Bankman-Fried lied in tweet claiming FTX could cover client holdings, new CEO says
Zachary Halaschak
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FTX‘s new CEO testified that Sam Bankman-Fried did not tell the truth when he told the public that the embattled exchange could cover its clients’ holdings.
The revelation came on Tuesday during a hearing before the House Financial Services Committee that featured CEO John Ray III. Ray was asked by Rep. Ritchie Torres (D-NY) about the veracity of Bankman-Fried’s initial claims in an effort to establish a timeline of the exchange’s collapse and determine whether Bankman-Fried lied to investors and customers.
FTX USED QUICKBOOKS AND SLACK FOR FINANCES, NEW CEO SAYS
Torres brought up how, during a recent interview, Bankman-Fried conceded that he knew there was a problem on Nov. 6, yet despite that, tweeted the following day that FTX had “enough to cover all client holdings.”
The congressman asked Ray if he thought Bankman-Fried was lying to customers when he posted that claim.
“I don’t want to give the dignity to his comments. He also said that he had $10 billion to invest in the company that day,” Ray responded.
In seeking further clarification, Torres asked Ray whether the Nov. 6 tweet was actually the reality of the situation.
“Absolutely not,” responded Ray.
“So that statement was false?” Torres continued, with Ray responding that Bankman-Fried’s message was indeed false.
Bankman-Fried was supposed to testify during the Tuesday hearing but was arrested by Bahamian authorities just hours before the panel convened.
Torres also brought up Ray’s testimony about FTX’s bookkeeping and corporate governance, likening it to that of a college fraternity. Earlier during the hearing, Ray said that FTX’s finances were extremely unorganized and informal.
“It’s an absence of record-keeping. Employees would communicate invoicing and expenses on Slack, which is essentially a way of communicating [in] chat rooms,” Ray told lawmakers. “They used QuickBooks — a multibillion-dollar company using QuickBooks.”
Slack is an instant messaging platform that is popular with businesses. It allows users to send messages and photos to their co-workers and react to posts with a wide array of emojis.
“It seems to me corporate governance by emoji sounds like a recipe for the misuse of funds,” Torres said.
During Tuesday’s hearing, Ray also told lawmakers that Bankman-Fried commingled customer funds at FTX with those of associated cryptocurrency hedge fund Alameda Research, which he also founded.
“First, customer assets at FTX.com commingled with assets from the Alameda trading platform. That much is clear,” Ray said. “Second, Alameda used client funds to engage in margin trading, which exposed customer funds to massive losses.”
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Bankman-Fried has been charged by the U.S. with fraudulent behavior after promoting FTX as a reliable cryptocurrency asset trading platform. He made his first appearance in Bahamian court amid the congressional hearing on Tuesday and did not waive his right to an extradition hearing.
If convicted, the disgraced former billionaire could face decades behind bars.