FTX CEO Makes Revealing Statements in US House Testimony

John Ray brought to light several irregular business activities related to FTX, including a dubious loan.

  • In the recent FTX hearing, John Ray revealed irregular business activities of FTX.
  • In Ray’s words, the funds were deposited directly into Alameda Research, not FTX.
  • Ray testified that Alameda invested in struggling cryptocurrency firms with funds belonging to non-U.S. customers. 
  • The CEO estimated that the mismanaged funds exceeded $7 billion.  
  • He believes that recovering funds from FTX will be difficult.
  • In the wake of FTX’s collapse, John Ray assumed the CEO role.

FTX CEO John Ray has raised concerns about the credibility of documents relating to the embattled cryptocurrency exchange FTX. In a hearing held on Tuesday by the U.S. House Financial Services Committee, Ray raised attention to many irregular business activities of FTX that also included a dubious loan. 

“There were no corporate controls, no corporate oversight, no independent board,” Ray said. “The owners, business, and senior management had virtual control of all the accounts and could move money or assets as desired, undetected by customers.”

Following the collapse of FTX, John Ray became the CEO of the beleaguered cryptocurrency exchange and was charged with steering it through bankruptcy. Four weeks into his appointment, Ray appeared as the only witness before the committee for the hearing that lasted for about four hours. 

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FTX founder Sam Bankman-Fried was also supposed to testify virtually to the committee about the circumstances that led to FTX’s collapse, but his arrest by the Bahamas Royal Police prevented him from doing so.

How Alameda Invested into Firms with FTX Funds

Ray confirmed the funds were deposited directly into Alameda Research, not FTX.

He explained that Alameda Research and the FTX Group operated as a single entity. Therefore, it is difficult to distinguish the brain behind their operations and how they operate. 

Ray testified that Alameda’s operations relied solely on funds from FTX customers and that the firm invested in struggling cryptocurrency firms using funds belonging to non-U.S. citizens using FTX. 

Efforts to Reclaim Mismanaged Funds

Ray’s testimony didn’t establish clear premises on the exact funds belonging to customers that FTX mismanaged, but he deduced that the mismanaged funds account for more than $7 billion.  He believes that there will be a long road to recovery of the lost funds from FTX.

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“At the end of the day, we are not going to be able to recover all the losses here,” the CEO said. “There was money spent that we will never get back.”

However, to give some hope, the CEO ensured the recovery of more than $1 billion in digital assets. In addition, Ray established that the new management of FTX has secured cash in the bank account of the crypto exchange. 

Moreover, he noted the firm is working to locate all of FTX’s funds and that some could be held in offline digital wallets known as “cold storage.”

“It’s possible that assets have escaped the system and exist in a thumb drive that we just don’t have knowledge or possession of,” Ray said

According to John Ray, FTX’s poor bookkeeping makes it harder to track missing funds.

On the Flipside

  • John Ray also pointed out that FTX used QuickBooks as its accounting program, an uncommon choice for a company with billions of dollars in annual revenue.
  • The US Attorney, Damian Williams, confirmed that they are not done investigating the FTX collapse and will bring charges against other individuals involved in the incident.

Why You Should Care

As a result of the recent hearing of FTX CEO John Ray, some truths were revealed, and some predictions were confirmed. It also demonstrated the need for more transparency from centralized exchanges.

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Soumen Datta

Soumen has been a dedicated researcher and writer in the field of cryptocurrencies for the last few years. Even though Indian crypto regulations are still unclear, he believes that India will continue to innovate in the years to come. He loves to play his guitar and sing along in his spare time. He holds bags mostly in BTC, ETH, BNB, MATIC, ADA.