Bankman-Fried Jolts Hearings, Upsets Senators With No-Show Plan

© Bloomberg Sam Bankman-Fried, founder and chief executive officer of FTX Cryptocurrency Derivatives Exchange, speaks during a Senate Agriculture, Nutrition and Forestry Committee hearing in Washington, D.C., U.S., on Wednesday, Feb. 9, 2022. The top Democrats and Republicans on the committee last month sent a letter to the CFTC calling for the regulator to take a more active role in overseeing cryptocurrencies.

(Bloomberg) — After spending the past two weeks participating in media interviews, former FTX Chief Executive Officer Sam Bankman-Fried is being more selective when it comes to appearing before Congress to discuss the collapse of his cryptocurrency empire. 

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Bankman-Fried said Monday during a Twitter Space interview that he is “currently not scheduled” to attend the Senate Banking Committee’s hearing on Dec. 14, though he will testify at a separate hearing by a House panel a day earlier.   

Senate Banking Committee lawmakers said in a statement later Monday that Bankman-Fried declined to testify and called the decision “an unprecedented abdication of accountability.” His counsel has stated that “they are unwilling to accept service of a subpoena,” the statement said.

Earlier, the disgraced crypto mogul said he is “open and willing” to having a conversation with the chair of the Senate committee about the hearing if his attendance is deemed important, Bankman-Fried said during the Twitter Space interview. Bankman-Fried missed a deadline last week set by the Senate committee for a response to a request to testify. 

Bankman-Fried, who is in the Bahamas, confirmed he will attend the Tuesday hearing by the House Financial Services Committee remotely. He is listed as a witness alongside current FTX CEO John J. Ray III, according to a media advisory from the committee. Starting at 10 a.m. in Washington, the House hearing will be split into two parts, each featuring one of the men. 

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Ray in remarks prepared for the House hearing blamed FTX’s collapse on the failures of its previous leaders.

“The FTX Group’s collapse appears to stem from the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals,” Ray said in the written testimony released Monday in advance of the hearing. The prior management “failed to implement virtually any of the systems or controls that are necessary for a company that is entrusted with other people’s money or assets.”

It’s not the first time Ray, who previously oversaw the liquidation of Enron Corp., has hard harsh words for his predecessors. He previously said he’d never seen such a lack of corporate controls and trustworthy financial information.

According to Ray’s testimony, some of the unacceptable practices at FTX included: the use of computer software that gave senior managers access to systems that stored customer assets without controls to prevent them from redirecting those assets; commingling of assets; the ability of FTX’s sister company Alameda Research to borrow funds for its own trading or investments; and the absence of audited financial statements. 

The possible mishandling of customers funds and the flow of money between FTX and Alameda are at the center of civil and criminal investigations into once-prominent crypto exchange. Bankman-Fried, who hasn’t been charged with any crimes, has denied trying to perpetrate a fraud, though he has owned up to grievous managerial errors at FTX.   

Ray in his prepared remarks also said that FTX went on a “spending binge” in late 2021 through 2022, during which about $5 billion was spent on different businesses and investments — many of which may be worth a fraction of what was paid. 

The current CEO said he and a team of outside consultants and experts are sifting through the company’s financial records to try to locate assets that can be used to repay customers and creditors. The scope of those efforts is “enormous,” he said. 

“It involves detailed tracing of money flows and asset transfers from the time of FTX’s founding, and highly complex technological efforts to identify and trace crypto assets,” Ray said. “We are in the process of collecting and reviewing dozens of terabytes of documents and data, including records of billions of individual transactions, and we are leveraging sophisticated technology and expertise to identify and trace additional transactions and assets.”

(Updates to include a statement from the Senate committee in the third paragraph.)

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