FTX Collapses Amid Allegations of ‘Old Fashioned’ Fraud


The House Financial Services Committee held a hearing on Tuesday, following the Monday evening arrest of FTX founder Sam Bankman-Fried in the Bahamas. The cryptocurrency exchange had already been hit with a series of civil lawsuits and penalties from US regulators.

The Justice Department and Bahamian authorities said that Bankman-Fried was taken into custody based on an indictment from the United States, which was released shortly after the hearing started. The US Attorneys Office for the Southern District of New York listed eight charges against the disgraced crypto executive, including conspiracy to commit wire fraud, securities fraud, individual securities fraud counts, wire fraud, wire fraud, money laundering, and conspiracy for circumvention of campaign finance regulations.

John J. Ray, the panel’s sole witness and the new chief executive officer of the company, Jeremy, stated that the company had “no records of any kind” and used QuickBooks accounting software to track its multi-billion dollar portfolio. “This is really old-fashioned embezzlement. This is just taking money from clients and using it for their own purposes. Nothing fancy,” Ray testified in a piercing four-hour hearing. “Sophisticated, maybe in the way that they’re hiding something, frankly, right in front of your eyes. This is just embezzlement. Old school, old school.”

The company filed for Chapter 11 bankruptcy last month after allegedly transferring billions in funds from FTX clients to Bankman-Fried’s hedge fund, Alameda Research. The Securities and Exchange Commission also charged the former crypto “darling” Tuesday morning with allegedly “orchestrating a scheme to defraud equity investors in FTX Trading,” according to the agency.

Bankman-Fried was also scheduled to testify before the Senate Banking Committee Wednesday. She previously declined to attend. Before her company went bankrupt, Bankman-Fried donated almost $40 million to candidates, campaigns, and political action commissions in the 2022 midterm elections. Most of her publicly disclosed contributions went to Democrats. FTX’s co-CEO Ryan Salame donated $23 million more, with the majority of his contributions going directly to Republicans.

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