The former billionaire CEO of the disgraced cryptocurrency exchange FTX said he is willing to testify Tuesday in front of the House Committee on Financial Services, which is investigating the collapse of the multi-billion-dollar company that is estimated to have affected more than 1 million people.
“I still do not have access to much of my data — professional or personal,” Sam Bankman-Fried, who also goes by SBF, tweeted to the committee on Friday morning. “So there is a limit to what I will be able to say, and I won’t be as helpful as I’d like.
His tweet came after outgoing committee Chair Rep. Maxine Waters, D-Calif., and Rep. Patrick McHenry, R-N.C., who is expected to lead the committee once Republicans take control of the House in January, both requested that Bankman-Fried testify Tuesday.
Why is this important?
Federal, international and state regulators are all scrutinizing potential wrongdoing at FTX under Bankman-Fried’s leadership. The Department of Justice and the Securities and Exchange Commission have been investigating the collapse of FTX, according to the Wall Street Journal. The Justice Department has the power to prosecute criminal fraud, and the SEC enforces civil regulations.
The Department of Justice wrote in a court filing Dec. 1 that an independent party should “investigate the substantial and serious allegations of fraud, dishonesty, incompetence, misconduct, and mismanagement” at the company. That’s on top of an October court filing in which regulators in Texas wrote that FTX might have been selling investments in Texas without being properly registered, in violation of state law.
What is FTX and what happened?
FTX was a tool that investors all over the world used to buy cryptocurrency and trade their cryptocurrency for other assets, including for other digital currencies or cash. They could also store their cryptocurrencies in digital wallets, similarly to using a bank. The company promised customers not to use their money for trading, but did.
FTX collapsed in early November, when the company was unable to pay all the customers seeking to get their money back. Before the collapse, the Bahamas-based company was one of the largest cryptocurrency exchanges in the world and earned notoriety through its advertisements featuring A-list celebrities like quarterback Tom Brady and comedian Larry David.
Who was impacted?
FTX wrote in a court filing in bankruptcy court that it owes money to more than 100,000 people, mostly customers, but that number could grow to more than 1 million.
- How much money is at stake? At least $1 billion in customer money went missing, according to Reuters.
New CEO: ‘A complete failure of corporate controls’
The CEO who replaced Bankman-Fried after his resignation wrote in a court filing in November that the company “did not keep appropriate books and records,” and used software “to conceal the misuse of customer funds.”
- The new CEO, John J. Ray III, has worked on corporate failures such as Enron, but wrote, “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”
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Who is SBF?
Bankman-Fried is an MIT-educated 30-year-old who started his career at an elite New York trading firm before creating Alameda Research, FTX, and more than 130 affiliated companies. Forbes estimated Bankman-Fried was worth $24 billion as of April of this year. He has been a major donor to Democratic politicians and political efforts.
Bankman-Fried stepped down as FTX’s CEO in early November and filed for bankruptcy on behalf of FTX’s more than 130 related companies. He has not been charged with a crime. In recent weeks, he participated in interviews with major news outlets such as the New York Times and Wall Street Journal where he expresses regret over mismanagement of the company but denies any intentional wrongdoing.
What is the committee?
This Committee on Financial Services oversees banking and investing issues. The committee has held hearings related to major financial scandals such as Enron and Bernie Madoff’s Ponzi scheme. Waters tweeted on Wednesday that if Bankman-Fried did not show up to testify, subpoenaing him was “definitely on the table.”
Spokespeople for Waters and McHenry did not respond to a request for comment.
How can I watch the hearing?
Tuesday’s hearing is called, “Investigating the Collapse of FTX, Part I” and can be streamed on the committee’s website. So far, the website indicates only Ray, the current FTX CEO, is scheduled to testify.
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Story Credit: usatoday.com