Today, Congresswoman Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services, delivered the following statement at a full Committee hearing entitled, “Investigating the Collapse of FTX, Part I.”
I’d like to welcome Mr. John Ray the third, who has been appointed as CEO of FTX to oversee its bankruptcy, to testify before our Committee for the first part of our investigation into the fall of FTX. I am hopeful that the arrest of Mr. Bankman-Fried, the founder and former CEO of FTX, means he will be held accountable for the fraud he has committed and the harm he has caused. He was scheduled to testify under oath before this Committee today, unfortunately the timing of the arrest denies the public the opportunity to get the answers they deserve. Rest assured that this Committee will not stop until we uncover the full truth behind the collapse of FTX.
Just a few months ago, FTX was one of the largest cryptocurrency exchanges in the world, with a valuation of $32 billion in just three years since its founding. Today, FTX is bankrupt and possibly looted. FTX misused approximately $10 billion in customer funds and owes creditors at least $3 billion dollars.
Today, as many as one million people, many of whom are here in the United States, are locked out of their FTX accounts, and may recover only a fraction of their hard-earned investments, if any at all. But this failure is not just noteworthy for its size, but for the company’s total disregard for standard business practices, governance, risk management, and criminal conduct. Mr. Ray, who also oversaw one of the largest corporate bankruptcies in U.S. history – Enron – declared that he had never in his career seen such a “complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.” I am also deeply troubled to learn how common it was among Bankman-Fried and FTX employees to steal from the cookie jar of customer funds to finance their lavish lifestyles.
Today, this Committee will dig deeper into Mr. Ray’s findings with the hopes of piecing together the events that led to the collapse of FTX, and the subsequent harm to millions of customers who put their trust in the platform. We will also look at FTX’s deep ties with Alameda, a crypto hedge fund predominantly owned by Bankman-Fried, that gambled away billions of dollars in customer assets that were inappropriately transferred from FTX. And importantly, we will hear how Mr. Ray and his team are trying to recover funds for customers, by piecing together Bankman-Fried’s broken recordkeeping, and by identifying potentially unlawful transfers to himself, as well as his friends and family.
Under my leadership over the past four years, this Committee has closely focused on the growth and popularity of crypto precisely because of the many concerns that the failure of FTX has highlighted. Last year, I created a Digital Assets Working Group comprised of Democratic members of the Committee with the goal of learning more about the underlying technologies, applications for finance, and the risks they pose to consumers and the economy. When the President’s Working Group on Financial Markets urged Congress to safeguard the economy from stablecoin risks, I and Ranking Member McHenry jumped into action and continued to work on a bill with the Members of this Committee. The ongoing failures of crypto firms like TerraUSD, Celsius, BlockFi, and most significantly, FTX and Alameda Research, only serve to strengthen the importance for Congress and the public to understand the harm caused to customers, what laws have been broken or flaunted, and how Congress and the regulators can prevent this from happening again.
I want to say that I am pleased that the Committee’s efforts have pushed enforcement agencies across the country to take greater action against bad actors who misuse customers funds. I also applaud the SEC for authorizing separate charges relating to Mr. Bankman-Fried, and I look forward to additional actions to hold him accountable and make customers whole again.
I yield back.
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