John J. Ray III, the newly appointed CEO of the now-bankrupt cryptocurrency exchange FTX ( FTT-USD ), testified Tuesday in front of the House Financial Services Committee saying the implosion of the once-mighty firm "stems from greatly inexperienced individuals," namely pointing to founder and ex-CEO Sam Bankman-Fried. When asked whether FTX had adequate risk management systems and controls, Ray said "there were virtually no internal controls [or record keeping] and no separateness whatsoever" in terms of how funds across SBF's empire were linked. FTX and Alameda, the trading firm that was around 90% owned by SBF, "operated as one company" despite the fact that they're entirely different businesses, Ray said. FTX reportedly loaned out over half of its customer assets to Alameda to fund risky financial bets. He also touched on SBF's previously disclosed $1B loan he personally received from Alameda. The former CEO was said to have received a number of loans, having signed as both the issuer and recipient of one loan, in particular. Ray noted he's still examining how the loans were used. Ray, who oversaw Enron's bankruptcy in 2001, said his team has so far secured more than $1B in digital assets in an ongoing process that "will take weeks if not months to secure all the assets" to cold wallets in secure places. Nevertheless, the commingling of funds across SBF's empire as well as the lack of documentation is making it difficult to track and trace assets, he said. "We're dealing with literally a paperless bankruptcy." He suggested records and controls are needed and "you need to segregate people's money," Ray said when asked what he thinks needs to be done to safeguard customers of crypto trading platforms. Update at 11:41 a.m. ET: With $8B of customer money lost, "by definition, I don't trust a single piece of paper within this organization," Ray said. This is a developing story. Check back for updates. Sam Bankman-Fried was scheduled to testify along with Ray Tuesday before the House Financial Services Committee, though he was was arrested late Monday afternoon in the Bahamas . Dear readers : We recognize that politics often intersects with the financial news of the day, so we invite you to click here to click here to join the separate political discussion .
