Gregory's ServerRep. San Nicolas explains his line of questioning: "The FTX collapse right now is just FTX. But are these lack of controls, and are these environments that resulted in the FTX collapse still existing today? And could the same thing happen in similar operations, such as Binance for example? Could they also engage in the same activities under the current regulatory regime and, if things go wrong, have the same outcome?"
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 Rep. Himes (D-CT) describes "a 30-year-old gazillionaire who raised billions of dollars living in some condo with a bunch of young people." Pleased to report that the world "polycule" has not been yet been uttered in Congress today. Ray: "Crypto assets have inherently some difficulties. The assets can be taken or lost. We have assets that are in what are called hot wallets and those that are in cold wallets. Hot wallets are very vulnerable to hacking. If you've done any looking on the Internet you'll find that hacking is almost ordinary course in this business sector. Lots of vulnerability to the wallets." If any Representative wants to know where to look on the Internet, have I got a site for you 😁 Ray speaks of specific failures at FTX: "Our keys aren't stored in a centralized location. We don't know where all of our wallets are. Passwords were sometimes kept in just plaintext format." Rep. Emmer (R-MN) is up. He's a huge crypto advocate, and is one of the "blockchain eight" who signed the letter urging the SEC to back off. He's recently been trying to pin the FTX collapse on SEC chair Gary Gensler. Emmer is now accusing Gensler of refusing to answer questions or testify before the House FSC, and wants Ray to share any communications he has between FTX and Gensler. Ray confirms he will. Emmer takes a moment to advertise crypto, and blame the collapse on centralization rather than crypto as a whole. 🙄 Emmer asked if there was a compliance department at FTX. Ray: "There were people with titles." Ray: "Alameda had almost a complete ability to lose money beyond their collateral." Rep. Meeks (D-NY) pushing the "financial inclusion" promises he sees in crypto 😮💨 I would direct people to Tonantzin Carmona's report: https://www.brookings.edu/research/debunking-the-narratives-about-cryptocurrency-and-financial-inclusion/ Rep. Loudermilk (GA): "Summarizing, there's not evidence right now that his statement would be true that FTX US is completely solvent." Ray: "Clearly not." Rep. Gottheimer (D-NJ), also a part of the blockchain eight, spending a significant portion of his time talking up his own record in trying to regulate crypto, and denigrating the SEC and Gary Gensler. Gottheimer: "Do you believe Mr. Bankman-Fried when he says that all US users will receive a dollar on the dollar return of funds at the end of these bankruptcy proceedings?" Ray: "That's very speculative at this point." Rep. Davidson (R-OH), also part of the blockchain eight: "Based on your review of the records, is the transfer of customer funds from FTX.com to Alameda research in conflict with the FTX.com terms of service?" Ray: "Yes, that's my view." Rep. Budd (R-NC), part of the blockchain eight: "What happened at FTX was fraud on a massive scale... the head of FTX should be dealt with in the same way that other disgraced leaders of Enron were prosecuted to the fullest extent of the law... What I want to protect is innovation, and we want to see it flourish..." Blames SEC for regulation by enforcement, says they've forced crypto companies offshore. Talks up his own attempts to regulate crypto. Rep. Torres (D-NY), part of the blockchain eight, asks if SBF was lying when he tweeted on Nov. 7 that "FTX has enough to cover all client holdings". Ray: "I don't want to give the dignity to his comments. He also said he had $10 billion to invest in the company that day, so..." Torres: "At that time when he sent out the tweet... did FTX actually have enough assets to cover their liabilities?" Ray: "Absolutely not." Torres: "At that time when he sent out the tweet... did FTX actually have enough assets to cover their liabilities?" Ray: "Absolutely not." Gonzalez (R-OH): "To your knowledge, were customer funds transferred to Alameda for the purposes of paying off called loans?" Ray: "That's certainly possible. We need to investigate that further, but that's certainly one of the paths that we would potentially find." Gonzalez asks about the backdoor between FTX and Alameda, which SBF has denied knowing about. "In your eyes, is there any way that SBF or senior management wouldn't know about this sort of thing?" Ray: "No." Gonzalez addresses claims in SBF's testimony, where he blames FTX's collapse on Binance, and says the company would have been fine otherwise. Gonzalez: "Prior to that episode, is your belief that FTX was solvent?" Ray: "No." Gonzalez on SBF's statement: "There's some accountability, which is of course good, but then there's a lot of excuse-making and some complaining. Like, 'in fact, many of us are still missing access to our own personal data, which is being held hostage by the Chapter 11 team's leadership'. I would note that that's what happens in life when you perpetrate a massive fraud and steal billions of dollars from your customers." Rep. Tlaib (D-MI): "The idea that cryptocurrency can be a solution for financial conclusion is not only laughable, it's dangerous. These get-rich-quick kind of ads and targeting of my residents? It's predatory." |
Rep. Hill (R-AR) is a noted crypto advocate with an "A" rating from the "Crypto Action Network".
He repeats McHenry's "bad apples" description, and makes the tired argument about how "we don't throw out railroads" because of fraud in the 1800s.