of thing? >> no. >> thank you. now shifting towards the goal of the bankruptcy proceeding, which is to find the assets in return the assets asap. i think that's the goal we all share. part of that of course is having the data, a paper trail that would allow you to recreate transaction histories, figure out where the assets are, so you can actually go get them. how would you characterize the quality of the record keeping at ftx and alameda? >> ultimately, we hope the raw data is there. through the expertise we have, we will be able to assemble the. it will be time consuming, because it's raw data. the jump-start you normally half of the company, we just don't have. we're starting your zero. >> do you have any evidence that suggests that data was willfully destroyed? prior to your arrival in the company? >> we have images the slack and byron meant that the company had, but we are aware that there were certain forms of communications with disappearing messaging, so, those were the result of police leah risk of loss there. >> one of the things in mr. bankman-fried's testimony that is leaked, that wasn't submitted, is he spends a considerable amount of time talking about binance and how binance effectively created a run on the bank, suggesting that had that not occurred, ftx was solvent and would have been just fine. prior to that episode, is your belief that ftx was solvent? >> no. >> i didn't think so either. that's pretty much all i have four questions. one final thing i'll note, there are some accountability, which is of course good, but there's a lot of excuse-making and complaining, such as in fact many of us are still missing as access roam personal data which are still being held hostage by the ftx leadership. i would like it known that that's what happens in life when you perpetrate fraud -- you lose your freedom and use aspects as sex to a whole bunch of things that you wish you had. just a simple reminder for everybody that that is what happens. final question actually. i do have 11 minute left. you mentioned 100 million dollars that was transferred to 1500 the hayman accounts prior to the bankruptcy, unlike and ask you to say this is exactly what happened, but what is your spidey sense day about what might have gone on there? it's awfully suspicious. >> obviously, it's alarming. in my job, i try to keep focused on one thing, follow the money. so, we'll see, will investigate who receive that money with the circumstances were. >> thank you and thank you again for being here. i wish you luck in tracking down all the customer funds, making sure their return to the rightful owners. thank you madam chair. i yield back. >> thank you. the gentlewoman from michigan, miss tlaib is now recognized for five minutes. >> thank you very much mr. mrs. chairwoman. mr. ray, i really appreciate you coming. here one of the things that stood up for me is how much ftx spent on celebrity endorsements and arena naming rights, really targeting residents like myself and others, in my community. naming rights of the miami heat arena, i think you will spend 135 million, and nft partnerships with golden state warriors and washington capitals, 210 million sponsorship of the mercedes, some -- endorsements an ads with tom brady, naomi, stephen, curry larry david, it goes on and on. do you know the total amount of ftx how much they spent on sports endorsements and arena naming rights? >> we don't have a full tally of that. is just an accumulation of data. >> do you know if you's -- >> i can't tell you what was made paid encrypt towards versus cash. >> -- i think you doubled the number of u.s. users. is that true? >> i don't have date on that. >> do you think it's financially responsible dove spending hundreds of millions of dollars on these kinds of sponsorships and quote on quote partnerships while they have not been able to cover customers deposits? >> no. >> firstly it all sounds like a lot the houston astros playing at and one park. i represent the -- the third poorest congressional district mr. wray. this impacts every day folks like my residents to really targeted by those ads. -- one of the things i read, which was really taken aback and madam chairman of her, on terri o teachers pension had to write off $95 million, these are teachers. and, the consequences of the crypto collapse on every day people, it's something that does not get discussed enough, and understanding why accountability and oversight is important. that's why really pre-shape the chairwoman during this hearing. the idea that cryptocurrency can be a solution for financial inclusion is not only laughable, it's dangerous mr. ray. the quick rich, get quick rich kind of ads and targeting -- its predatory. and to quote my friend senator warren, it's full ship. let me talk about that book bs a little bit. the role of exchange tokens in the crypto industries -- it's reported that all media held billions -- in that ftx's own exchange token, meanwhile ftx's own website stated that ftt is the backbone of ftx's ecosystem. i know you're rolling your eyes. so chevron could see. it -- by the start of november, it hovered around $20, and the collapse and value triggered a so-called a veteran like situation. and right now ftt is valued at just over $1 per token, is that correct? >> that's correct. >> clearly ftx hadn't interest of inflating the value of its own token, and it seems in hindsight that ftx were being propped up by monopoly money, is that correct? >> there may be that pattern yes. >> you discuss how ftx. com is solid from ftx to u.s., and ftx dot u.s. user? >> structurally, they. are they do share a common environment, the a. w. s. is still. >> ken ftx dot u.s., or, e users, could they trade with ftt? >> on their particular exchange, which is the ftx. us exchange, yes. >> can you describe how ftt collapse in value has affected ftx's. us silo and affected u. s. customers, residents, in their ability to recover their funds? >> we don't have a full accounting of what crypto assets are within each silo to backup those customer accounts. we need to accumulate the full value of the collateral, and then will obviously look at what type of crypto is there, and that will be an exercise we will have to go through. >> can you explain this whole thing around ftx's reliance on digital tokens that they control -- that's something that i think we dig deeper into. >> i have seen stories about that and i've read quite a bit about it. we have not done a full investigation into what was going on in the marketplace relative to the various tokens. i know that's of particular interest to the regulatory community. some of this may have played into what happened, in terms of the downfall of ftx and other crypto companies. certainly something we are gonna investigate. >> thank. you >> thank you very much, the gentlewoman from tennessee, gentleman from tennessee, mr. rose, is now recognized for five minutes. >> thank you chairwoman waters. thank you ranking member for mchenry holding this history. and also thank you to mr. wray -- mismanagement of funds, the use of complex margins, and the -- certain digital osp that's last that's led to fraud. the timing of the events of the last 12 hours is certainly interesting, as a -- attorney, it makes me wonder why the prosecutor would not want to add lying to congress as another charge against mr. bankman-fried. -- chair gensler has failed at his job, and worst of all, he has failed to protect investors, which is one of the key components of the scc stripe are mission. similarly, while he has been asleep at the, wheel the democratic majority has failed to have him testify to this committee for 14 months, which i believe is a disservice to investors. i hope in the next few weeks, we in the new republican majority, will start to finally hold a biden administration value accountable for their values. i see my time is limited. mr. ray, it is my understanding that ftx and alameda hold a number of digital assets, including more than 30 billion of feather u.s. d t. can you describe the efforts that you are taking that un-winding ftx and bankruptcy proceeding won't cause unnecessary negative impacts to these digital asset markets? >> at this stage, what we are doing is sick where chris sequestering those assets and coal storage. we have now not embarked on any liquidation process related to those cryptoassets. when it comes time to look at the ultimate distribution of those assets, whether it's in cash for incline, obviously will be instituting every procedure in processes in place to make sure there is no depreciation of value or distributing. our goal is to maximize the value to customers. >> thank you. mr. wright, you have said alameda -- have you seen any documents suggesting that the recipients of those investments did any due diligence as to the source of funds being use by ftx and alameda? >> i've not seen personally seen any documentation relative to other parties due diligence. i'm not sure will -- we have certainly not found anything today. >> on the flipside, have you seen any indication as to whether adequate due diligence by ftx's institutional investors would've raised red flags? >> i don't know what work they did. obviously, they found themselves in a fairly grave position. i don't know what diligence they may have done. it's hard for me to answer that. >> is there any indication as to whether any potential investors before the events in the members took the path of investing after taking a hard look at ftx? >> again, i'm not really preview ate what intelligence people may have done. it's just not something that i've got this ability to. >> so, from owning a company myself and responding both responding to jewels just requests and making them, as we look at companies, we kept significant records of the jewish that we requested and we responded to. are you seeing evidence that any such records were being kept by ftx? >> not that i am aware of. the company's record keeping was very minimal, even as to some of the investments, we don't have to completely transactional documents -- i think that speaks somewhat for your question. >> and, again, just to give you a chance to reiterate, from all of your experience throughout your career, you find out the remarkable -- >> more remarkable. >> thank you again for being with us today and chairman, thank, you i yield back the balance of my time. >> thank you. the gentlewoman from north carolina, miss adams is now recognized for five minutes. >> thank you madam chair. thank you ranking member mchenry for hosting the hearing today. thank you mr. ray for being here. mr. wray, judging by the reaction of my colleagues, it's clear how frustrated we are, especially given your testimony restate that you had never seen such an utter failure of corporate controls, and every level of an organization. mr. ray, my question, my colleagues and i have asked repeatedly about your efforts to recover customers assets. you've told us today, it will take some time. but you're the expert. do you genuinely believe that these customers are ever gonna get their money back? >> certainly we're working hard to recover all the assets, and sequester those four, ultimate return to customers. it's obviously a challenge. it's a massive loss. it's very speculative right now with the recovery will be. it's too early to tell with the ultimate recovery will be to each particular customer. at some point we will obviously know that. and we hope to maximize that. well >> well, okay, doesn't sound like you really the really gonna get their money back. do you think that some of the losses suffered by these investors are simply a result of the nature of investment and risk taking on the market? or was this fraud? >> certainly, i think the way the company operated, materially risky losses,, position's i clearly a better run company would affect controls and procedures in place to avoid losses. >> -- i want you to touch on the quality of ftx's bookkeeping, was there a discrepancy between what it disclosed to its investors versus what was going on in the company internally, and can you provide an update on your efforts to fill those gaps? >> the quality of the record keeping was very poor in the company. we still don't have complete financial statements for every one of the entities. we are going back and rebuilding those right now. we have processes to have a beginning entry with their assets in cash, our liabilities we will do that on entity vantage basis. in the coming months, through the bankruptcy process, there will be disclosures about the financial status of every one of the entities, but that's a process that will build out over the next four months. >> so, in your testimony, you discuss the existence of a computer infrastructure that gave senior manage management personal access -- can you describe examples of the misuse of customer funds that took place as a result of these vulnerabilities? >> the main issues is simply taking customer funds and using it for other purposes. obviously, there were investments name bait, payments may, expenditures that were made with customer funds, that obviously trading had occurred, cause losses that ultimately harm the customer. >> all right. thank you so. much i yield back. thank you. >> thank you very much. the gentleman from wisconsin, mr. steil is recognized for five minutes. >> thank you madam chair. thank you mr. ray from being here. -- why the indictment on the timing of the indictment by the justice, but i think it's policy makers, we're here to understand the ftx collapse and what could be done from preventing a future fraud from ever occurring again, where individuals lost their money. it's complicated by the fact that ftx is domiciled in a foreign jurisdiction, by all indications, mr. bankman-fried bankman-fried is also in a foreign jurisdiction at this time. so why would a company like a company like ftx would choose to set up outside of the united states in the first place. -- we can't lose sight of the fact that millions of americans lost their money in. this i'm outraged. your outrage. the american people should be outraged. a day after ftx filed for bankruptcy, multiple outline at a outlets reported that there was a hacker in potential threat. -- the company was in touch with law enforcement officials and regulators. have you determine whether in fact assets were moved out after the bankruptcy? >> yes. clearly. there was assets moved out off to the bankruptcy. >> do you know whether or not that was a hack, or was this done, as this has been reported, under the direction of the bahamian authorities? >> it was both. >> it was. both so some was done as a result of a hack, some was done as a result of a request by the behaving in authorities? >> yes, that's right. >> you have any indication as to why the bahamian authorities made that request? >> it wasn't a request. they just took it. >> the bahamian authorities took the funds that red ftx through the road action. >> was no action required by ftx employees? >> they were aided by the ex employees, yes. >> they were aided by former employees of? ftx >> yes, mr. gary wang and mr. bankman-fried. if -- you have insight into the motivation for him is action? >> unlike the chapter 11 process, that there's no transparency in the process in the bahamians, and we have repeatedly asked them for clarity and what they've been doing. we've been shut down on that. >> so, you have requested the insight as to why this was done from the human authorities, and the bahamian authorities reply to, you was that they did not reply, or the reply that it wasn't satisfactory. >> they put out statements that it was in the interest of bahamian creditors, although, in our view, it violated the -- >> you have questions that still remain unanswered by the bahamian authorities that would shed additional light on your investigation is that information to be provided? >> yes. >> do you believe that at that, time mr. bankman-fried was attempting to undermine chapter 11 cases by expanding the scope, by moving the assets into the counts of human authorities? >> it appears. so >> so it appears that may be working to undermine the scope of u.s. federal bankruptcy law? >> yes, that's what appears so. >> so do you still believe the chapter 15 k should be consolidated in the delaware bankruptcy court? >> i do not think so. >> what do you think should be, what do you think would be the best course of action? >> the liquid april the liquidation proceeding relative to ftx us markets, they file the proceeding, there that is the proceeding. we think that chapter 11 process is the only open transparent process that gives visibility to customers of what happened, and when they're gonna get the money, and how they're gonna get their money. the process, and the islands, is not a transparent process. we have opened up the ability to share everything that we have with the bahamian government., similar to how we sure with other liquidators around the world, it's meant to be a very cooperative situation. the pushback that we have cotton is extraordinary in the context of bankruptcy. it raises this question. it seems irregular to me. there are a lot of questions on our part. obviously we're investigating. >> i appreciate your candor on that point. that's a really important point to look at. one of my concerns is we look at overall crypto policy, shifting away from the specific bankruptcy, is that we have a large number of crypto companies that have chosen to domicile outside of the united states, rather than inside the united states. a lack of a regulatory framework inside the united states, in my concern is that that's putting people to be offshore. when a fraud like this occurred, it's to the detriment of americans to place their money interest in a company like ftx. i appreciate you being here. i'm cognizant of my time. i yield back >>, the gentleman from massachusetts, mr. lynch -- is now recognized for five minutes. >> thank you madam chair. thank you mr. ray. i appreciate your patience with us today. and your testimony. recently, we received a leaked copy of mr. bankman-fried's intended testimony. it was leaked to forbes. basically, he continues to allege that this was on an accident, that it was unintentional. he was unaware of his companies, various companies activities. however, as my colleagues have pointed out previously, this structuring, as you have said, of these four silos of companies, the location in the bahamas, indicates a deliberate attempt to avoid u.s. jurisdiction and u.s. security laws. in our conversations with mr. gensler of the scc last week he indicated that there are laws in place that would've protected investors if customers had mr. bankman-fried had decided to register his offshore operations in the united states. is that your understanding? >> i'm not familiar with regulations. obviously, there was an absence of regulation relative to these operations. clearly, any regulation would've helped. >> the southern district of new york unsealed its criminal indictment this morning, alleging that mr. bankman-fried lie to investor. he now faces a counts, including wire fraud on customers and lenders, and conspiring to defraud the u.s. and violate campaign finance laws. do you have any information that would counter veil those charges. is there anything that you've seen in the way that mr. bankman-fried structure this company, or anywhere that he tried to comply with u.s. securities law in your investigation so far? >> we certainly made all over information available to the regulators and the enforcement agencies. they're seeing what we're seeing. >> what i'm trying to get out is, while mr. bankman-fried continues to say this was an accident, it appears to me that every step of the way, that his actual intentional his acts were intentional, willful, and these were conscious decisions made by him and structuring his company as he did. >> i don't know what is intent was. i know what the results were. there were disastrous for customers. >> i realized that at least so far, the reports say that only about 2% of the people were defrauded in this ftx collapse were from the united states. is that correct? >> i don't know how they're calculating their numbers on the customer basis. it's hard to count. we do know that the u.s. investors were on the u. s. exchange, and the relative losses there are a fraction, but it's too early to tell how muscles losses are on either side will is a general tooth to the statement of the u.s. will suffer, that particular exchange will suffer less than the. com exchange, purely because of the siphoning off of cash and assets from. com over the go alameda. >> despite the structural differences between these different operations, ftx. com, ftx u.s., there is without a doubt a barrage of advertising, endorsements, especially in minority communities, where we bankman-fried admitted that he was trying to supposedly bank the unbanked with access to ftx. is that how the u.s. citizens were swept up into this? you have any indication that that was the process? they do heavily, there is a lot of hype around crypto. there were hundreds of millions of dollars fence on advertising to u.s. citizens on f t and i'm just wondering if that's what drew these victims into this disaster. >> i don't have a professional view of that. your own observations will guide you. >> okay. my time has expired. madam chair. i yield back. >> thank you. the gentlewoman from pennsylvania, miss dean, is now recognized for five minutes. >> thank you madam chairwoman. thank you ranking member for hosting this extraordinary hearing. -- mr. ray, i want to just make sure we set the stage, which is that no matter what, the failure, the fraud, the infliction of pain on people is extraordinarily real, as intriguing, as disastrous as the events leading up to the phones of bankruptcy are. and of course, you have the task of trying to recapture the assets and protect them and transparently convey them back to folks as best as possible. all of that is outrageous. i would like to focus my time a little bit of what happened on the 11th on the 12th of november. you say in your testimony, i'm gonna cite both your testimony and the declaration filing in court. you said that you accepted the position of chief executive officer for ftx group in the early morning ali was of the verma the 11th, and quickly realized that bankruptcy filing was necessary, which began that day. you also say, that as the cases were filed, debtors and the representatives were tirelessly through the night to secure assets. you then go, in yesterday's pleading, trying to block the other liquid or was trying to do just say during this period on the 11th and the 12th as best i can build this information merge that better systems and assets were -- one of those two sources? >> there were two situations going up. there was a hacking by a third party. we are tracing that hockey. using our own cyber teams. close for being assisted by the government in tracking the ultimate location of those crypto assets. the other thing that happened at the same time was, aged with resources of our former management the vehemently government took control of certain crypto astronauts. >> the virgin commission? >> yes. >> instructed mr. bankman-fried and -- to mint, what does that mean mint? and transfer hundreds of millions of dollars of these tokens to cold storage for their benefit? >> what they referred to is, it's mentioning the ftt ftt, which is a coin created by the company, could literally be minted, you could create new money with it. and that process, ftt was transferred to the bahamian authorities. >> to the tune of how much money? >> approximately, about 300 million. >> 300 million. and you say, that would be mr. sam bankman-fried and mr. gary wang who did that minting in transferring? >> i have information that they were both involved. -- all visalli the rico operating with the governments in doing so. >> and this was post-back roughly filings? >> post back from sea, yes. >> that kind of wrongdoing, for somebody of your expertise, how is it that the walls were not secured? that someone was that someone was able, in the sea is one unknown and one of the likely known, was able to go in, mint, manufacture tokens and transfer them to a foreign government? >> it really goes back to the control of the company and its assets in the hands of a few people, in this case wrongdoers. they held the keys, and they knew what the wallets were. and there's a lack of documentation internal controls between the companies assets to all of the keys and they were able to take those assets purely by the way the company was established and post 11th or 12th has that kind of access and the keys, mentoring, transferring, stopped? >> we haven't seen any avoidance of hacking. we certainly have isolated any involvement of the former founders of the company, whether that's cash or other assets. what we don't know is whether or not the founders could have taken crypto and put it in a cold wallet that we just don't have an awareness of. if they did, hopefully we can trace that. you may find in the billions of data that we have, a trail there. but it's possible that assets would have to skip the system maybe exists in a thumb drive that we just don't have any knowledge or possession of. >> thank you mr. reagan thank you for your team's work. >> thank you mister we -- the gentlewoman from new york, miss ocasio-cortez will be recognized for five minutes. >> -- i want to put together a little bit of a timeline of this collapse between ember 12th and yesterday. on november 2nd, we have coindesk leaking these balance sheets, on the eighth binance signed a nonbinding letter to acquire ftx, and bankman-fried freezes or pauses withdrawals from ftx. i like to submit to the record your declaration to the u.s.'s bankruptcy court, ftx's declaration to the u.s. bankruptcy court that was filed yesterday. on november the 9th, the day after those assets were frozen, binance binance announced it would not go through with the purchase. according to this filing, the same day bankman-fried email the bahamian attorney general with an offer. that offer stated, that he would offer to unfreeze withdrawals just for about how maine law bahamian customers just on ftx so they can quote, tomorrow, fully withdraw all their assets, is that correct? >> on november turek on the venmo tent, the next day, ftx was placed into a foreign provisional liquidation in the bahamas. correct? >> the next morning. now, after that, bankman-fried then made good on his offer. on this previous days offer in that email to the bahamian -- opening withdrawals just in the bahamas for period of 25. 5 hours. is that correct? >> now, during that period, $100 million was withdrawn in the bahamas from ftx by 1500 individuals. correct? >> correct. >> this was a day before you are such a takeover. so he was still in control. right before he was supposed to have this off. >> correct. >> now, i think what we have here is that,, on november 12th, we have congresswoman dean was just asking about, this additional minting, and then, on the verma 16, the bomb mania appointed joint provisional liquidators did something very interesting. we came to the united states bankruptcy corps and san and tree to recognize the bahamian liquidation as the main foreign proceeding. with that additional control be of any potential value to mr. bankman-fried for that bomb mania on proceeding to be the main one? >> clearly, there seems to be an effort by the bahamian commission to get control of the bankruptcy process. i think that was evidence by their filing, which was made up in new york, not delaware. >> thank you for that correction. did you uncover any evidence that demonstrates that this window, 25. 5 hour window opened an exchange for any consideration offer dumpster bankman-fried by the bahamian attorney general or any state official, including a promise to initiate liquidation proceedings, which might offer a path towards mr. bank reentry retaining some controller control over ftx. com? >> we intend to investigate that very carefully. >> thank you very. much no timeline of yesterday. yesterday, you file that same declaration, that revealed some of this explosive information. what time did you file this? >> around three, or 4:00. >> around three or 4:00. when you file disinformation, that requires that discloses that you are sharing this information, it discloses that two opposing counsel, correct? >> yes. we documented it on the world knows about it. >> now, if opposing counsel essentially becomes notified of this, that would mean that bankman-fried and potentially bahamian officials would have been potentially privy to that information starting to run three or four piano correct? >> correct. >> what time was mister bankman-fried arrested yesterday? >> i believe it was in the early evening hours, after 4:00. >> i believe it was in the evening, after that finally. i'd like to submit to the record the statement from the attorney general of the bahamas issued yesterday on the arrest of mr. sam bankman-fried. after summiting got to the record, i would like to note, that in the statement, they stated, at such time as a formal request for extradition is made, presumably by the southern district of new york, but they do not stay when that request for extradition was made. ,? >>. . >> thank you very. much >> thank you, the gentleman from texas, miss garcia, also the vice chair of the subcommittee on diversity and inclusion is now recognized for five minutes. >> thank you, madam chair and thank you mr. ray and thank you for your patience today as we come towards the end of this hearing. let me just say that i was once city controller of houston and under me was a city auditor so i have a lot of auditing, overseen a lot of audits and this has got to be one of the most ridiculous loosey-goosey operation i have ever seen i wouldn't be surprised if you come back and tell us you found money under somebody's mattress because it seems like there was total lack controls, total lack of transparency, total lack of any accountability and it's much like an onion that every time you peel a layer, it gets a little smelly or an uglier. i know we need to stay tuned. i also want to go over a little timeline, following up on my colleagues questions. ftx international was founded before ftx u.s., correct? >> could you repeat the question. >> ftx international was put together before ftx u.s.? >> yes. >> so before ftx u.s., u.s. customers were not, didn't have a former platform to participate in, because as i understand, it ftx international was for non-usa customers? >> that is correct. >> so, do you happen to know how many ftx u.s. customers there really is? >> we don't have an accurate customer account. we have a user number, which is about 2. 7 million. customers did have multiple accounts. some of those accounts of zero balances. >> so 2. 7 million. we were told that's, i saw some information that we were told was about 2% of the total picture of ftx customers, is that about right? >> i don't know how they're calculating. that on a relative basis, the u.s. users and the value and the petitions day is relatively small compared to. com. >> i'd be curious to find out, and i've asked this question, -- just about this whole crypto space, who is the consumer here? who are the people being harmed? i'm not talking about hedge fund managers. i'm not talking about investors. and not talking about entities. how many real people are being hurt? >> we don't have a breakdown by institution versus individual. clearly, there's a lot of individuals harmed by this, a lot of individual accounts. crypto accounts are certainly a, something that is available to consumers. i would expect the populations would include the large amount of consumers. when you say that you're telling me you have no consumer data just account numbers right now? >> we have account numbers. we can ultimately figure out the names associated with those accounts. but what we don't know is what the identity necessarily is behind some of those account names. >> you don't have any information on the demographics or states, you can tell me if i've any in my district? -- >> not at my fingertips. we certainly can accumulate that and break that down. >> well, i would be really interested. obviously, for many of us, it is our constituents that we want to make whole. what we have a concern for the entire crypto space and all of the people who participate in any of these traits on their platforms we have a deeper concern for our own constituents, and we need to make sure that we do make them whole. i know one response to a previous question, you said, you weren't sure when you would be able to make everyone whole. is that answer the same for the people for just the u.s., or is that also the same for the people in the ftx international? >> it's the same for all the customers. obviously, the extent of the harm appears greater on the international side. we are hopeful on the usc that -- that obviously would lead to a greater recovery in a sooner recovery, but it's a little premature to nail that down today. >> thank you. when you do the demographics of the consumer data, keep in mind, morning consult studies show that about a quarter of black and latino respondents won't cryptocurrency, it's a quarter compared to 17% of white respondents, so we need to make sure when we talk about making everybody hole, we're talking about everybody. >> absolutely. >> thank you. i yield back. >> thank you very much. the gentleman from south carolina, mr. timmons is now recognized for five minutes. >> thank you madam chair. thank you mr. ray. let's go back to enron. that trial was from january 30th 2006 until may 25th 2006. a pretty lengthy trial. i imagine that the federal prosecutors presented ample evidence, of a lot of witnesses. would it have been helpful to have the defendant testify before congress for like six hours, answerable buster questions under oath, prior to that trial, with that have been helpful to federal prosecutors? >> by that time, the company had been confirmed out of bankruptcy. >> before he was arrested, would it have been helpful for him to come before congress and testify for hours on an answer every question we could come up with? >> absolutely. >> so it would've been helpful? >> oh yes. >> okay. so, why 36 hours before he was scheduled to testify before this committee for hours on end, did the southern district of new york set a provisional arrest warrant to the bahamian government to facilitate his arrest, to preclude his testimony, which would've been incredibly helpful in the prosecution of sam bankman-fried? >> i obviously can't speak for the agency. >> it's kind of bizarre. i was a prosecutor for a number of years. i've prosecuted a number of white collar cases. the thought of getting six hours of congressional grilling for the target of an investigation, that would be great for my case. so, i just don't understand. they gradually return the indictment on the ninth. technically, you could delay weeks if you want to. so this was a decision made by somebody at the doj to prevent it sam bankman-fried from coming here, a couple of hours, and testifying before congress, answering questions in front of the american people. i've read his alleged testimony, that he was going to give. he's basically saying, he lacks the criminal intent. he lacks mens rhea. he's saying his attorneys pressured him into filing chapter 11. he mediately, after doing dock you signed, signed away everything. set out a want to do. that he told's attorney, this is all what he says, told his attornies to undo it. i do not want to do that. it seems that he's been taking steps ever since that to try to wrangle control of his company back. is that fair to say? >> i can only read what you read in the press i haven't talked to him., ..? >>,. >> that is basically the bahamian government or outside, what do they call it, joint provisional liquidators are trying to wrangle control of this bankruptcy, is that fair to say? >> it seems that way, yes. >> arguably, you are going to be going after the hundred million dollars that was allowed by 1500 bohemian citizens to take out that was allegedly owed. you will still get to the bottom of. that you plan on going after that money, correct? >> we will investigate every potential cause of action. >> if it 1500 people in the bahamas were allowed 25 and a half hours to withdraw 100 million dollars, do you plan on trying to get that back and distribute it appropriately? >> we will certainly pursue every course of action to recover. >> you're gonna do everything you can to maintain control of it and keep it in chapter 11. is that fair to say? >> that's part of. say the bankruptcy process here is the one place that has transparency in the greatest number to vax vice value for creditors, these things are not mutually exclusive. we work with liquidators all the time on a cooperative basis. this is a little bit unprecedented. >> i think that's fair to say. this is gonna be a law school exam for many students and years to come. i will end with the. i really look forward to figuring out why the department of justice issued a provisional arrest warrant to preclude sam from testifying before us this afternoon. i do not understand it, as the prosecutor, the thought of him going on the record for three, four, five hours, and answering every question, to try to keep his alleged mens rea out of this, would've been wonderful. i look forward to figuring out why they did that. with that nature i yield back. thank you. the gentleman from illinois, mr. garcia is now recognized for five minutes. >> thank you, chair waters. ranking member mckinley for hosting this important hearing. thank you, mr. ray for joining us today. i want to start by zooming out a bit. ftx is not an anomaly, it is a collapse. it is just the case -- it is not just the case of one corrupt guy stealing money. it is about a an entire industry that refuses to comply -- and thinks it is above the law. it is not. finance is being investigated by the finance, it is being investigated by the doj. the fcc is investigating the cofounder of tara luna, which collapsed earlier this year. digital currency group had many of the same conflicts of interest -- the crypto industry is in crisis because crypto assets have no inherent value. this company is making money using one thing, hype. one the hype runs out, these businesses fail. ordinary investors, especially late comers who are disproportionately low income, black and latino, lose. mr. ray, in the november 17th finding, he noted that your team had detected on authorized minting of approximately 300 million in tokens by an unauthorized source. they're the bankruptcy petition, your december 12 filing note that one source of the unauthorized minting remains under investigation, a second source has been confirmed, without doubt. who was the source of this unauthorized maintain that your team has confirmed without doubt? >> the second source i think you're referring to is the bahamian commission. >> mr. ray, what of the unacceptable management practices at ftx that you identified was the absence of independent governance throughout the ftx group. people from the same groups or leading various companies. and, there were potential conflicts of interest because of this. can you tell us more about the risks a lack of independent governance and what risks were created as a result? >> we had no independent border directors. with the lack of oversight by an independent board, it leaves the company in the hands of a small group of individuals. the company is effectively naked when it comes to internal controls. that was certainly the case here. it is something that is a typical of companies on the size. >> customers report, you have confirmed during the hearing, that ftx was asking customers to send money to alameda, instead of fdr. mr. bankman-fried claims this is because in the early days of ftx, the company did not have a bank account. on twitter space yesterday, mr. bankman-fried said he does not know if assets were moved over from the alameda to ftx after those early days. to your knowledge, how long work customers instructed to send funds to alameda that were meant for ftx? >> we don't have a precise timeline of the circumstance. that is one of our investigations. certainly looking to what kind of communications were given the customers. did they know? did they actually have knowledge of that direction? those are all questions. >> were the assets ever moved over to ftx? were they allowed to stay with alameda? >> there were certainly certain assets that stayed with the exchange. effectively in a pot, if you will. clearly assets moved to alameda. or, those assets where there continuously. clearly there was an allocation to alameda of customer funds utilized for other purposes. >> thank, you sir. madam chair, i yield back the balance of my time. >> thank you so very much. the gentleman from massachusetts, mr. auchincloss, vice chair before committee, is now recognized for five minutes. >> mr. wray i appreciate your patience and diligence afternoon in answering these long questions. you have addressed everything with karen thaw. you haven't played any video games value talk to us, it's terrific. mr. bankman-fried leaked his written testimony to forbes today. just one more link in a long chain of dissembling and lines from mr. bankman-fried. i think it's important to allow you to respond anything you put in their here on the record here with us. he really makes to pointed assertions. one is that you have not engaged with him, you're not allowed him access to year passed within counts. can you explain to the committee now why that is the appropriate course of action? >> well, for a couple of reasons. first of all, we want an independent examination. we didn't want to rely on people who could potentially compromised -- as we now sit here today, we know that that was a wise decision. second of all, what he was asking for, fundamentally, but to allow access to a system that we know just hours after the bankruptcy filing he had the created assets from the estate. >> i think those two are sufficiently good reasons. i will reclaim. the second broad point he makes the, were he allowed to restart ftx, he could raise the financing and make customers whole. i think that is a fear paraphrasing what he is asserting. can you respond to that? whether that is true or credible? >> in my history of doing corporate restructuring, i don't find the remotely believable. the first thing investor would have to do is pay several billion dollars just to have the company back to the position it was in. it is a fantastic idea. >> it would be throwing good money after bad in the biggest sense of the work, right? >> correct. >> good, thank. year i wanted to give you that opportunity. i'll associate myself with the very self alonna questioning from both missed a castillo cortez and from mr. timmons, from both sides of the aisle. and this timeline. i will -- november 6th ftx was facing a liquidity crisis. on november 8th the gritty halls were halted. in november 9th mr. bank friesen an email to the bahamanian customers could make to all that they had, quote, segregated fund for all behind meaning customers. quote, despite his awareness of ftx withdraw -- on november 10th, two days after withdrawals were halted, nearly $100 million in cryptocurrency was withdrawn by the, quote, asserting to be bahamian customers. then, quite conveniently for mr. bankman-fried countries counsel, he is arrested right before he was due to provide hours worth of sworn testimony to congress. mr. wray, do we have your commitment that as you continue to unravel this ball of yarn and pulling on the threats here, that if you find any evidence of improper collusion between mr. bankman-fried and any authorities, in the bahamas are also, you make that known to us? >> absolutely. thank you. >> i want to close, really, with comments directly to the broader industry here. i am neither a crypto bull or bear. my job of the policy makers not to deliver new products that technology, but to advance awesome glaciers that protect consumers and advance the u.s. dollar the world reserve currency. i remain this mark in tech agnostic position. i think is the appropriate. one we need strong clear regulations here in washington. i do have to say my patience with the crypto bulls have been wearing thin. it's been 14 years, the american public has been made of the promises better the scene of the ponzi scheme. it is worth noting that our innovation and investments every years ago identified five general percentages of the future. dna sequencing, artificial intelligence, robotics, energy storage, and blockchain. and yet those first four disruptive technology have already delivered game changing innovation that affects my constituents in daily life. blockchain has the sphere produced by papers embodied cast about enough tease cryptocurrency, it's all none of it has achieved -- scale. it's time for the block chain investors and entrepreneurs to build things that matter or to lose more credibility. madam chair, yield back. >> thank you very much for that, without objection, i would like to enter into the record the closing statements from ranking member -- and myself. i would like to thank you, mr. john ray iii -- >> gentleman waters. i have not had an opportunity to testify or question the witness. >> i would like to thank you for your presence here. >> parliamentary inquiry all members entitled to question witnesses. >> you are, and if you would like to, -- for everybody >> to call a recess. that's your decision, not mine. >> just one moment, please. you may go right ahead and have five minutes. thank you. >> thank you, madam chair. >> you are certainly welcome, sir. >> mr. wray, earlier today you said ftx was one of the worst bankruptcies you have handled in your 40 years of legal and restructuring experience. under mr. bankman-fried, ftx had almost no record keeping, risk management, or accounting. in fact, ftx has zero accountants on their payroll. mr. bankman-fried explained to bloomberg business week yvette ftx is accounting was done by him and his, quote, i was really lazy about the mental math. a complete lack of any basic record keeping makes it difficult to track down assets and untangle this mess. are you aware of any additional wallets of the cofounders potentially have access to that contained deader assets? >> no, we are. not >> there's also been very little attention to the banks ftx had a relationship with. i don't know i have heard about any questions today. the ties between ftx and farmington state bank became in march when alameda research invested 11 point $5 million in the bank's parent company, f b h. if you have any insight or additional information as to why a small, agricultural lending bank with no footprint in the fintech or crypto has a relationship with ftx? >> that's the subject of our inquiry. we have not made that investment. >> thank you. i appreciate that. you've also stated that alameda's business model as a market maker required deploying funds to various third-party exchanges which are inherently unsafe and further exacerbated the limited protections in foreign jurisdictions. to your knowledge, are any of the ftx cofounders or their family members affiliated with a third party exchanges that received funds from alameda? >> we are certainly investigating that. it's going to take some time to dig through that. it's really a part of our focus. >> thank you. i appreciate you coming here today and i would like to yield the balance of my time to the ranking member, mr. mchenry. >> i yield back. thank you. >> thank you, as i was saying before, without objection, i would like to enter to the record the closing statement from ranking member mchenry and myself. would like to thank you, mister john ray the third -- >> chairwoman waters, chairwoman waters! i have not had the ability to testify or question the witness? >> i would like to thank you for your presence -- >> chairwoman, waters! we have agreed in public and disagreed in private, other times done the opposite. i want to thank you for how we have attempted one another with one another to treat digital assets and the bipartisan we -- work we have here. mr. ray, thank you for you and your team, your willingness to participate today and as a forthright nature by which you handled a hearing like this. there will be ongoing conversations in the new year. and the title of this hearing was part one. part two will be next year. as chair of the committee is my intention to continue the work of chairwoman waters when it comes to this matter. we know more because of your testimony. you had someone who was a crypto genius, behind closed doors was using quick books. we know somebody who was a pretender through the technology, who was doing everything possible to obscure everything that is innately a transparent product. now understand. why a lot more of the why. we wish you well in resolving these matters. we look forward to continuing the conversation. >> thank. you >> without objection, all members will have five legislative days within which to submit additional written questions for the witness for the chair, which will be forwarded to the witnesses for their response. i ask a reticent to please respond as promptly as you are able. without objection, all members will have five legislative days within which to submit extraneous materials to the chair, for inclusion in the record. the hearing is adjourned. >> we are funded by these television companies and more, including cox. >> homework can be hard, but squatting in a diner for internet work is even harder. that's why we're providing lower income students access to affordab internet, so that homework can. >> c-span now is a free mobile app featuring your unfiltered view of what is happening in washington, live and on demand. keep up with the day's biggest events with live screens of floor proceedings and hearing from u.s. congress. white house events, if the courts, campaigns, and more from the world of politics. all at your fingertips. it can also state earned with the latest episodes of washington journal and find scheduling information for c-span's tv network, and c-span radio. plus a variety of compelling podcasts. c-span now is available at the affable store and google play, download it for free today. c-span now, here front row seat to washington, anytime, anywhere. >> be up to date in the latest in publishing with book tv's podcast about books. current nonfiction book relations, best seller interest list, and trans through inside interviews. you can find about books, -- >> the misconduct and collapse of the cryptocurrency company ftx democratic senator cheri brown of ohio led the hearing and looked in the resulting impact on consumers in the industry itself. this is two hours. >> senate affairs will come to order. thank you for the witnesses joining us today's hearing we, believe, is in the hybrid format. that was the intent. we're having some

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