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Sam Bankman-Fried and his top lieutenants had “free rein” over troubled crypto exchange FTX and its sister trading firm, Alameda Research, the new FTX CEO said in a congressional hearing. 

Testifying before the House Financial Services Committee on the collapse of FTX and its impact on crypto markets, John Ray III told lawmakers that there were no distinctions between FTX, Alameda Research and other entities which filed for bankruptcy protection last month. 

“The owners of the company could really run free rein across all four silos,” Ray said. Ray was the sole witness after Bankman-Fried, the former CEO who had also been scheduled as a witness after high-profile negotiations to secure his appearance, was arrested in the Bahamas last night. 

Once valued at $32 billion, FTX collapsed after a run on its native utility token last month. Ray took over as CEO of FTX after Bankman-Fried stepped down from that role. The new executive has described FTX’s financial situation as the worst mess he’s seen in his career, noting that the multibillion dollar business ran its accounting through the small business bookkeeping software Quickbooks, if it recorded financial transactions at all. 

“It’s really unprecedented in terms of the lack of documentation,” said Ray, who called it a “paperless bankruptcy.”

Bankman-Fried was hit with criminal and civil complaints from the U.S. Justice Department, Securities Exchange Commission and the Commodity Futures Trading Commission on Tuesday morning. Bankman-Fried is accused of giving Alameda special access to FTX customer funds and defrauding investors; he and other executives also gave themselves unpaid loans through Alameda. FTX’s new leadership has been cooperating with U.S. regulators and plans to “turn over any information that would be relevant to them,” Ray said. 

Ranking Republican Rep. Patrick McHenry, R-N.C., called Bankman-Fried’s arrest “welcome news,” but noted it does not reveal what went wrong at FTX, and said he still wanted to hear from the former FTX boss. “I look forward to getting his lies here on the record, under oath,” said the North Carolina Republican. 

He and top current Committee Chair Maxine Waters, D-Calif., said they still plan to move ahead on legislation around digital assets. The two have negotiated to draft a comprehensive regulatory framework for stablecoins. 

“This committee will not stop until we uncover the full truth behind the collapse of FTX,” said Waters at Tuesday’s hearing. 

Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from founder and former FTX and Alameda CEO Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.