FTX's new CEO accused the collapsed crypto exchange of 'old school' embezzlement that was 'not sophisticated at all'

• FTX's new CEO has accused the collapsed crypto exchange of "old school" embezzlement.
• In congressional testimony Tuesday, John Ray said the alleged fraud at FTX was "not sophisticated."

FTX's new CEO has accused the crypto exchange of "old school" embezzlement in scathing congressional testimony.

In his four hours before the House Financial Services Committee on Tuesday, John Ray ripped into FTX's business and bookkeeping practices.

"This is really just old-fashioned embezzlement," Ray said. "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 is just plain old embezzlement. Old school, old school."

Ray said FTX had "no record-keeping whatsoever," building on his prior criticism of the crypto exchange for failing to maintain proper logs of internal decisions. He also told lawmakers on Tuesday that FTX would use QuickBooks to track its billions of dollars of assets.

Ray took aim at FTX executives in his opening statement, saying the exchange collapsed in the hands of a "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."

Ray said he didn't trust the records that FTX had managed to maintain. "We've lost eight billion dollars of customer money. So by definition, I don't trust a single piece of paper in this organization," he said.

He added: "I've just never seen anything like it in all 40 years of doing restructuring work and corporate legal work."

Ray, who's helped oversee insolvencies at several large companies — including the disgraced energy giant Enron — was appointed to lead FTX's restructuring after the exchange filed for bankruptcy on November 11.

Sam Bankman-Fried, FTX's cofounder and former CEO, was charged by the Securities and Exchange Commission on Tuesday with defrauding investors. The SEC accused Bankman-Fried of diverting "billions of dollars" of customers' money into his crypto hedge fund, Alameda Research, for his personal benefit.

Bankman-Fried was arrested in the Bahamas on Monday at the request of the US government and was denied bail.

Rep. Ann Wagner asked Ray at Tuesday's hearing if FTX's funds could have been transferred to Alameda by mistake, given how Bankman-Fried said he "made a lot of mistakes" as CEO.

"I don't find any such statements to be credible," Ray responded.