Former CEO of the now-bankrupt crypto exchange FTX, Sam Bankman-Fried, is getting closer to criminal investigation that may indict him for the collapse of the company.
On Monday, the chair of the U.S. House of Representatives Financial Services Committee demanded that Bankman-Fried testify before Congress on Dec. 13.
“It is imperative that you attend our hearing on the 13th, and we are willing to schedule continued hearings if there is more information to be shared later,” Representative Maxine Waters, the committee chair, wrote on Twitter.
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.@SBF_FTX, we appreciate that you've been candid in your discussions about what happened at #FTX. Your willingness to talk to the public will help the company's customers, investors, and others. To that end, we would welcome your participation in our hearing on the 13th.
— Maxine Waters (@RepMaxineWaters) December 2, 2022
There have been calls on the authorities to open criminal investigation into what led to the FTX collapse under Bankman-Fried’s watch. Many, including Tesla and Twitter CEO Elon Musk, believe that FTX’s downfall is as a result of fraud and mismanagement of investors’ fund.
FTX’s collapse has been largely attributed to the romance between FTX and Alameda Research, a hedge fund that Bankman-Fried co-founded. It was reported that Bankman-Fried moved as much as $10 billion in investors’ fund from FTX to Alameda.
The calls to probe Bankman-Fried intensified following the conviction of Elizabeth Holmes, the founder and CEO of Theranos, for fraud.
Though Bankman-Fried has denied committing any fraud, blaming the situation on ignorance and “oversight”, people are pointing his excuses out as a pattern, which was similarly used by Holmes.
“I didn’t know exactly what was going on,” Bankman-Fried, 30, told the Times on November 30. “Obviously, that’s a pretty big mistake and oversight, that I wasn’t more aware.”
Among those who have downplayed Bankman-Fried’s excuses is convicted scammer Anna Sorokin. She said “He’s just trying to save himself.”
Also, Neama Rahmani, the president of the West Coast Trial Lawyers law firm and a former federal prosecutor, told The New York Times of Holmes’ case that people use two typical excuses to evade responsibility in a matter like this.
“Generally speaking, when you go into these types of cases, there’s two types of defenses: ‘I didn’t know’ and ‘It wasn’t me.”
New FTX CEO John J. Ray III, in a series of filings in a Delaware court, accused Bankman-Fried of handling the management of FTX poorly. Ray said among other things, FTX “did not keep appropriate books and records or security controls” for its digital assets, used unsecured shared email accounts to access private keys, and cannot provide a list of those working for the company as at Nov. 11.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here. From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented,” Ray said.
The FTX has been accused of gross mismanagement of investors’ fund. Ray acknowledged some of the accusations. He said FTX Group corporate funds were “used to purchase homes and other personal items for employees and advisors,” and assets were assigned to staff personally with no record of them having to repay any loan.
Though Bankman-Fried has dismissed Ray’s testimony as “false”, new information and increasing pressure from the public appear to be forcing the House Committee to set up a hearing.
On Sunday, Bankman-Fried agreed in a tweet that he would testify before the committee after he finished “learning and reviewing” what actually went wrong with FTX. But Bankman-Fried has been granting interviews to media outlets, telling his side of the story – which has so far, exonerated him from any wrongdoing.
Based on this, the committee believes that the former CEO now has enough information about what happened in FTX to honor a hearing.
Waters responded to Bankman-Fried’s tweet on Monday: “Based on your role as CEO and your media interviews over the past few weeks, it’s clear to us that the information you have thus far is sufficient for testimony.”
.@SBF_FTX,
Based on your role as CEO and your media interviews over the past few weeks, it’s clear to us that the information you have thus far is sufficient for testimony. (1/3) https://t.co/YUVVjOkC40
— Maxine Waters (@RepMaxineWaters) December 5, 2022
However, it is not clear if Bankman-Fried will honor the committee’s invitation to be interviewed on December 13. What is clear is that the quest to unravel what resulted in the collapse of the $32 billion exchange has started.