and bailey, this was their last memory of cheering together. an outpouring of emotion, hoisting the championship trophy one more time. zayn said of his reign, to have three state championships, i don't even know how to feel. it's crazy, he said. the seniors will leave their high school cheerleading careers with their heads held high knowing their leadership and performance have left a lasting legacy on the team. congratulations to all the talented athletes and coaches on this team. they've earned it. mr. speaker, i yield back. the speaker pro tempore: thank you. pursuant to clause 12-a of rule 1, the chair declares the house in recess until noon today.

>> we take you live to a hearing on the f.t.x. crypto currency collapse. we join it in progress. >> i want to follow up on mr. sessions' discussion having with you. on the issue. if you are required -- one requirement that you are supposed to submit to each customer and -- what else are

you required to do? >> i have to defer to the tax quotes. they are experts in the field. i'm sure they'll do a review of what should have been submitted. mr. cleaver: what do you know now you are supposed to submit other than the 109-d to every customer and to the internal revenue service. >> i don't know personally at this point what was required to be submitted. that's part of our review with independent accountants. mr. cleaver: could you expand or maybe even update us on the extent of the controls in the areas previously identified in your november 17 declaration. mr. ray: it's extensive list. it crosses the entire spectrum of the company from lack of list

of bank accounts. hundreds of bank accounts dispersed all over the world. lack of -- complete list of employees and their functions by a group or name. extensive use of independent contractors as opposed to employees. lack of insurance that you would normally would see. certain businesses. either inadequate insurance or complete gaps in insurance. for example the alameda silo had no insurance whatsoever. the list goes on and on we could spend all day on that. mr. cleaver: i wonder if you would support a resolution that i have been thinking about

introducing changing the name of crypto currency to creepy dough currency. i'm going to discuss this with my colleagues. this is an appropriate name. i just wanted to know whether you would support changing it to creepy dough. mr. ray: i'll leave that skill set to the committee. mr. cleaver: thank you. i yield back. >> thank you. ms. waters: the gentleman from missouri, mr. luetkemeyer, is recognized for five minutes. mr. luetkemeyer: thank you, madam chair. mr. ray, it's been reported that f.t.x. couldn't get a bank account for some time. as a result f.t.x. used alameda research's bank accounts. does this raise any red flags for you the fact they couldn't find a way to get a bank account? mr. ray: a few red flags. the bank situation should have been a red flag for someone

being asked to deposit money into an account that was not the exchange account. certainly should have been a red flag for customers. mr. luetkemeyer: is alameda u.s. charter bank or off shore? or the bank they are using. mr. ray: it's not a bank. it's -- most of the entities in the structure are unregulated entities. mr. luetkemeyer: this is an entity that passes through money, hedge fund that does things. it doesn't have a bank account per se? mr. ray: it has bank accounts, absolutely. mr. luetkemeyer: in the u.s.? mr. ray: yes. mr. luetkemeyer: here we have a company that's off shore. can't get a bank account offshore, have to come into the u.s. to do its banking business. the important part of this comment is that in order for these companies to exist they have to be able to change their digital assets into hard u.s. dollars at some point. they need a bank account. they needed alameda to do that,

is that correct? mr. ray: any of the silos had in bank accounts, that's certainly -- existed, separate bank accounts do exist. i think the real issue here for us is that money was transferred from one account to the other. seemingly without limit. that's the issue. mr. luetkemeyer: you talked about the accounting issues. it's interesting from the standpoint that we are talking today about a problem with these crypto currency firms with securities firms, and we can't have an accounting system that actual will i works -- actually works. this should be a red flag for all of us in the financial services world in regards to the chinese investments making and we aren't able to get accounting

information on those firms. what else is going on with those firms similar to the debacle at f.t.x. just a side light comment. the farmington state bank, this is an investment that alameda made into and a bank according to "new york times" article, 26th smallest bank out of 4800 in the country. they bought in 2020. they dropped $11.5 million in for percentage of the ownership. do you know what the percentage of ownership was in that bank they purchased? mr. ray: i believe the ownership was approximately 10%. mr. luetkemeyer: that's what i have heard. it is off the charts. outrageous. it should be a red flag. they were able to purchase that even though it's a minority interest. fdic allowed that to happen. they changed names to moonstone bank. since then they have force the accounts dropped $71 million again.

according to this article. have you looked into this relationship at all? see what's going on here? whether there is any -- mr. ray: we are looking at it. it certainly is one of the things that came to our attention fairly quickly. we are looking at what the dollars were that went from the f.t.x. group to that bank. we are looking at the connections of that bank to the bahamas. mr. luetkemeyer: the way this all transacted here, is this common by the way they purchase businesses and dump excessive amounts of money based on the fact they had it? or was a good investment or not in all these different companies? it looks like an excessive investment to buy a bank to do something with it. stuff it full of money. money laundering going on? missing dollars? somebody stuffing something in their back pocket at some point

down the road to take off with it? is that what's going on? it begs a lot of questions here. mr. ray: there is loot more questions than answers. certainly it's highly irregular. it's what's gotten our attention. mr. luetkemeyer: i thank you for your comments this morning. it's tkerpbg when you -- it's concerning when you see this sort of lack of accounting, somebody dealing with this level of money, and there is no -- lots of different companies where money shifts back and forth, you wonder by living off shore, the bahamas, if there is not some far away bank account stuffed with money. i hope you do your job and do it well. thank you for being here this morning. chair waters: thank you. the gentleman from colorado, mre chair of the subcommittee on consumer protection and financial institutions. you are now recognized for five minutes. mr. perlmutter: thanks, madam chair. mr. ray, i have so many questions it's hard to figure out what questions to asked. let's start with easy once.

how long have you been on this job? mr. ray: four weeks. mr. perlmutter: do you know when the madeoff bankruptcy was filed? mr. ray: circa 2008. perlmutter: do you know they just made a distribution out of that bankruptcy last week? mr. ray: that's what i understand. mr. perlmutter: that's 14 years? how old are you? mr. ray: is that a permitted question? mr. perlmutter: i want you to add 100 to whatever your age is when you finally untangle all of this. the reason i say that is we watched this f.t.x., but a bunch of other crypto companies, start thrashing about say nine, 10, 12 months ago, as the house of cards started falling down, the thrashing became more, we had something like that in colorado back in the 80's when the savings and loans were saving

and every was trading their funny money. we called it trading cats for dogs. to hide lousy loans. to not show the failures of those particular banks. here your job, i think, as the bankruptcy trustee or conservator or whatever you are is to go gather as many assets as you can. that could be from some very innocent people who got paid money to then spread it out equally among who you think the real creditors are or -- is that sort of a fair statement? mr. ray: general statement. mr. perlmutter: because we on this committee, and the number of us had to deal with the madoff stuff, one of the things you are going to face is some guy say, i'm more innocent than that guy. i should get to keep my money

even though i got paid yesterday, but i'm an innocent guy. you are going to be dealing with so many preferences, so many fraudulent transfers. have you any idea what the total money in and total money out of f.t.x. was? mr. ray: we don't have a full accounting at this early stage, no. mr. perlmutter: do you know how much was in tokens. say i have 10dogi coin which a year ago -- doge coin. i have 10. a year ago 10 for sake of argument was wo*rts $1,000, or 100 bucks a coin. i put that in there. but doge coin today is worth, i don't know what, say not nearly that much. how are you going to evaluate

that as to what i should get out of the bankruptcy? mr. ray: doing an accounting and tracing of all the assets. all the ins and outs. that's made difficult by the commingling of assets. perhaps you may have invested in a certain coin or old coin, we'll have to trace what happened to that coin. again, what we have explained here today and to our testimony, there is commingling of assets. that makes it more complicated than simply how much is my coin worth. we are going -- it's going to be a painstaking process looking for the ins and outs, what happened to your crypto. at the bankruptcy, at the time of the bankruptcy we know when that occurred. very specific time when that bankruptcy occurred. we will look at customer accounts as of that date.

that will be determined essentially what your account position was. of course assets vary in terms of fluctuating in value. and again because of the circumstances we find ourselves in and the lack of documentation, the potential commingling between silos, then also what happened with alameda taking funds from f.t.x..com, it isn't as simple as how many coins do i have in my account. mr. perlmutter: what i'm saying is, if i put $1,000 in and it's gone. i put 10doge coins in and they are gone, you have to figure that out and my guess is you will be back here in a year when you have a bert handle on the numbers to talk to this committee. thank you for doing this. i yield back. chair waters: thank you very much. you know by now that mr. perlmutter is a bankruptcy attorney. you can tell by those questions.

this would be a good time to enter into the record, without objection, i would like to enter into the record the indictment of sam bankman freed -- bankman-fried by the southern district of new york that was unsealed this morning and the separate filings from the securities and exchange commission and the commodity futures trading commission, both of which were filed this morning. thank you. with that, the gentleman from michigan, mr. huizenga, is recognized for five minutes mr. huizenga: thank you, madam chair. mr. ray, i'm going to get my colleague to shift a little bit, or get up, thank you. one quick question. have you been sharing your findings with the s.e.c. at all? as you have been going through this? mr. ray: yes. mr. huizenga: how about southern district of new york? mr. ray: yes. mr. huizenga: i'll get to a couple of practical questions

because i think these were the things i was going to ask you. and also ask mr. bankman-fried. in your declaration you said the quote, f.t.x..com platform was not available to u.s. users, close quote, earlier this month cftc chairman suggested in testimony before the senate agriculture committee that 2% of funds housed at ftx.com were from u.s. individuals. confirm whether there were u.s. individuals or persons, customers of ftx.com? mr. ray: yes. we found there is a small number of u.s. customers that had engaged -- mr. huizenga: is 2% small? less or more. mr. ray: we don't have those numbers on an investor bay sis we have it on a customer basis. less than a couple hundred. mr. huizenga: it could amount to billions. billions of dollars that was in there.

at least it could be millions or hundreds of thousands we don't know that number or do we? mr. ray: i don't know that number. billions would sound -- mr. huizenga: you mentioned there was bills in it. billions in it. mr. ray: we don't have an accounting of what those particular customers had. mr. huizenga: will determining this be part of your work through this bankruptcy process? mr. ray: absolutely. mr. huizenga: will part of your work be determining which assets belong to which is customers? u.s. customers of ftx.com? mr. ray: we'll do a tracing analysis. try to identify the sources and use of all the funds. mr. huizenga: 10 customers that had a lot of money or a thousand customers that had some. can you provide some indication of whether customer funds from ftx.com were transferred to alameda research? mr. ray: definitely assets of customers in the dot-com silo were transferred, no question.

we have not seen this at this stage from the u.s. silo. of course we do have one concern and that's the concern we are chasing down which is whether or not there is commingling between the dot-com silo and the u.s. silo exchanges. the reason for that is we know there were sort of control and access of authorized users at the most senior management level amongst all the assets. it's something we have to focus on. we haven't seen evidence right now of that. but certainly that's something we need to investigate and trace. mr. huizenga: my remaining two minutes i turn to operations s there any evidence of his parents' involvement? mr. ray: we are investigating that, as well as any other players. mr. huizenga: email, slack, cigna? mr. ray: it's billions of records. very vibrant environment. mr. huizenga: i hear that you

haven't discovered that? it would seem interesting that they didn't either give legal advice or business advice or parentsal advice maybe? parental advice maybe? mr. ray: clearly in our papers we indicated that mr. bankman had given legal advice. mr. huizenga: had he been an employee of f.t. kpw-rbgs? mr. ray: i don't know if he has employee status. he certainly received payments from the family -- the family did receive payments mr. huizenga: that sounds like employment to me. i raise that because on december of 2021 i met with sam bankman-fried in my office which was immediately before he came down to the hearing. he was 15 minutes late and his father accompanied him in that meeting. i asked him and focused on what types of regulation he was under. his engagement with leg r*eg lators and how that affected f.t.x. with regulators and how that

affected f.t.x. it seems to me there is more to uncover here. certainly mr. bankman-fried has -- let's say wooed many in new york, silicon valley, around the world, yes, certainly here in d.c. he was -- they loved the exciting idea after politically progressive, smart, entrepreneur who is going to reimagine capitalism and change the world. feeling better about themselves. all while making them gobs of money. i'm glad to see it's finally unraveled. my time is up. i yield back. chair waters: thank you. the gentlewoman from ohio, mrs. beatty, who is also the chair of the subcommittee on diversity and inclusion, is now recognized for five minutes. mrs. beatty: first of all let me just say thank you to chairwoman waters and our ranking member, and certainly to you, mr. ray.

we have heard a lot. a lot of this has been difficult to digest primarily because of what has happened to so many people and so much money involved. mr. ray, you mentioned in your testimony that one of your primary goals is to limit to the greatest extent possible the harm suffered by f.t. skp-rbgs customers -- f.t.x. customers. hundreds and hundreds of millions of dollars have been removed from crypto wallet and estimate about one million people have money frozen in the exchange. can you -- if you can't answer that question -- chair waters:

mrs. beatty, would you repeat the question. mrs. beatty: i am sorry i am home recovering. i'm sorry about any connection. basically, hundreds of dollars have been removed from crypto wallet, and it's estimated that about one million people have money frozen in their exchange. can you tell us how many users have lost money, and when will they get their money back. mr. ray: our process is such that we are securing our assets every day. every day we are out looking for wallets and the keys to those wallets to maximize the recovery of value. that's an ongoing process. we have secured all the cash in the bank accounts to the extent that we can at this point. we have secured crypto assets. we are still in the process of doing that.

ultimately that's a question of months. the litigation as been pointed out by other members will take a longer time frame that. is our number one focus is to generate value to repay those customers. i don't have a customer account for you today. we do know that there was 2.7 million users in the u.s. silo, which, again, overstates the customer relationships because people have multiple trading accounts in the dot-com silo. we had over 7.6 million users. again overstating the actual customer relationships due to the multitude of accounts by any particular customer. we need to get to the bottom of those customer numbers. mrs. beatty: thanks. let me ask you this. despite the fact that f.t.x. told customers it would not trade customers' funds, we know

now that f.t.x. loaned out, i think about $10 billion in customer assets, proprietary trading. mr. ray, do you know how it was possible for f.t.x. to access clients' funds in violation of its own terms of service that noted without clients' permission and expose his customers to such massive loss? mr. ray: as i indicated there was no corporate controls, no corporate oversight, no independent board. the owners of the business, senior management had virtual control of the accounts of each of the silos and could move money or assets as desired undetected by customers. to the extent there were rules, there were very few, they were made to be broken. mrs. beatty: i think what i'm

hearing you saying is there was no one person approved this. let me ask you a last question. can you tell us what regulatory changes could prevent the unauthorization or unauthorizing customer funds in the future based on your wealth of experience? mr. ray: without speculating about what regulatory fix there could be, i have said -- earlier testimony the critical thing is segregation of customer funds and transparency. mrs. beatty: lastly, in your five points that you out lined, i'm sorry if you said it before, is there a timetable that you think you can get to that? that can be a yes or no. i think i'm getting close to my time. mr. ray: there is no particular time frame. it's as quickly as possible. in my experience with enron --

mrs. beatty: is that months, weeks? mr. ray: certainly isn't weeks. it's definitely months. the causative action could take longer. we will marshal assets on a weekly basis and monthly basis and do that as quickly as possible. mrs. beatty: thank you so much for taking the time to try to help us out. i yield back. chair waters: thank you. the gentleman from kentucky, mre minutes. mr. barr:thank you, madam chair. mr. ray, in your declaration you said many of the companies in the f.t.x. group did not have appropriate corporate governance and this situation is unprecedented. you also in your testimony today said that the f.t.x. collapse stems from the lack of an independent board and complete failure of any internal controls or governance whatsoever. can you elaborate in describing the governance structures for

f.t.x..com that led you to make those comments? mr. ray: first and foremost, there is no independent board of directors. one of the first thingsdy was put on an independent board of directors, led by our chairperson, who is the former u.s. attorney and honorable joseph firman, former u.s. district court judge. put in a corporate structure of independent directors. put in separate officers, new officers of the company, i put in a few c.f.o., new chief information officer, new head of administration. all independent. with some background and experience in these sectors. none of the employees, there is a lot of titles in the company, no experience to back it up. mr. barr: can you explain how the ftx.com government structure differs from the governance structures of f.t.x. us us? mr. ray: virtually no difference. no structure. mr. barr: have you examined the

government structure or flow of assets to the f.t.x. foundation or various affiliates including f.t.x. communities, f.t.x. climate or the future fund? mr. ray: we are digging into that. we have not completed the review. mr. barr: i'm curious in your work whether or not you determined whether those entities were established properly as nonprofits or whether or not the funds received were improperly transferred customer accounts. do you have any visibility into that yet? mr. ray: we are looking at that right now. we have asked our folks at ao*erpbs and young -- ernst and young to look at the tax side of it and we are investigating the money transfers. mr. barr: was the f.t.x. foundation other not for profit, ostensibly, entities completely separate from the for-profit entities? mr. ray: they were owned by sam bankman-fried. i can't tell you they were separate because they got funds

from alameda. we know the source of their funding was from the f.t.x. group. there was separate ownership, but not separate funding. mr. barr: co-mingled assets as well. one e.s.g. ratings firm gave f.t.x. a hire score for governance than exxonmobil. given your testimony that f.t.x. collapse stems from the absolute concentration of control in the hands after very small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls necessary for a company that is entrusted with other people's money or assets, what would you say about this e.s.g. governance rating which rated f.t.x. higher than exxonmobil? mr. ray: i get my money back. mr. barr: can you identify which entities had audited financial statements? mr. ray: yes.

there was no audit at alameda. no audit at the venture silo. audit at the u.s. silo. and also awe at this time did he dot-com side of the aisleo. i can't speak to the integrity or quality of those audits. we are reviewing the books and records much as i said earlier, much of those books and records were maintained on fairly unsophisticated ledger work pwao*bgs. mr. barr: you testified of the lack of record keeping. there is a whole lot of financial statements that are either not audited or not available, is that fair to say? mr. ray: fair. mr. barr: in your declaration you stated you did not believe those audited financial statements were reliable. can you evaluate -- mr. ray: we lost $8 billion of customer money. by definition i don't trust a single piece of paper in this organization. mr. barr: sam bankman-fried in

his testimony last year said f.t.x. has designed an offered a platform with a market structure that's risk reducing. to be sure there are irresponsible actors in the digital assets industry. those actors attract the head hrao*eurpbs. f.t.x. is not one of them. was that statement incorrect? mr. ray: false. mr. barr: let me conclude by describing what is going on here by a popular crypto commentator, if you set up an exchange where you are the mark and maker, you are the issuer, prime broker, you trade against your own customers, you have a vested interest in creating the assets, promoting the assets, manipulating the price of the assets what you have is a crypto casino. i yield back. chair waters: the gentleman from california, mr. vargas, is recognized for five minutes. mr. vargas: thank you very much, madam chair. i thank you once again for taking the lead to hold bad actors accountable and pursue

transparency in the crypto currency space. and also, mr. ray, thank you for being here today to testify. i think i start off a little bit like mark kru ji-man does in the "new york times." don't get the point. i don't get the point of block chain and crypto currency. it's like keeping track of how many times you chew gum. who cares. there are other ways less fraudulent to make transactions. that being said, how many times have we talked here about the potential for abuse, fraud, and crypto market? quite a bit. we have had a lot of cheerleading from some people. especially on the other side of the aisle. i don't hear it today. haven't heard it yet. i do want to hear it like we normally hear it how wonderful it is and how they shouldn't be regulated by the s.e.c. too tough on them. imagine we are not going to hear that today. especially after what we saw with f.t.x.

we do want to see order and transparency in this industry and throughout the financial markets. if you are an issuer of crypto currency or manager of crypto currency exchange and conduct business with u.s. customers, consider this f.t.x. collapse as your public service announcement. come into compliance with the security act of 1934, and owl their applicable federal and state laws. do not skirt the law and mishandle u.s. citizens funds and claim incense -- innocence. the crypto currency to continue, oklahoma city stk-pbs need to be informed, and companies need to comply. that wasn't happening, with a was it, mr. ray, with this particular company? mr. ray: no, sir. mr. vargas: why wasn't it? mr. ray: again, you have control on-n a small group of individuals. without any oversight whatsoever. from an independent board or

experience managers. it's just a recipe for problems. mr. vargas: what government entity is responsible for this fiasco? mr. ray: not for me to say. mr. vargas: it is for you to say. you're right there. i'm asking. you had to opine. who is it? should the s.e.c. have been more aggressive even though we had a lot of my friends on the other side saying they shouldn't have been? should the s.e.c. be more aggressive? mr. ray khro* i'm not a regulatory lawyer. aim not here to express views who should regulate it. i have said very clearly that we need transparency. customers need to have segregated accounts. they need to have ownership. it's their money. it's no different than a bank. you would expect the same level of scrutiny of any funds you have on deposit with someone else. that is a minimum. mr. vargas: i agree with everything you have said. at the same time i have to say that the product that they give

is a hybrid product, is it not? mr. ray: certainly as a currently it's an alternative currency, yes. mr. vargas: who should regulate it? mr. ray: i don't have an opinion on that. mr. vargas: that's the whole problem. i don't get the point of crypto currency to begin with. other than if you are a terrorist or someone that wants to hide money. then i get the point. other than that, don't get the point myself. if we are going to have it, we have to regulate it. someone has to be in charge. we have to make sure that we don't continue to defraud the american people. that's where the government comes in. somebody's got to take charge of this. i think it's the s.e.c. i always thought it was the s.e.c. we got a lot pushback from my friends on the other side. i didn't hear them quite today pushing back as they normally do. i would love to see that. again, someone has to regulate this if it's going to exist. don't you agree? mr. ray: i certainly think there

has to be more controls in this sector. who should regulate it i defer to this committee. mr. vargas: with that, i yield my time back. thank you. chair waters: thank you. the gentleman from texas, mr. williams, is recognized for five minutes. mr. williams: thank you, madam chair. thank you, mr. ray, for being here. appreciate t there's been many comparisons that have been made as people examine what happened to f.t.x. from bernie madoff to enron it looks like this will go down as one of the largest frauds in history. mr. ray, you are in a unique perspective on the fact you have worked on the enron bankruptcy. i would be interested real quick if you talk a little bit real quick about how it compares. you got cut off in the early time. i would like to hear about that. mr. ray: enron was a really different company. crimes that were committed there were highly orchestrated,

financial machinations, by highly sophisticated people. to keep transactions off balance sheets. this is really old-fashioned embezzlement. this is just taking money from customers and using it for your own purpose. not sophisticated at all. sophisticated perhaps in the way they were able to hide it from people. frankly right in front of their eyes. this isn't sophisticated whatsoever. this is just plain old embezzlement. mr. williams: old school. mr. ray: old school. mr. williams: there you go. it seems like fried had some interesting ideas how he can stay relevant in the f.t.x. world. even after stealing customers money and driving k-pt to bankruptcy. i have read he wants to be retained as an outside

consultant. and been very critical of your own appointment, quite frankly, into this position. after last night all his wishes seem more unlikely. what role, if any, should he play in f.t.x. moving forward? mr. ray: the role he's currently playing. zero. mr. williams: you stated that f.t.x. was a platform allowing for users to trade digital assets. were users engaged in simple exchange of assets or were they permitted to engage in leveraged complex transactions? mr. ray: yes. can you repeat the question. mr. williams: sure. you stated f.t.x. was a platform allowing for users to trade digital assets. were users engaged in simple exchanges of assets or were they permitted to change in leveraged contract extensions? mr. ray: yes. mr. williams: you stated you have recovered over $1 billion in assets. can you give a description of

the nature and type of assets you have recovered to date? mr. ray: we recovered over billion dollars of crypto asefplts coins of various nature. we security those. that's been my primary focus. we certainly also secured our bank accounts, bank accounts were frozen. we got control over those accounts with new authorized users, which certainly puts myself. our main goal is secure the cash and crypto assets. that's an ongoing venture. mr. williams: thank you for being here. i yield back. chair waters: thank you very much. the gentleman from guam, mr. san nicolas, is recognized for five minutes. mr. sonics: thank-d -- mr. san nicolas: thank you, madam chair. mr. ray, thank you for being here today. there is lot of people following this trying to understand what

happened for a variety of reasons. i of course primary responsibility will be to make sure that the creditors are made whole, as well as depositors and everybody else who has a stake in varying degrees within the company. my first question is, have we been able -- have you been able to pinpoint the specific cause for f.t.x.'s collapse? i know there is all kinds of stories about loans to the owner and no internal controls. loans to alameda. commingling. is there a specific trigger point, or specific cause that has resulted in the f.t.x. collapse? mr. ray: i described t it's just the unlimited ability of those in control positions to borrow customer funds, or take customer funds, then deploy them for

their own use. that use involves margin trading, which is inherently risky. and of course they spent enormous amounts of money beyond that. it's really the misuse of funds. it's simple as that. on a larger scale basis. mr. san nicolas: what is the big picture of balance and losses as a result of this bankruptcy? how much has f.t.x. lost because of this? mr. ray: we don't have exact numbers. several billion dollars. in excess of seven billion. mr. san nicolas: in excess of $7 billion we are saying that bankman-fried and company basically took or misallocated $7 billion and that's why f.t.x. has collapsed? mr. ray: funds were taken from customers. funds were invested.

trading losses incurred in alameda. and funds were deployed that will never be valued at the same dollar amount. it was over $5 billion of investments made. certainly there is some value there. we'll try to get that value. sell those assets. but oftentimes even when he made those sorts of investments, whether it was directly or through others in management, sometimes you would do that really without any pro forma or any valuation, not sure how some of the purchase price numbers were derived. it gives you a worry that the purchases were overvalued. there is certain there as well. mr. san nicolas: alameda lost $7 billion as a result of investment decisions and marginal trading? mr. ray: there is a multitude of reasons that caused the gap in assets between the customer

balances and what's there today. what we hope to gain. it can't be pinpointed just on losses on trading activity. mr. san nicolas: the reason i'm asking, i'm narrowing it down because my time is expiring. it's important for us to very clearly understand what caused this collapse. when we had the 2008 financial crisis, bear stearns collapsed, and layman brothers waoerbgs could have gone in there and pointed to these different reasons that could have contributed to it. but the underlying reasons why there was a subcrime crisis and lack of liquidity in these institutions. that allowed us to have a policy response, regulatory response to prevent that kind of thing from occurring in the few taoufrplt the f.t.x. right now is just f.t.x. are these lack of controls and these environments that resulted in the f.t.x. collapse, are they still existing today? could the same thing happen in similar operations such as -- could they also engage in the same activities under current

regulatory regime and if things go wrong have the same outcome? mr. ray: three points i'd make. first of all we are going to detail the sources and what happened to alt funds. that will tell us exactly how the losses were incurred. some of those may be lessons learned. some may just, frankly, will be payments that were made from other people's money. mr. san nicolas: going back to my question. the circumstance that is led to f.t.x.'s collapse, those circumstances still exist in the crypto space and can other companies collapse in a similar set of circumstances? mr. ray: certainly, we ceased trading. could it happen at other companies? i can't speak to them because i don't know how each of these companies are operated. obviously our company operated in a very distinct way that led to losses. every company is different. >> the gentleman from arkansas, mr. hill, is recognized for five minutes mr. hill: i thank the

chairman. i appreciate you being here, mr. glad to have you before the committee. i want to thank ranking member, mr. mchenry, and the chair, chair waters, for working constructively in the digital asset space over the past four years. and i want to remind my colleagues that mr. mchenry talked about bond rip-offs in the railroad expansion in the 1870's and 1880's. true, fannie mae and freddie mac leading us down the prim rose path in the early 2000s on housing ownership in the secondary market, and they were frauds. and fraudulent actors. that didn't mean we didn't want to invest in railroads in the united states for the history of the country. it didn't mean we don't need a vigorous single family housing market and secondary market in our country. let's not confuse the malfeasance and disgusting activity of f.t.x. with the fact that we need a proper, thoughtful regulatory oversight of digital assets.

i thank chair waters and ranking member mchenry. 14 years ago, this week, bernie madoff was arrested and charged with operating the largest ponzi scheme in american history. its collapse injured 37,000 investors and led to major reforms at the securities and exchange commission and their oversight. bankman-fried was arrested in the bahamas last night. many ways the fall of f.t.x. dwarfs that of bernie madoff with court filings suggesting over one million creditors are somewhere in the lurch in the f.t.x. silos. americans were hurt and i want everyone listening to know in today's hearing this is just the first step that congress is taking in understanding what happened and how to create the appropriate regulatory environment. we do want to understand the decision that is led to the collapse and impact on our customers and other market participants and how to prevent it from happening again. mr. ray, thanks for stepping up

in your leadership capacity. and in looking at the bankruptcy filing, mettis was the audit firm for the dot-com silo. their website says they are the first ever c.p.a. firm in the metta verse. looking at their website they have 24 offices, 600 staff, 100 partners. principally california, new york, and new jersey. you stated you are not familiar with them s. that correct? mr. ray: correct. mr. hill: are they cooperating with your -- in your role as bankruptcy trustee? mr. ray: we are reaching out to both firms. audit firms and the firms that do taxes. we certainly have tools available so if they don't cooperate. everyone seems to be cooperating at this point. mr. hill: are they -- you anticipate they'll actively participate in the forensic accounting work you are doing with ernst and young?

mr. ray: absolutely not. we are taking information we get from the prior taud tores -- auditors and accountants and tax professionals and we'll take our investigation from there on an independent basis. mr. hill: can you tell us who the partner in charge is of the audit of that firm? mr. ray: i can't tell you. off the top of my head. mr. hill: is it jerry itell, brian goldblatt. mr. ray: no. can i provide that to you. mr. hill: thank you. the second auditing firm are a manino, you are familiar with them that's part after hropbdown-based firm? mr. ray: correct. mr. hill: do you feel the same way about their performance based on the books and records you have seen they also were inadequate in serving as an auditor firm? mr. ray: i don't want to disparage that firm. we do have to look through the books and records and look at the audits themselves and see how comprehensive they were.

see if the audit would have picked up anything that we see. and certainly we are going to look at the related party disclosures in those audits. whether there are any footnotes or exceptions. we need to go back and look at all those audits from a look back perspective to determine what maybe could have been done that wasn't. mr. hill: you anticipate the united states being a creditor in these proceedings, either for tax purposes? mr. ray: premature to tefplt we are certainly looking at that ourselves. to the extent we find any irregularities in the tax area, we'll be notifying the i.r.s. nothing we have seen at this point. but our investigation is so early. mr. hill: you state that the internal controls were the weakest that you have seen in your experience. f.t.x. u.s. and f. ftx.com there is no a distinction between those. whether you were international or domestic investor it's the

same pot is that fair? mr. ray: that's certainly our worry. there is limited amount of u.s. customers in the dot-com in the exchange. we are focused on commingling and worried the silos weren't respected for purposes of the crypto assets. mr. hill: i yield back. >> the gentleman from connecticut, mr. himes, is recognized for five minutes mr. himes: thank you, mr. chairman. thank you, mr. ray, for being here and for undertaking this remarkably complicated task. at the end of the day our job here is to learn from the mistakes that were made, who made them, and what we can do going forward. like it or not, we are moving into a crypto assets, crypto world. we really do need to learn. this whole thing has the feeling of a hollywood blockbuster. that's why the cameras are here. we have a 30-year-old gazillion air who raised billions of dollli