FTX’s bankruptcy-era CEO, John J. Ray III, appointed to shepherd the collapsed crypto exchange through Chapter 11 reorganization, testified on Tuesday that the company’s founder and former CEO, Sam Bankman-Fried, made multiple misstatements about his companies’ financials.

Ray, who oversaw Enron’s infamous corporate fraud, characterized FTX’s actions as “old fashioned embezzlement.”

“This is just taking money from customers and using it for your own purpose,” Ray said. “Not sophisticated at all,” he said, explaining that what might have been sophisticated about the scheme was hiding it in plain sight.

Ray’s testimony may also have shed light on the theories that underlie the Justice Department’s accusations against Bankman-Fried, who was charged with eight counts of wire fraud, securities fraud, and conspiracy in an indictment unsealed on Tuesday.

The agency’s criminal charges, which allege that Bankman-Fried misappropriated customer funds by allowing the funds to be used by his crypto hedge fund Alameda Research, require it to prove beyond a reasonable doubt that Bankman-Fried knew and intended to lie about the arrangement to customers or lenders.

FTX Group CEO John J. Ray III listens to a question, at a U.S. House Financial Services Committee hearing investigating the collapse of the now-bankrupt crypto exchange FTX after the arrest of FTX founder Sam Bankman-Fried, on Capitol Hill in Washington, U.S. December 13, 2022. REUTERS/Elizabeth Frantz

The FTX chief’s testimony came before the U.S. House of Representatives’ Financial Services Committee, where Bankman-Fried was also scheduled to testify via video conference. However, the public’s opportunity to hear testimony from the embattled founder foreclosed after he was arrested Monday evening by Bahamian authorities.

Bahamian authorities took Bankman-Fried into custody at the request of the U.S. Justice Department on Monday night, based on its indictment originally filed under seal.

In the indictment, the DOJ charged Bankman-Fried with wire fraud and conspiracy to commit wire fraud against FTX customers and lenders, conspiracy to commit commodities fraud and securities fraud, conspiracy to violate money laundering laws, and conspiracy to defraud the U.S. government through violations of campaign finance laws.

In separate civil actions filed Tuesday, the U.S. Securities and Exchange Commission, and the U.S. Commodity and Futures Trading Commission, respectively, alleged Bankman-Fried violated securities laws and the Commodity Exchange Act and the agency’s regulations.

Asked if there’s any way that Bankman-Fried and FTX’s senior managers wouldn’t have known that its entities had commingled customer funds, allowing Alameda unlimited access to FTX customer accounts, Ray III said, “No.”

In an interview at the New York Times’ Dealbook Summit, Bankman-Fried said he didn’t “knowingly commingle [customer] funds.” He added that he “didn’t ever try to commit fraud on anyone,” that he “wasn’t “running Alameda,” and “didn’t know what was going on.”

Ray was also asked about contentions in Bankman-Fried’s leaked prepared hearing remarks which suggested FTX was solvent but for a run on the bank caused when Binance walked away from a planned investment in FTX, and that FTX US remains solvent and capable of paying off all of its customers. Bankman-Fried also tweeted the claim on November 10, the day before the exchange’s bankruptcy filing.

“Given the evidence you’ve gathered, is there any degree of truth to this claim,” Georgia Rep. Barry Loudermilk asked Ray.

“We still have a hole in the U.S., so as we sit here today it is not solvent. That’s just inaccurate. And I’m not sure how he would even know that, quite honestly. We’re hopeful,” Ray said.

“Prior to that episode, is your belief that FTX was solvent?” Ohio Rep. Anthony Gonzalez asked about Binance’s about-face. “No,” Ray replied.

Missouri Rep. Ann Wagner asked Ray if the transfer of FTX funds to Alameda could have been done by mistake, given that Bankman-Fried has publicly apologized for making mistakes in leading his companies.

“I don’t find any such statements to be credible,” Ray III said.

Rep. Wagner went on to say that FTX’s international trading platform, FTX.com, held itself out as having a sophisticated risk management system commensurate with the size of his operations.

“I can say that it’s absolutely false. There was no sophistication whatsoever,” Ray III said. “There was an absence of any management.”

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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