Yahoo Finance's Alexis Keenan breaks down the charges against former FTX CEO Sam Bankman-Fried, who was scheduled to testify at a House hearing Tuesday, as well as remarks from the current CEO John Ray before Congress on the FTX collapse.

Video Transcript

RACHELLE AKUFFO: And usually it would be inflation, but we're starting with the story of the day, which is Sam Bankman-Fried has been arrested and indicted, charged with defrauding investors of $1.8 billion. The detention happening the day before he was set to testify before Congress on the fall of FTX.

We have Yahoo Finance's Alexis Keenan now with the details [AUDIO OUT] story.

ALEXIS KEENAN: Hi, Rachelle. So the latest what's going on here in these multi litigations is that the Department of Justice coming from the Southern District of New York-- that's the Manhattan prosecutors. They have filed an eight-count complaint against Sam Bankman-Fried, who has been arrested, as of yesterday evening, in the Bahamas.

And he is being held currently on these particular charges. This is the indictment that came down from a grand jury-- a federal grand jury-- conspiracy to commit wire fraud, conspiracy-- or rather wire fraud against customers, conspiracy to commit wire fraud against also lenders, wire fraud against lenders, conspiracy to commit commodities fraud, also conspiracy to commit securities fraud, conspiracy to commit money laundering, as well as conspiracy against the United States by way of violation of campaign-finance laws.

So that is what the Department of Justice is saying. That comes in connection with a complaint that we saw earlier filed by the SEC alleging violations of securities laws, US securities laws, and also a complaint coming down from the CFTC.

Now we have been listening to FTX's CEO-- current CEO-- John J. Ray testifying before Congress. He's testifying before the House Financial Services Committee where Sam Bankman-Fried had been also scheduled to testify but, of course, now is not given the arrest.

What John J. Ray has said so far, I just want to summarize some of the highlights here. He was asked about whether there was any distinction between FTX's various entities. He said no. There was no distinction virtually at all between FTX and Alameda, that the executives had free rein to have money flowing back and forth between those companies without any oversight.

He also talked about how much money so far has been recovered for the victims of this alleged fraud. He said approximately $1,000,000,000 at this point has been secured in cold-storage wallets.

He also said that he was asked to elaborate why this fraud he has said in the past is worse than Enron, a bankruptcy that Ray also oversaw. He said that the fact that there was no recordkeeping whatsoever by FTX and its related entities was very problematic. It is making it really difficult for them to figure out exactly where the money flowed and exactly what happened.

He said that invoices and expenses were communicated by employees through Slack. He said the company was using QuickBooks for a multibillion-dollar company. He said that's nice but not for a multibillion-dollar company.

Also he had been asked whether he was cooperating with-- whether FTX's current leadership is cooperating with US authorities and regulators. He said absolutely yes we are in cooperation, and we will continue to do so.

AKIKO FUJITA: Alexis Keenan with the very latest there. Thanks so much for breaking that all down for us.

Rachelle, it has been interesting to listen in on this hearing today on the back of what it sounds like it was a pretty big surprise for lawmakers, Sam Bankman-Fried's arrest last night over in the Bahamas. You heard Maxine Waters saying the public has been waiting eagerly to get these answers under oath before Congress. The timing of this arrest denies the public this opportunity.

Now some interesting comments coming from John Ray, as Alexis pointed out, but I want to point to what Patrick McHenry said. He is, of course, the congressman from North Carolina who said, we've heard everything but the truth, alluding to what we have heard from Sam Bankman-Fried so far, saying, this is really just old-school fraud with new technology. In other words, for all the talk about how crypto is unregulated, how they're kind of like the Wild West, he's saying essentially, you know, this is not a new story. This is just masked in new technology. It's going to be interesting to see how this all plays out, obviously along with the legal track as we keep a close watch on what's playing out over in the Bahamas as well.

RACHELLE AKUFFO: And when you think of how much of a turn around this is-- because obviously SBF was considered a wunderkind in this industry, someone that lawmakers were listening to. So now to see him now on the flip side of this-- and we heard from FTX's new CEO John Ray as he was going through the details saying that the company was using QuickBooks-- a multi-billion dollar company using QuickBooks for its accounting.

And he said no offense to QuickBooks but this isn't the sort of accounting you should be doing for a company of this size, trying to understand what's been happening as we're seeing here with these commingled funds-- allegations of commingled funds and who really had oversight at the end of the day of these multiple entities.

And so this was a big surprise, as you mentioned there, from Maxine Waters. A lot of us were wondering what was going to happen because we were all bracing, waiting to hear him testify today. So as you mentioned there, the public really robbed of that opportunity because, really, the only person who can answer these questions is the one person who isn't there.

AKIKO FUJITA: Well, and you point to that question at the heart of all of this, which is did, in fact, FTX and Alameda-- which are both owned by Sam Bankman-Fried-- did they comingle the funds? John Ray was asked that pointblank by lawmakers in this hearing, and he said this operated as one company. There was no distinction between FTX and Alameda.

Certainly going to be the line of question we expect, not just within this hearing but also directed at Sam Bankman-Fried as well. We're now looking at, as Alexis pointed out, charges from the SEC.

Although I thought that was kind of interesting, Rachelle, that they did go after more of defrauding the investors themselves, not necessarily the customers of FTX. And then, of course, we had this unsealing of the federal indictment, which is, of course, what Sam Bankman-Fried was arrested under.