By EARYEL BOWLEG

Tribune Staff Reporter

ebowleg@tribunemedia.net

FTX CEO John Ray III said the Chapter 11 process in Delaware is the only clear option that gives visibility to customers about what happened to the fallen crypto giant and a chance to recoup their money, as he lambasted the process in The Bahamas as not transparent.

He alleged that he has repeatedly asked for clarity from Bahamian regulators about what they have been doing but has been “shut down”.

Mr Ray made the revelation yesterday during the US House Committee on Financial Services hearing into FTX’s collapse.

One-by-one several members of the committee questioned the new CEO for nearly four hours about the once crypto giant’s downfall and his handling of it in the aftermath.

Sam Bankman-Fried, the disgraced former CEO, was set to testify remotely, however, the 30-year-old was arrested on Monday and arraigned yesterday, thus unable to appear before the committee to answer their questions.

 During the hearing, Mr Ray was pressed about the assets moved after the filing of bankruptcy.

 In November FTX, its hedge fund Alameda Research, and “dozens other affiliated companies” filed a bankruptcy petition in Delaware.

 Congressman Bryan Steil mentioned that a day after the bankruptcy filing multiple outlets reported that there was a hacker or potential theft.

 He also noted Mr Ray stating unauthorised access to certain assets occurred and that the company was in touch with law enforcement officials and regulators.

 As for whether it was determined assets were moved after the filing, the CEO confirmed that was indeed so. He elaborated that the action was done by both hacking and at the direction of Bahamian authorities.

 But Mr Ray told the committee it was not a request as they just “took it” when asked why the Bahamian authorities made that request.

 He said local authorities were aided by former employees, namely Mr Bankman-Fried and a “Mr Wang”.

 Congressman Steil wondered about any insight into the motivation behind this action.

 The CEO testified: “Unlike the Chapter 11 process, there’s no transparency in the process and the Bahamians and we’ve repeatedly asked them for clarity about what they’ve been doing and we’ve been shut down on them.”

 He said statements from local regulators stated the action was done “in the interest of Bahamian creditors” but Mr Ray said in his view, it violated the automatic stay in the bankruptcy.

 The Securities Commission of The Bahamas has previously said it had transferred digital assets of FTX Digital Markets to a digital wallet under its control for “safekeeping”.

 Mr Ray admitted he had questions that still remain unanswered by Bahamian authorities that would shed additional light into his investigation if that information was provided.

 Asked if he still believed that the Chapter 15 case launched by Bahamian regulators should be consolidated in the Delaware bankruptcy court, Mr Ray said: “No, I do not think so.”

Congressman Steil quizzed the CEO on what he thinks would be the best course of action.

 Mr Ray said: “They have a liquidation proceeding relative to FTS Digital Markets. They filed that proceeding there - that is their proceeding. We think the Chapter 11 process is the only open transparent process that gives visibility to customers of what happened and when they’re going to get their money and how they’re gonna get their money.

 “The process in the Bahamian islands is not a transparent process. We have opened up the ability to share everything that we have with the Bahamian government similar to how we share with other liquidators around the world and not only in this case in other cases it’s meant to be a very cooperative situation.

 “The pushback that we’ve gotten is sort of extraordinary in the context of bankruptcy. It raises questions, it seems irregular to me. There’s lots of questions on our part and obviously we’re investigating it.”

 Congresswoman Alexandria Ocasio-Cortez, meanwhile, had a line questioning that honed in on potential benefits Mr Bankman-Fried stands to gain with Bahamian authorities’ involvement.

 She highlighted an e-mail exchange between Attorney General Ryan Pinder and Mr Bankman-Fried, which revealed the latter sought his go-ahead to “open up withdrawals for all Bahamian customers”.

 Mr Pinder denied he or any government official gave permission for the founder to violate a freeze order by returning $100m in assets to 1,500 purported “Bahamian” clients.

 The committee member pointed out that the Bahamian appointed joint provisional liquidators did something “very interesting” and came to the United States bankruptcy court and sought an entry to recognise the Bahamian liquidation as the main proceeding.

 She went on to ask Mr Ray if that additional control was of any potential value to Mr Bankman-Fried.

 Mr Ray replied: “Well, clearly there seems to be an effort by the Bahamian commission to get control of the bankruptcy process and I think that was evident by their filing.”

 Ms Ocasio-Cortez asked: “Did you uncover any evidence that demonstrates that this window, that 25.5 hour window opened in exchange for any consideration offered to Mr Bankman-Fried by the Bahamian attorney general or any state official, including a promise to initiate liquidation proceedings, which might offer a path towards Mr Bankman-Fried retaining some control or influence over ftx.com?”

 Mr Ray said: “We intend to investigate that very same thing.”

 Mr Ray also said they will investigate “every potential cause of action” when Congressman William Timmons asked about going after the $100 million in FTX assets that was allegedly withdrawn by 1,500 Bahamian accounts in violation of a freeze order.