Sam Bankman-Fried arrest updates: Former FTX CEO denied bail due to flight risk

FTX CEO John Ray, who is overseeing the company’s bankruptcy proceedings, told House members on Tuesday that no separation existed between the operations of FTX and Alameda Research, a crypto hedge fund also founded by Bankman-Fried.

“There were virtually no internal controls and no separateness whatsoever,” Ray said.

Bankman-Fried faces accusations that FTX used deposits to pay Alameda Research creditors, a claim reportedly made by former Alameda Research CEO Caroline Ellison during a call in early November.

In an interview last week, Bankman-Fried told ABC News’ George Stephanopoulos that he was not aware that was true but said Alameda had a large position open on FTX that was "overcollateralized a year ago."

Ray told House members that FTX transferred several billion dollars in customer funds to Alameda Research.

When asked by Rep. Patrick McHenry, R-N.C., if there was a distinction between FTX and Alameda Research, Ray said, “Absolutely not. There’s no distinction whatsoever.”

“The owners of the company could run free reign,” Ray added, noting that Bankman-Fried owned 90% of Alameda Research.

Sam Bankman-Fried's lawyer, Mark S. Cohen, offered his first comments on the arrest of his client Tuesday morning.

"Mr. Bankman-Fried is reviewing the charges with his legal team and considering all of his legal options," Cohen said in a statement.

Bankman-Fried was scheduled to make his first court appearance in the Bahamas Tuesday.

John Ray, the new CEO of bankrupt crypto exchange FTX, who oversaw the dissolution of Enron, testified before House members on Tuesday that FTX lacked corporate controls to an extent he had never witnessed.

“I’ve never seen an utter lack of record keeping,” Ray said. “Absolutely no internal controls.”

Earlier this year, FTX was valued at $32 billion. Within weeks of a customer sell-off totaling billions of dollars, the company declared bankruptcy.

Company officials communicated invoice and expense reports over Slack, an internal messaging service, Ray said.

He said FTX employees used the accounting software QuickBooks, which is popular among small businesses.

“Nothing against QuickBooks – it’s a very nice tool,” Ray said. “Not for a multibillion-dollar company.”

The eight-count indictment from the Southern District of New York charges Sam Bankman-Fried with conspiracy and fraud.

The indictment also said Bankman-Fried provided false and misleading information to lenders about the true financial condition of Alameda, his privately held crypto hedge fund.

There's a final count of conspiracy to violate campaign finance laws through political donations that concealed the source and exceeded the permissible amount.

"In or about 2022, Samuel Bankman-Fried, the defendant, and one or more other conspirators agreed to and did make corporate contributes to candidates and committees in the Southern District of New York that were reported in the name of another person," the indictment said.

Federal prosecutors were expected to elaborate on the charges at an afternoon news conference in Manhattan.