Everything you need to know about the FTX saga that unfolded today

John J. Ray III, who made his name overseeing the liquidation of Enron in the early 2000s, is the man in charge of sifting through the rubble of FTX, the once-mighty cryptocurrency exchange — founded in 2019 and run into the ground by 2022 by Sam Bankman-Fried.

On Tuesday, Ray testified before the House Financial Services Committee, relaying what he could about the company he took over just four weeks ago. When a congressman asked Ray how his experience with FTX compares with Enron, Ray was quick to make the distinction clear:

“The crimes that were committed [at Enron] were highly orchestrated financial machinations by highly sophisticated people to keep transactions off balance sheets,” Ray told lawmakers. FTX, on the other hand, was “not sophisticated at all.”

“This is really old-fashioned embezzlement,” Ray continued. “This is just taking money from customers, and using it for your own purpose.”

In other words: Look, there’s a lot going on here, but don’t let all the talk of digital assets confuse you — this is a con as old as time.

Mark Cohen, a lawyer for Bankman-Fried, said his client “is reviewing the charges with his legal team and considering all of his legal options.”

So, what’s happening? Quite a lot today:

Federal prosecutors from the Southern District of New York (aka, a really aggressive, elite bunch of lawyers who rarely lose when it comes to white-collar cases) charged Sam Bankman-Fried with eight charges of fraud and conspiracy. They say he misappropriated FTX customers’ deposits by using those funds to pay expenses and debts of Alameda, his crypto hedge fund.

US Attorney Damian Williams called the FTX case “one of the biggest financial frauds in American history.”

Meanwhile, US markets regulators filed civil lawsuits accusing Bankman-Fried of defrauding investors and customers, saying he “built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto.”

And as if all that weren’t enough, Bankman-Fried’s successor, Ray, spent the day calling out the colossal mismanagement that took place before FTX and Alameda collapsed. In addition to calling the previous leaders “a very small group of grossly inexperienced and unsophisticated individuals” — under oath, mind you — Ray also illustrated that mismanagement by revealing that FTX used QuickBooks to run its business, which was valued at more than $30 billion at its peak. (Ray clarified: “Nothing against QuickBooks. It’s a very nice tool. Just not for a multibillion-dollar company.”)

Anything else?

So much… but I’ll stick to the highlights.

Bankman-Fried could face up to 115 years in prison if convicted on all eight counts against him in a federal indictment unsealed Tuesday morning, according to congressional statutory maximum sentencing guidelines.

(That said, he likely wouldn’t get the maximum sentence, and it’s not uncommon for a judge to have those sentences run concurrently.)

Bankman-Fried remains in the Bahamas, where FTX was based, and was arrested Monday night. He was arraigned Tuesday, and a Bahamian judge denied his request for bail, saying that he posed a flight risk. (His extradition to the United States is in the works, but that process can take weeks.)

What should we make of all this?

There’s still a ton we don’t know about the case. But the fact that prosecutors put together an eight-count, 14-page indictment just four weeks after FTX filed for bankruptcy suggests prosecutors may have an ace in the hole, and/or a preponderance of evidence against the company. (The SDNY are an aggressive people, but they are not sloppy, and they don’t indict without a solid case.)

Several lawyers not involved in the case have told me that the speed of Bankman-Fried’s arrest signals that former FTX employees may be aiding prosecutors.

“The smart move by former employees would be to rush to become a cooperator in exchange for more lenient treatment, and it would not be surprising to learn that one or more of them had done so,” said Howard A. Fischer, a former SEC lawyer. He added: “The fact that only one person has been charged so far would seem to indicate this as well.”

Correction: An earlier version of this story incorrectly identified John Ray. He is Sam Bankman-Fried's successor.