Sam Bankman-Fried and FTX have been involved in fraud for years, prosecutors say

In the early 2000s, Mr. Ray oversaw the breakup of Enron, the energy trading company that collapsed in an accounting scandal. During the hearing, he called the perpetrators of the Enron crimes “very sophisticated,” while FTX executives appeared to have engaged in “really old-fashioned embezzlement,” he said. he declares.

“Even with most businesses going bankrupt, we have a fair track record of what happened,” Mr. Ray said in his testimony. “We are dealing with a literal paperless bankruptcy. This makes tracking difficult. »

The SEC, in its complaint, amplified these concerns and warnings. The complaint stated that from the outset, “FTX had poor controls and fundamentally flawed risk management procedures.” The SEC said the company treats assets and liabilities as “interchangeable” in its books and records.

So far, however, no one other than Mr Bankman-Fried has been charged.

On several occasions, however, the indictment refers to other people who helped Mr. Bankman-Fried carry out the allegedly fraudulent scheme, without naming any of them.

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

“Someone had to describe to them what happened and what was done in detail,” said Erik Gordon, a law and business professor 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 reporting.