Sam Bankman-Fried, the ex-CEO of collapsed crypto exchange FTX, was accused of fraud and violating campaign finance laws by US prosecutors on Tuesday. Sam was also denied bail by a judge in the Bahamas, sending him to a local correctional facility instead.
He lowered his head and hugged his parents after the magistrate judge refused bail citing a “great” risk of flight. He was ordered remanded to a correctional facility in Bahamas until February 8. He will initially be held in the medical department, according to a local official.
Bankman-Fried has been arrested in the Bahamas on a US request. US prosecutors said the investigation is ongoing and “moving very quickly.”
Meanwhile, FTX’s new CEO John Ray testified US House of Representatives Financial Services Committee. His testimony on Tuesday came shortly after US regulators charged Bankman-Fried. Ray blamed collapse of the crypto exchange on poor management practices and inexperienced leaders.
“The FTX group’s collapse appears to stem from absolute concentration of control in the hands of a small group of grossly inexperienced, non-sophisticated individuals,” said Ray. He was named CEO of FTX after Bankman-Fried stepped down and company filed for bankruptcy on November 11.
Ray also said there was virtually no distinction between the operations of FTX and Alameda Research, Bankman-Fried’s crypto trading firm, which maintained close ties with his exchange.
“I’ve just never seen an utter lack of record keeping – absolutely no internal controls whatsoever,” Ray told the US House of Representatives Financial Services Committee.
There was not any immediate comment from Bankman-Fried on Ray’s testimony.
He said he was shocked to learn FTX was using Quickbooks – software geared toward small and mid-size businesses – for accounting and approving invoices via Slack messages.
Asked why he had testified that he did not believe the audited financial statements were reliable, Ray said: “We’ve lost 8 billion dollars of customer money. So by definition, I don’t trust a single piece of paper in this organization.”
It will take weeks, perhaps months, to secure all the group’s assets, Ray said, warning it would be a lengthy process.
“At the end of the day, we’re not going to be able to recover all the losses here,” he said.
(With inputs from agencies)
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