The FTX hearing by the House Committee on Financial Services starts in about twenty minutes. I'll be livetweeting it here, and will be publishing a recap of it in my newsletter later.
Hearing stream: youtube.com/watch?v=rWAnri
Newsletter:
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I'll use the #FTXhearing hashtag throughout, so feel free to filter it out if I'm clogging your feed or you'd rather catch up later.
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Congressman says he is disappointed to not have testifying today, because he wanted to "hear his lies here, on the record, under oath".
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McHenry parroting the "a few bad apples" crypto industry talking point: "We have to separate out the bad actions of an individual from the good created by an industry and an innovation."
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New FTX CEO John J. Ray III is giving his statement. This was published online last night, and I have a thread on it here: twitter.com/molly0xFFF/sta
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Quote Tweet
The testimony by new FTX CEO John J. Ray III has been published online in advance of tomorrow's @FSCDems hearing.
docs.house.gov/meetings/BA/BA 1/11
Show this thread
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Rep. Waters asks Ray if there is evidence that SBF tried to hide links between Alameda and FTX, and if there was any independent governance.
Ray says there was no segregation or independent governance, and Alameda, FTX, etc. were operated "as one company".
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Ray answers a question about loans to SBF: poor documentation of loans, "in one instance he signed as both the issuer of the loan as well as the recipient of the loan". They have no information as to the purpose of use of the loaned funds at this point.
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McHenry questioning Ray on distinctions between FTX.com and FTX.us
"There was a public distinction between the two," but crypto assets were stored together.
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Ray says he's not concerned about the cross-jurisdictional nature of this bankruptcy, and confident that various jurisdictions will cooperate.
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Ray just said that FTX used QuickBooks for recordkeeping. "A multibillion dollar using QuickBooks!"
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Rep. Sherman's turn. He has not been quiet in the past about his distaste for crypto.
"My fear is that we'll view Sam Bankman-Fried as just one big snake in a crypto garden of Eden. The fact is, crypto is a garden of snakes."
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Sherman urges his colleagues, "don't trash Mr. Bankman-Fried and then pass his bill!" and points to significant crypto lobbying influence on the House. Sherman is referring to the DCCPA.
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Sherman also introduces into the record the letter from his colleagues to the SEC earlier this year, in which they urged the SEC to back off on crypto. prospect.org/power/eight-co
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Sherman asks if Ray will turn over evidence of loans from the FTX businesses that may have been used for disguised campaign finance contributions. Ray confirms he will.
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Rep. Green points to SBF's academic background, and asks if it's possible that "all of this is just one big mistake", as SBF has been trying to portray it.
Ray says he is hesitant to cast judgment at this time, while they are still digging through records.
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"Others will judge him by his actions," says Ray.
Green thinks this is "more than sincere ignorance and conscientious stupidity".
Indeed.
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Rep. Sessions (R-TX) is asking about whether the SEC was engaged with FTX, and is inquiring about information submitted to the IRS.
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Rep. Cleaver (D-MO) describes SBF's submitted statement as "so disrespectful."
He reads, "'I would like to start out by formally stating under oath...' I can't even say it publicly. Absolutely insulting."
SBF was going to say "fuckup" in Congress, huh
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"The bank situation should have been a real red flag," says Ray, in response to Rep. Luetkemeyer's (R-MO) question about FTX's early inability to get bank accounts.
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Leutkemeyer is the first to ask about Moonstone Bank (fka Farmington State Bank), a bank with $5.7M, into which Alameda invested $11.5M to acquire ~10% ownership.
Good question!
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Ray is looking into it, but doesn't seem to have much to say on it at this point.
See Protos reporting for more on this very weird situation: protos.com/the-curious-ca
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Leutkemeyer asks if there could be money laundering going on, or if FTX execs were using it to hide money.
Ray again doesn't say anything specific, but acknowledges "It's highly irregular".
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Rep. Perlmutter (D-CO) asks if dogecoin is pronounced "doe-gee-coin" or "doggycoin". Someone helps him out. "Oh, dohj-coin!"
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Rep. Waters enters into the record the three criminal filings against SBF, from the SDNY, SEC, and CFTC.
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Rep. Huizenga (R-MI) asks if Ray has been sharing findings with the SDNY or the SEC.
Ray confirms he has.
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Huizenga asks about possible US users of FTX.com.
Ray says somewhere on the order of hundreds. He says that those customers having billions of dollars on FTX.com is probably an overly high estimate.
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Ray says they haven't yet seen evidence of direct transfer of funds from FTX.us to Alameda, but they are very concerned about possible commingling of funds between FTX.com and FTX.us.
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Huizenga now asking about the possible involvement of SBF's parents in FTX.
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Huizenga talks of a meeting he had with SBF last year, noting SBF was "at least fifteen minutes late" and accompanied by his father.
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Rep. Beatty (D-OH) asks how Alameda accessed client funds in direct violation of their own terms.
"There was no oversight," and executives could "move money around undetected" said Ray.
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Rep. Barr (R-KY) asks about an ESG ratings firm that gave FTX a higher rating for governance than Exxon-Mobil. He asks Ray, given his assessment of FTX governance, what would he say about that?
Ray: "I'd get my money back"
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