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

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.

While the full criminal charges have yet to be released, the Securities and Exchange Commission released it's complaint against Sam Bankman-Fried early Tuesday.

"It’s serious," said Brendan Quigley, a former federal securities fraud prosecutor in New York who is now a partner at Baker Botts. "Assuming they can show promises were made to counterparties, investors or clients about where money was going to go, and that it didn't go there, that's a serious offense, probably wire fraud at least."

Bankman-Fried’s public statements could come back to haunt him, including an interview with ABC News' George Stephanopoulos.

"The big thing will be if SDNY can shows conflicts either between his public statements or between his current public statement and something that was said or promised to investors," Quigley said.

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FTX's Sam Bankman-Fried opens up about crypto collapse

ABC News' George Stephanopoulos spoke exclusively with the embattled CEO about his role in his crypto company's downfall in part one of a two-part interview. Watch part two on GMA.

ABCNews.com

Though cryptocurrency can seem a mystical world, the civil complaint from the Securities and Exchange Commission reads like a standard case of securities fraud, accusing Sam Bankman-Fried of building a "house of cards."

Bankman-Fried raised $1.8 billion for FTX while "orchestrating a massive, years-long fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire," the complaint said.

Customers sent billions of dollars to FTX believing their assets were secure but, from the start, the SEC said Bankman-Fried "improperly diverted customer assets to his privately-held crypto hedge fund, Alameda Research LLC, and then used those customer funds to make undisclosed venture investments, lavish real estate purchases, and large political donations."

Federal prosecutors in New York said they would unseal related criminal charges later Tuesday.

"We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto," said SEC Chair Gary Gensler.

The civil complaint seeks penalties and fines, but also to prohibit Bankman-Fried from "participating in the offer or sale of securities including crypto asset securities" in the future, a move that would complete his fall as the poster child for the emerging cryptocurrency marketplace.