Senate Banking hearing to take aim at FTX and crypto industry: 'The largest Ponzi scheme in history'

The Senate Banking Committee connected Wednesday is holding a 2nd time of hearings this week connected the downfall of cryptocurrency speech FTX, examining however the company's implosion could interaction the nascent industry.

On Tuesday, FTX's caller CEO John J. Ray testified successful beforehand of the House Financial Services Committee wherever helium accused erstwhile executives, including laminitis and erstwhile CEO Sam Bankman-Fried, of embezzling lawsuit funds.

"This is truly conscionable aged fashioned embezzlement. This is conscionable taking wealth from customers and utilizing it for your ain purpose. Not blase astatine all," Ray said successful 4 hours of blistering grounds earlier the House Financial Services Committee. "Sophisticated, possibly successful the mode they are hiding something, frankly, close successful beforehand of their eyes. This is conscionable plain aged embezzlement. Old school, aged school."

U.S. prosecutors, securities and commodities regulators accidental Bankman-Fried utilized billions of dollars of FTX lawsuit funds for his ain idiosyncratic use, to put successful different ventures, to donate to politicians and PACs, and to repay billions of dollars successful loans owed by Alameda Research, the cryptocurrency hedge money helium besides founded.

"That's the large breakdown, here. Funds from FTX.com, which was the speech for non-US citizens, those funds were utilized astatine Alameda to marque investments and different disbursements," Ray told House Financial Services Chairwoman Maxine Waters, D-Calif. Bankman-Fried, who was scheduled to testify, was arrested successful the Bahamas connected Monday nighttime instead. FTX filed for Chapter 11 bankruptcy past month.

Bankman-Fried was charged by national prosecutors successful the Southern District of New York for a wide assortment of crimes including ligament fraud, securities fraud and violating campaign finance regulations. The Securities and Exchange Commission separately charged that Bankman-Fried ran thing little than a "brazen," years-long fraud astatine his now-bankrupt crypto exchange FTX "from the start," which allowed him to divert billions of dollars of lawsuit funds into his ain hands to turn his sprawling empire.

"This was not a lawsuit of mismanagement oregon mediocre oversight, but of intentional fraud, plain and simple," U.S. Attorney Damian Williams said successful a connection unsealing the indictment.

Though Ray and Bankman-Fried won't beryllium portion of the Senate Banking proceeding connected Wednesday, 4 cryptocurrency experts volition beryllium testifying instead, including Kevin O'Leary, a longtime paid FTX spokesman.

The pre-released opening remarks by the witnesses suggests that the proceeding won't conscionable absorption connected FTX but however the illness of the institution whitethorn interaction the manufacture astatine large.

"We request to get to the bottommost of what happened astatine FTX, but we can't fto its illness origin america to wantonness the large committedness and imaginable of crypto," O'Leary says successful his opening remarks.

Ben McKenzie Schenkkan, an histrion who regularly speaks retired connected crypto, says successful his prepared testimony, that the manufacture is simply a "massive speculative bubble."

"I taxable to you contiguous that the full cryptocurrency manufacture resembles thing much than a monolithic speculative bubble built connected a instauration of fraud," Schenkkan said. "In my opinion, it is the largest Ponzi strategy successful past by an bid of magnitude."