Senate Banking hearing set to take aim at FTX and cryptocurrency industry: ‘The largest Ponzi scheme in history’

The Senate Banking Committee on Wednesday is holding a second day of hearings this week on the downfall of cryptocurrency alternate FTX, analyzing how the corporate’s implosion may influence the nascent trade.

On Tuesday, FTX’s new CEO John J. Ray testified in entrance of the Home Monetary Companies Committee the place he accused former executives, together with founder and former CEO Sam Bankman-Fried, of embezzling buyer funds.

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“That is actually simply quaint embezzlement. That is simply taking cash from clients and utilizing it on your personal objective. Not refined in any respect,” Ray stated in 4 hours of blistering testimony earlier than the Home Monetary Companies Committee. “Refined, maybe in the best way they’re hiding one thing, frankly, proper in entrance of their eyes. That is simply plain outdated embezzlement. Old fashioned, old fashioned.”

U.S. prosecutors, securities and commodities regulators say Bankman-Fried used billions of {dollars} of FTX buyer funds for his personal private use, to put money into different ventures, to donate to politicians and PACs, and to repay billions of {dollars} in loans owed by Alameda Analysis, the cryptocurrency hedge fund he additionally based.

“That is the most important breakdown, right here. Funds from FTX.com, which was the alternate for non-US residents, these funds have been used at Alameda to make investments and different disbursements,” Ray informed Home Monetary Companies Chairwoman Maxine Waters, D-Calif. Bankman-Fried, who was scheduled to testify, was arrested within the Bahamas on Monday night time as a substitute. FTX filed for Chapter 11 chapter final month.

Bankman-Fried was charged by federal prosecutors within the Southern District of New York for all kinds of crimes together with wire fraud, securities fraud and violating marketing campaign finance laws. The Securities and Change Fee individually charged that Bankman-Fried ran nothing lower than a “brazen,” years-long fraud at his now-bankrupt crypto alternate FTX “from the beginning,” which allowed him to divert billions of {dollars} of buyer funds into his personal palms to develop his sprawling empire.

“This was not a case of mismanagement or poor oversight, however of intentional fraud, plain and easy,” U.S. Legal professional Damian Williams stated in a press release unsealing the indictment.

Although Ray and Bankman-Fried will not be a part of the Senate Banking listening to on Wednesday, 4 cryptocurrency consultants will likely be testifying as a substitute, together with Kevin O’Leary, a longtime paid FTX spokesman.

The pre-released opening remarks by the witnesses means that the listening to will not simply deal with FTX however how the collapse of the corporate could influence the trade at massive.

“We have to unravel what occurred at FTX, however we will not let its collapse trigger us to desert the good promise and potential of crypto,” O’Leary says in his opening remarks.

Ben McKenzie Schenkkan, an actor who commonly speaks out on crypto, says in his ready testimony, that the trade is a “huge speculative bubble.”

“I undergo you in the present day that your complete cryptocurrency trade resembles nothing greater than an enormous speculative bubble constructed on a basis of fraud,” Schenkkan stated. “In my view, it’s the largest Ponzi scheme in historical past by an order of magnitude.”