February 6, 2023

In the early 2000s, Mr. Ray oversaw the liquidation of Enron, an energy trading company that collapsed due to an accounting scandal. During the hearing, he called the perpetrators of the Enron crime “very sophisticated,” while FTX executives appeared to be involved in “really just old fashioned embezzlement,” he said.

“Even with most companies that fail, we have a fair road map of what happened,” Mr. Ray said in his testimony. “We’re dealing with a truly paperless bankruptcy. It makes it difficult to track.”

The SEC amplified these concerns and warnings in its complaint. From the start, “FTX’s controls were inadequate and its risk management procedures were fundamentally flawed,” the complaint said. The SEC said the company treated assets and liabilities as “fungible” in its accounting ledgers and bookkeeping.

However, no one other than Mr Bankman-Fried has been charged at this time.

In many cases, though, the indictment names, without naming, other people who assisted Mr. Bankman-Fried in carrying out the alleged fraudulent scheme.

Legal experts, including some lawyers familiar with the investigation, said it was likely some of Mr. Bankman-Fried’s former associates were cooperating with authorities, especially given the speed at which charges were being brought.

“Someone had to describe to them in detail what happened and what was done,” said Eric Gordon, a professor of law and business at the University of Michigan. “Someone gave them a shortcut.”

Royston Jones, Jr., David McCabe, Ephrat Livni, William K. Rashbaum, Rebecca Davis O’Brien and Benjamin Weiser contributed to this report.



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