does the terminal rate actually arrive and where and when will cpi actually abate before taking a big bite out of the consumer and out of businesses. >> liz,s thank you very much great to see you >> you too >> thank you, becky quick. >> you're very welcome i owe andrew an interview now. i stole his interview. >> no, no. he wasn't here >> check this out, folks, softer than expected numbers. >> i hurt for you. >> big news for the markets. they will pick it up on "squawk on the street" now see you tomorrow good tuesday morning welcome to squawk on the street. i'm carl quintanilla with john cramer and david faber at the new york stock exchange. annual rate biggest deskhcline n two years. we'll talk implications for the fed.

we'll begin with cpi fueling the rally this morning, jim. you said it's pretty remarkable. how much of this holds >> well, look, i think it's actually going to be better than holds. the areas that are still up are about to go down used cars are down that's just a -- i would say just a prediction basically about how much new supply is going to come on i do believe the housing chain has considerably slowed. the number of houses that are being built will soon come into fruition at the same time mortgages are still high energy is down and i think it's going to have a hard time rallying from here so, david, other than staying at home for food, which is a little odd, cereal, wheat, is at a very big low.

feds have to win they have won on all these commodities. they took it from producer to consumer now, look, we still have a lot of help wanted >> 6% is not -- >> they got a raise. >> it's not nothing. it means a terminal rate of 5% or more, right >> well, i don't want to say 5%. >> no? >> we have seen the two-year was at 4.6 probably could go back but i don't -- it's very hard for a very rigorous guy to go back to the 5 to 7 i think he can say, look, we can do five. look, if the wages are still high, then this is not as important. and they need more people, which means they need more firings it's not like they are creating new people they need more firings they need more engineers a lot of things in the wrong

place. 80,000 irs agents. get excited about commodities. >> but not wages coming down, which you have pointing to for quite some time as being -- okay the fed is still in a bind back to carl's question, is this rally for real we're still dealing with 6% inflation. maybe we don't get to 5% the fed is still going to continue to push things because wages continue to increase by the way, we haven't seen earnings revisions of significance many people believe we're going to need in '23 to really bottom. >> yesterday was important you saw a not so great enterprise company get a bid substantially important. >> we're going to base the

market on webber >> i did a lot yesterday i was too critical of amgen. amgen has an international pipeline to run that stuff through. it takes forever that's why pfizer baltimore nurtech. look, it's going away. do you want to buy up? i never buy up they don't make sense. there's always a chance during the day where someone comes out, they have a rumor or something weaker without the wages coming down you have to be careful >> yeah. >> you need the wages to come down >> yeah. people are slicing it up a bunch of different ways this morning one way is core, ex shelter, month on month, two months of negative reads negative reads >> right that's very positive and i think that shelter is a combination -- a lot of -- there is a piece in the journal today how you raise rates and it doesn't help the shelter

situation. shelter situation has been hurt by supply chain. once you can get the homes into finish lennar will say the demand is not as strong as it was. i always hate to say it because it sounds so heartless we need amazon fires ex. there's still going to be bidding up some things but they're not bidding up fortunate. they're not bidding up apparel you go to the supermarket, they're not bidding up beef and chicken. tyson hasn't been doing that well >> right >> they're bidding up vacations. airline travel was down. >> yeah. i would question that. >> some of the guidance out of jetblue and save, for example, not exactly robust this united order -- >> yeah. united obviously helps

david, you know what is not mentioned in terms of deflation? >> tell me >> sec charges staggering staggering >> yeah. you want to move on to sbf and crypto have you had enough on the market it's okay. you can. you can. >> i'm just saying we need the other piece of the puzzle. you can have a couple of months of good numbers without hearing that wages have peaked and are going down or flat because, you know, you have these things like -- it has motor insurance going higher those cycles are high. >> it's going to take a while. >> the notion that when you go to costco and they will say, all right, so now we look at this. we look at the news release and say, okay, who has raised price.

now you can roll prices back costco's business is to try volume they're going to go to everybody who raised prices and say, hey, you know what, we have a kirklands brand. it's better than your brand. that's what they do.

is. >> wire fraud, securities fraud, securities fraud conspiracy and money laundering he will no longer testify this morning. new ftx john ray is set to testify in the next hour, jim. we do expect to hear at least some of that >> you read the right paragraph. i mean, this notion, everyone is listening to this. the alleged fraud is a clarion call to crypto platforms they need to come into compliance with laws. okay they could go after every single -- everyone finance. they can go after anyone

these companies have spent millions, billions to try to get people on the sec, get congress people to say, listen, we're broker dealers we are anything we want. i've been waiting for someone in the fed, federal government to say this do you think finance is in compliance >> well, you bring that up that is a focus this morning for any number of people >> how would you feel? >> they did earlier today temporarily halt some withdrawals of the usdc on the eth and bnb chains bnb has taken a hit. >> the sec guys who were saying it was vin tech we love it

g gonzo! he should have declared war before this. there were people in government who believed that this was all fin tech it was innovation. it was block chain does amazon use block chain? how much does google use it? >> we are showing any number of people who invested if tx. it goes to the lack of diligence on the part of many of these investors. >> you read the piece? >> it surrounded mr. bankman-fried for quite some period of time when, according to the government, he is nothing more than a complete and total fraud. using alameda as his bank. saying, here, i will write you a

note i owe you, ftx,s billions of dollars. and going and using the money borrowed by alameda to finance all sorts of things. including the bahamas,politica donations. all of this in the complaint it will be interesting to see what the u.s. attorneys indictment looks like as well given all of those charges obviously, there was some disappointment today, including from members of congress mr. bankman-fried will not be testifying maxine waters put a statement out indicating she was a bit disappointed >> second bad thing this week for tom brady after that horrible game. no sacked many times. >> he did not have a good game there are any number of celebrities we have talked about a number of times involved with ftx and were compensated in different ways, some of which did not work out well for them unless you took cash, it didn't

work out well you for you. >> steph curry, he's a good guy. >> we don't know how much was an in-kind payment. >> we had mr. wufl on. >> we had mr. wonderful on >> mr. bankman-fried has been speaking so openly and bizarrely to andrew ross sorkin. >> trying to confess his way out of jail. it's never been done >> let's hear from any number of these other exchanges. >> did you see this tweet from john reid stark. >> there are some money leaving. >> office of internet enforcement. it sounds like a real job. as predicted, sbf is in jail my next prediction is sec will file a sweep of cases against crypto exchanges fail not at your peril at

coinbase >> publicly traded stuff >> well, we will see the wires, the reuters has an item that the cftc will allege fraud of digital commodity assets reuters citing a source there. let's bring in kate rooney i know you were talking early this morning about the timing of all of this and why you would want to have him not testify under oath >> we have also confirmed the source they are coming out with their own complaint in addition to what we hear from sdny and sec. pretty colorful language saying it was a brazen fraud from the get-go in terms of the timing here, maxine waters, other lawmakers have on voiced frustration in the idea that sam bankman-fried is not going to be able to testify despite saying he would do so. he had agreed to show up at least over zoom here for the

house financial services committee. legal experts i'm talking to question some of the timing but say if anything it suggests that the feds and the doj here did not want to give him any more chances to poison a potential jury as they put it. there's questions about he's done hours and hours of media testimony. he's done deal book, podcast, twitter spaces they wanted to cut it off there and say he's already painted public opinion in a lot of ways. they wanted to get ahead of it some people don't buy that others say they just wanted to stop the sbf show as they put it and he had another chance to go out there publicly in front of congress although this would have been the first time we have heard from him under oath. the bar is much higher than than doing a podcast, for example >> i want to come to you on what's going on in crypto now.

specifically binance a wave of withdrawals that's carried on today what do we know? >> $1.6 billion of withdrawals they're halting withdrawals for one particular cryptocurrency, stable coin, pegged to the price of a dollar. they said that's because they are doing a coin swap. there's some technical jargon in there. the bottom line is people are nervous about any sort of centralized exchange and for good reason. the ceo of binance has come out and said that's not true some of these allegations aren't right. but reports that the doj is considering prosecuting binance at this point with anti-money laundering laws. so they're absolutely the

biggest platform they have 75% of the global crypto trading volume. they're really, really a high-profile exchange right now. and it's worth paying attention to, although we don't have any signs yet there is any potential for bankruptcy but this usdc stable coin situation i mentioned is something people are watching. we will see if we can get more clarity. we have reached out a couple times. >> they had a report in terms of a firm called mazar showing bitcoin reserves showing how overcollateralized they were any concerns about that? >> there are and any proof of reserves, as they call them, there have been questions. a lot of exchanges have tried to get ahead of questions if their cryptocurrencies and deposits are backed one to one. there is a potential for cherry

picking and showing a portion of the balance sheet. >> it kah -- kate, kate. , which has a mole it's obviously justice has a wire or is willing to comply this has to be one where you want to be the first to say, look, i know this is a sweep. who do we know >> some of the lawyers i've been talking to say that is the likely scenario. ellison is the ceo which is sam bankman-fried. he has been out there implying that caroline ellison and those at alameda knew about this while he didn't. the pace and the velocity in which they were able to bring charges suggest there was a

whistle-blower internally. we don't know who it is yet. that is the expectation, that somebody has sort of sped this up by providing more information than they might have gotten otherwise. >> there isn't anyone in compliance with this they are all up. everybody watching gets a great opportunity. >> to do what? >> to get their money back before the other eople. >> you said never too late >> no. get your money out ahead of the other guy. they said you're all safe here safe is a relative term. today they might be safe tomorrow maybe not as safe you have a chance the get out. now. >> talk soon, kate still to come, boeing's dave calhoun on one of the largest

orders in recent years take a look at futures here. obviously green. dollar below $1.04 back to june time magazine names "the fabelmans" the best movie of the year.

you do what your heart says you have to. just look around. this digital age we're living in, it's pretty unbelievable. problem is, not everyone's fully living in it. nobody should have to take a class or fill out a medical form on public wifi with a screen the size of your hand. home internet shouldn't be a luxury. everyone should have it

and now a lot more people can. so let's go. the digital age is waiting. september 1st high of about 4,100. anything above that will take you back to late august. looking at cpi

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welcome back the mad dash opening bell six minutes from now. >> you can argue it sells 16 times earnings just a tour deforce quarter. serner is going to become the de

facto. a lot of large hospital chains we know are currently epic i think it could be epic decline of epic. you don't want to go against larry ellison. ellison was in great form last night. i've always loved them for being concise. she is a genius. she is not recognized because she is not a self-promoter she is putting up amazing numbers. this stock is too cheap. it's just a buy. >> second rate company good technology. oracle is blowing out real technology

they are talking cleveland clinic mayo. they say they're in. a lot of ways you can be in. this is oracle the likes of which people have not reckoned with yet and i was very impressed with the call and i am not impressed with the analysts who think, ah, it's oracle kind of like ibm >> merck and moderna for the treatment of melanoma. >> what a day. >> opening bell after this

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we have shown you futures in light of cpi jim mentioned mentioned 4.6. got down to 4.2. dollar now 1.04. huge implications. >> yeah. i mean, a lot of people don't know what's going to happen when

we see the earnings. use pepsico as an example. when you get the decline and the change in the dollar, sometimes it's really good wages could be the thing that makes it so powell is not on board. people are yeah coinbase that's it. >> close to 4,100. s&p up 103 the big board is schmucker

nicke nickelodeon celebrating the nfl game >> i think you should be careful here let's use what's going on right now. jm schmucker is ringing the ball stock is up 14% for the year and 52-week high those are still part of the problem. schmucker is a great company that stock cannot go up at the same time the fed cools things fed has to go 50 somehow they have to get a better supply chain. and costco other guys tend not to say,

listen, you want to be in. prepared a massive order ready for the next one that was a oneoff. it was really good well, no you see, we made a lot they will find someone who makes it cheaper >> hot dog vendor wanted an increase we will make it ourselves. >> kirkland, they know their brand is superior to the public label brand, so to speak what happens is costco, which had an okay quarter, they're going to get a special dividend. costco is the arbiter. not the government cut your price

>> walmart was known for doing that for many, many years. >> i'm waiting for dan to call me and say, jim, we do it all the time go ahead, just call me just get it over with. get it over with nate burleson ringing the opening bell >> shares of moderna up 15%. the news for moderna is an investigational personalized mrna cancer vaccine in combination with keytruda, the giant merck drug for any number of cancers they used it to treat and cited

clinical meaningful improvements for survival for people with stage 3 and 4 melanoma that's good. that's 44% reduce the risk of occurrence or death 44%. that is being viewed quite positively >> it's important to remember we have a lot of deals that are awful. lost a lot of money. in 2019, there was this guy that came up to me at the conference. moderna. i said oh, my god, your stock fell 6%.

what the heck is that. >> i have a development for the vaccine of cancer. yeah, so do i. oh, yeah can you please interview me. i put him on he had this great accent and i finished i turned to him and i said did we just present someone who is just making stuff up and she said, no, he might be for real i said, a vaccine for cancer first of all,, the first one against covid in february. >> yes >> and then this >> the reason we know moderna is for the covid vaccine. but you're talking about cancer

convenience. weber and traeger. >> maybe they have a needle you stick into the steak given the data, it's a covid-like moment for me >> he is so good >> you're telling me merck is better than traeger. >> your fascination with grills is a mystery to me >> pepperidge farm cookies >> and we know he loves spam >> it's fantastic. i have the regular and the figgy pudding spam and i also had the hormel chili.

i'm having chicken tonight affirm, hood, discovery, kbw cutting the banks out right. >> wow also negative. the market is saying pay no attention to the man behind the curtain. it makes sense i think they were too negative affirm has been pretty much beat up >> short of up start >> really? >> some of it, yeah.

the fed raises just another percentage point >> yeah. >> some of the companies are going to make it i don't like this up opening disney is up really big. there's nothing in the number that's good for disney sellers come in because they think disney is a pitiful helpless giant you shouldn't have done that that was bad >> a lot of the winners at the open at least are housing related. pulte, d.r. horton and others. >> toll did well you thought they were going to crumble. >> and you mentioned oracle already. you're very positive on the quarter. obviously, joined by a number of analysts as well who like the

print there, jim stock is up 4 plus percent >> it should it is 17 times earnings. some of the companies are not expensive. everyone thinks they are all involved with enterprise software it is like a golden calf >> where is your gut now, moses. all right. let's move on. >> i think it was his birthday yesterday. >> unbelievable. gave it to -- fabulous collection >> more on the cftc news kate >> carl, yes we did get that complaint from the cftc they are using ftx and alameda

of fraud and fraudulent misstatements of material fact this is similar to what we heard with the fcc unbeknownst to all but a small circle of insiders, customer deposits were regularly accepted held by and/or appropriated by alameda for its own use. bankman-fried's discretion, executives created features in the underlying code that allowed alameda to maintain an unlimited line of credit here. they say the company alameda, sam bankman-fried had an unfair advantage, including quicker execution times and exemption from the risk management procedures it had in place

and they talk about the hundreds of millions of dollars in poorly documented loans they talk about unauthorized uses ftx was never registered despite having employees and personnel based in the u.s. here about a 40-page complaint. >> kate, pretty remarkable >> i think it's going to be a sweep. i think that statement -- i've been waiting and waiting and waiting for the broad statement from the sec saying, listen, you have to get in compliance. these firms are not in compliance remember, a lot were formed with the idea that the government has really no right.

but we'll call ourselves whatever we want we'll do whatever we want. and a lot, including many that are still involved, they are saying come clean. >> you need to explain what compliance is. if they say we need to prove you're in compliance >> say if you're fidelity and it has this buck for money market, they're allowed to come in they could storm in tomorrow and say, okay, what do you have? what's in that you have to show them all the finance. thank you binance shows them everything >> right >> we'll continue to cover it. the hearing at the house in just a little while we mentioned that order from united of boeing planes of 787 dream liners >> not just a major order.

the largest ever commercial airplane order in the u.s. history. put this into perspective for people i think there are orders and then there are orders. >> without a doubt thank you for being bold exactly at that moment in time you could be bold and should be bold i give all the credit in the world. this is a testimony to sort of the post max boeing in my opinion and the 87 in particular it could be okay if this 787 program leadership decided to hide in a corner when the max issues were as difficult as they were they didn't. they interrogated themselves they looked at everything across the board. they had to hit the pause button for the better part of a year, as frustrating as it was they have come out, got it recertified.

>> you have said we will increase 787 down in charleston. it strengthens the backlog you go up to 5 and down to 10 a month. >> it is significant without a doubt. there will be more to come we will see that through >> critics are out there saying you and your counterparts in europe are talking about increasing production. you have supply chain, inflation and labor shortages in different pockets around the world how long does that last? how much does it constrain plans to increase production the next couple of years? >> i can't answer that last part decisively because it is a set of supply constraints that moves around. it hits us in places we're not

expecting at times slowly and steadily we will overcome those constraints i expect this next year to be a tough year i expect us to get beyond it in the following year and a question of how high do the rates ultimately get this is not a one quarter, two quarter fix. this is a steady whack-a-mole kind of situation. everybody has been honest and open about it, including your competitors. we're just dealing with it one moment at a time >> dave, jim has a question for you. jim. >> dave, congratulations, first, on the order fantastic. >> thank you, jim. >> there will come a day that the khaoeu news the will rue are they too late to get our

planes >> we just had to deal with the realities we faced for geopolitical reasons i'm guessing we have been unable to make the deliveries we would like to make to our chinese customers. we will continue to support them we stand ready we want to deliver them airplanes. in this period of time with such global demand at our doorstep we have to take advantage of the market >> there are two airplane makers the chinese truly think they rule because they have the most money. i don't see a lot of money i see them having a lot of covid. i don't see them doing anything. is it entirely possible they will just be in the queue like

every other country we thought would ever get a plane >> well, again, i'm going to be careful not to use sharp language they can't just manage other customers out for their benefit. united is critically important yes, there is a queue. we still have ear planes on the tarmac they can take >> dave, a lot of people are looking at the next few weeks and you have the 7 and 10 certification deadline if a waiver is not in place by then, people originally were saying boeing is going to throw in the towel and not build the planes what happens if there is not a waiver by the end of the year? >> in this case i think we have to all be careful not to put too much weight on the deadline

itself deadlines are not good for cert. they're not good for the regulator to get the job done. not good for us in trying to certify the airplane we have to make safe choices every step of the way. the 7 and the 10 are safe choices. this is the right alerting system in this airplane. that is the case we're making. >> are you confident you get the waiver or there is a decision where you will be able to make the 7 and the 10 and you'll be able to say, i don't know, sometime early next year at the latest it will definitely be made and certified >> we're just going to continue to work with the legislator to get the dates removed to extend. if they want to attach a provision or two, we get it.

everything will be safety related. that's what we're up to. that's what our regulator is up to >> dave calhoun. there are orders and then there are orders there is one of those there are orders 200 firm airplanes by united largest ever in commercial aviation here in the u.s guys, back to you. >> phil, much appreciated, as always phil lebeau and dave calhoun thank you, guys. dow holding onto gains not as much as futures have implayed hovering south of 4,100 on the s&p. we watched bonds as well two-year down to 4.12. take a look at the tableahead of a very important fed meeting. back in a minute

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you're puss in boots? no habla english. habla espanol? i don't speak spanish either. who is this guy? i'm puss's therapy dog.

wanna rub my belly. no, hard pass. puss in boots. rated pg. we are watching sec cftc and now the southern district this morning. let's get back to kate rooney. kate >> hey, carl this is an eight-count indictment from the southern district of new york the ftx founder is being charged with wire fraud, money laundering and violating campaign finance laws. these charges were just unsealed this started around 2019 until november 2022 when the company filed for bankruptcy they say sam bankman-fried did this willfully and knowingly charge one here, conspiracy to commit wire fraud on customers there's one here, conspiracy to commit wire fraud on lenders, wire fraud on lenders, c

conspiracy to commit securities fraud, conspiracyie to commit money laundering and conspiracy to defraud the united states and violate campaign finance laws. we officially have the unsealed indictment with sam bankman-fried being charged on eight counts back to you. >> kate, appreciate it very much jim, as we await the hearing, what can ray add to all of this? >> look, i think that he's not the guy. i think they have everything they need. i think that they have been waiting, everybody has been waiting to say, listen, these companies have to be in compliance with the law, and now gensler said it. so i thinkthat ray is going to say, listen, we will be compliant with the law none of these other companies -- >> yeah, ray's responsibility is to restructure the company >> right. >> and try to return as much as possible to creditors. >> yeah. >> that's it >> yeah. >> i mean i don't -- i'm not sure how - >> have to see what i have what

you're going to get back >> -- what took place at - >> yeah. >> -- at ftx >> i found it. >> what's that >> this is what you're going to get back >> $20 >> yeah. >> oh, that's it >> no, probably a little less. >> a little less >> this has got jefferson. i think it is probably going to have a lincoln he was a great man >> that would be quite unfortunate, but that obviously is part of everything we are covering this morning. >> you are not going to get anything back from these >> the billions of dollars that mr. bankman freed took from ftx. >> you read the -- you read what gensler said there's nothing. folks got some great houses, maybe airbnb >> yeah. >> there's nothing there's nothing. i mean there's nothing my guys say there's nothing. >> well, there's some apartments those can get sold >> those are apparently not -- you can't even get to them this guy wy clever he was clever, more clever

than -- than boskey, more clever -- i don't know, he is more clever than all of these guys >> we will see how clever he is. we will see how long he spends by behind bars potentially or whether to your point he gets off. >> could buy you a smucker's uncrustable and then you get change >> very nice >> speaking of which, jim, what's on "mad" tonight? >> i don't even know okay no, i have david gibbs >> oh, yeah, they raised their long-term guide today. >> the guy is great, the quarter is good, pizza is great, kfc is delicious. just don't take the skin if you are worried about your weight. i want everyone to write down a word, okay i want you to write down, retadatrudi. you can get it in this trial wi i will leave and get in this trial before i get my money out of various 22 to 24% weight loss.

>> let us know how that works out. >> 22%, 24%. i'm getting in that darn trial >> we'll see you tonight, jim, "mad money." 6:00 p.m. eastern time we will take you to this hearing as ware ene oping with levels of about 4,100.

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♪ ♪ good tuesday morning welcome to another hour of "squawk in the street. live at post nine of the new york stock exchange, in a moment we will go to capitol hill house financial services holding a hearing on the collapse of crypto firm ftx. john ray iii will testify. former founder and ceo sam bankman-fried will not he was charged this morning with defrauding investors, plus he was arrested in the bahamas last night. the southern district of new york unsealing that indictment moments ago, charging eight counts including wire fraud, conspiracy to commit securities fraud sec also involved filing a civil complaint against him alleging he engaged in a scheme to

defraud equity investors and ftx built a house of cards on a foundation of deception. in the meantime busy day for the markets. dow is up almost 600 on a cooler-than-expected print on cpi. got the nasdaq, s&p and the dow now positive for the month s&p, two-month high. we have a big show ahead of us in case you have not noticed. much more on ftx we are 30 minutes into the trading session. we are watching boeing, united airlines announced a 200-yet order with options for further purchases. the order is worth $43 billion at list prices of course, dave calhoun, ceo of boeing, was on our air a short while ago. boeing is up fractionally. united down 4% oracle beating on the top and bottom line. total revenue grew 18% management saying the strong u.s. dollar negatively impacting, but it was the strong, strong cloud business and the fact it is expected to

continue which has those shares up 3% right now. finally, moderna announcing an experimental melanoma vaccine commed with keytruda cut the risk of skin cancer recurrence you can see amemerck is up abou 1% we will get to the ftx hearing in a bit but we need to get to the markets reaction to the cpi number, very strong at least across the board for all of the major indices cnbc senior economic reporters steve liesman can fill us in on what the cpi number looks like, what it means and most importantly what it will mean with how the fed thinks about things >> i will do my best on all three. a sizable beat on inflation. progress in bringing down price hikes, but there's a question about whether this number will mean more to the markets than it does to the fed. here are the numbers we are looking at

0.1% beating the estimate of 0.3% on the headline year over year, 7.1% versus 7.3%, still high the core up 0.2%, a tenth lower than the estimate, the year over year falling 6.0% rather than 6.1% inflation is cooling for goods and services this month and the prices will cool even further in 2023 for the first time we can say the fed is winning its war on inflation. here are some of the details out there. you have a surge in food prices, up a half a percentage point, offset by a decline in energy prices, a bit more than expected used car prices continue to fall but owner's equivalent rent, a key factor driving inflation, up 0.7% services energy a bit hotter than the headline or the core, something that fed their powell has been watching. look at the futures market now marked down its estimate for the peak funds rate from around

499 before the number, now it is trading around 483 so a sizable chunk of what is expected to be the peak rate in may 2023 lopped off of that number the big change though still baked in for tomorrow, 50 basis points still baked in but now they're betting on 25 for the february 1 meeting some folks are saying, hey, maybe that's it afterwards now we wait to see if the market's exuberance is embraced by the fed and fed chair jay powell he's pointed to the labor market as a major source of inflation, so he might be happy about this number but not quite ready to take the victory lap the market seems to want him to take at this point, guys >> steve, that is where i want to pick up because you just touched on this, but really now arguably it is all about the labor market cooling until that happens the fed is likely to be hawkish, and we've heard that from both current and former officials leading up to the print we are getting today of course, this fomyc meeting

happening. walk me through what we saw in terms of wages and how it speaks to the resilience we are seeing in labor >> morgan, first of awfully want to say personally i would love to put on the party hat here, you know, and say this is done it is just my close read of what powell has been saying since yesterday, it may be too early for the following reasons. first of all, he has said several times that the fed is very cognizant and following the history of these things where the history raised rates in the '70s in response to higher inflation, then backed off and inflation surged ahead so i think they're going to want to put a couple of buckets on this fire before walking away and deciding that the fire itself is out. he has pointed, as you say, morgan, to the jobs market and the tightness in the labor market as an absolute key there for what is driving inflation, particularly that services, x housing core inflation number which is up 2% so that's a good number, but i think he's still going to be

concerned that higher wages from a labor shortage are going to work their way into cpi and into inflation. >> the other piece of this, i know we talk about it all the time, steve, but i mean just today, right, you got this cooler-than-expected cpi and equities are rallying on it. the s&p is up 2.25% right now. it speaks to looser financial conditions every time we get a data point that is moving in the fed's favor towards this tackling inflation narrative how much does it complicate the picture? >> it does complicate the picture and it could potentially guide powell in his commentary tomorrow, and for that you don't have to go back to the '70s for the his here just go back to the summer where the market became exuberant again and powell felt like he needed to again pour a bucket of water on it. then he came out with that short, sharp and shock speech in august at jackson hole where he basically said, i'm only thinking about inflation, inflation is a big problem, i'm not happy yet and that

redirected the conversation more towards where the fed wanted it to be. he's going to be concerned i think at some point that interest rates come down more than expected, markets rise more than he wants them to, such that it creates more stimulus to th brookings speech last week was a little bit more dovish, the market took it that way. we will see if he continues that, but i think he's going to be a little bit more cautious here about what this number means for the outlook for inflation and for fed policy than the market thivnks he is going to be. >> it will be fascinating. thank you. steve liesman on cpi and the fed meeting which begins today our congressional correspondent ylan mui is on capital hill and can give us a sense of what the scene is like outside the hearing room today on capitol hill. >> reporter: that's right. this hearing is about to begin current ftx ceo john ray is

sitting in the witness chair he has not started speaking yet but we expect him to outline a laundry list of failures of corporate governance and managements, including the fact that he says that ftx was co-mingling assets, there was a lack of documentation. it went on a $5 million spending spree for what he said were dubious access and he said senior management had access to customer accounts. we expect this hearing to last about four hours we thought it would last longer than that because sam bankman-fried himself was supposed to testify virtually today. obviously that's not going to happen now due to his arrest in the bahamas. while lawmakers have expressed support for the doj's move in making that arrest, they did seem to question the timing of it we already heard from the chairwoman of the committee, maxine waters, saying that the public deserves to hear directly from sam bankman-fried under oath and they will be deprived

of that opportunity now because of the timing of this arrest guys >> yeah, the timing is certainly i think curious. it is interesting, right, what a difference 24 hours could have made in terms of getting that testimony under oath all of this raises questions though, ylan, when you start hearing the word fraud being put to pen to paper with all of these filings coming out from regulators this morning on what it is going to mean for political donations. still too soon to tell or are we potentially going to see claw backs and what does it mean for lawmakers on the hill, including some of the people sitting with john ray later this morning? >> reporter: yeah, absolutely. so there are a number of both democrats and republicans who have received donations from sam bankman-fried or other ftx executives the ones who have gotten back to us with a response say they've been donating those funds to charity. interesting that, you know, you are seeing this on both sides of the aisle really one of the lawmakers who was most vocal about the timing of

sam bankman-fried's arrest was a representative who is a republican he said that republicans were ready to grill sam bankman freeland six ways to sunday and why couldn't the doj have waited one more way to allow this to occur. well, zelle din got $1,500 from an ftx executive and has not responded to our repeated request to find out what he did with the money >> we are watching the chair get ready for her statement. when she does, we will take that live kate rooney, do you expect many members of the committee to be critical of the ftc and whether they have enough tools to enforce? >> we heard a little bit about that it was mentioned on "squawk box" this morning and pointing to the ftc and what he described as failure of regulation. on the other hand, this company was domiciled and based in the bahamas, in antigua in some cases. there are certain areas where the sec's purview may not have

been enough. we got a complaint from the sec talking about defrauding investments, so they were going after sam bankman-fried this morning along with a wave of other complaints and indictments from lawmakers there is now a microscope in washington again on regulation, what they can do to prevent another episode like this happening again. this is a unique one sam bankman-fried like ylan was mentioning was a big donor in d.c., was seen as the expert witness, poster child for consumer protection. that image is shattered and he was swooping in to do bail outs and in hindsight doing what federal prosecutors are saying he never had the mon eave. a lot of it was ftx customer deposits there is a lot of disappointment on the lawmaker's side he is not appearing today in front of the

house, and there were likely going to be questions on where he got the money although based on his media appearances it is not clear we would have gotten much that he hasn't said publicly already >> kate, even as we see the images from the hill right now and i know you are situated in d.c. and we are getting ready to take some of this testimony in real-time within the next hour, there's been a lot of collateral damage and now, of course, you have all of these reports swirling around finance as well i guess. walk us through the situation that's happening there and whether we could potentially see more actions taken across more of the crypto space in general >> sure. now that ftx has gone bankrupt, withdrawals were halted on the stablecoin it has affected the price of the

dollar they said it had something to do with the coin sloth. in the meantime we have seen billions of dollars of withdrawal updated numbers were put out saying it was close to $2 billion. you are seeing a bit of fear in crypto markets >> let's get to the chair. this hearing is entitled "investigating the collapse of ftx, part one. i now recognize myself for five minutes to give an opening statement. first, i would like to welcome mr. john ray iii, who has been appointed ceo of ftx to oversee its bank rupruptcy, to testify before our committee in the first part of our investigation into the fall of ftx i am hopeful the arrest of mr. bankman freed, the founder and former ceo of ftx, means he will be held accountable for the fraud he has committed and the harm he has caused

he was scheduled to testify under oath before this committee today. unfortunately, the timing of his arrest denies the public the opportunity to get the answers they deserve rest assured that this committee will not stop until we uncover the full truth behind the collapse of ftx. just a few months ago ftx was one of the largest cryptocurrency exchanges in the world with a valuation of $32 billion in just three years since its founding today ftx is bankrupt and possibly looted. ftx misused and approximately $10 billion in customer funds and owes creditors at least $3 billion. today as many as 1 million people, many of whom are here in the united states, are locked out of their ftx accounts and

may recover only a fraction of their hard-earned investments, if any at all. this failure is not just noteworthy for its size but for the company's total disregard of standard business practices, governance, risk management and criminal conduct mr. ray, who also oversaw one of the largest corporate bankruptcies in united states history, enron, declared that he had never in his career seen such -- and i quote -- complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here, end of quote i am so deeply troubled to learn how common it was for bankman freed and ftx employees to steal from the cookie jar of customer funds to finance their lavish lifestyles today this committee will dig deeper into mr. ray's findings

with the hopes of piecing together the events that led to the collapse of ftx and the subsequent harm to millions of customers who put their trust in the platform we will also look at ftx's deep ties with alameda, a crypto hedge fund predominantly owned by bankman freed that gambled away billions of dollars in customer assets. they were inappropriately transferred from ftx importantly, we will hear how mr. ray and his team are trying to recover funds for customers by piecing together bankman freed's broken record keeping and by identifying potentially unlawful transfers to himself as well as his friends and family under my leadership over the past four years this committee hasclosely focused on the growth and popularity of crypto precisely because of the many concerns that the failure of ftx has highlighted.

last year i created an additional assets working group comprised of democratic members of the committee with the goal of learning more about the underlying technologies, applications, finance and the risk they pose to customers, consumers and the economy. in the president's working group on financial markets urged congress to safeguardthe economy from stablecoin risk i and ranking member mchenry jumped into action and continued to work on a bill with members of the committee the ongoing failures of crypto firms, lack, celsius, block five, and most significantly ftx and alameda research only serves to strengthen the importance for congress and the public to understand the harm caused to customers. what laws have been broken or

flaunted and how congress and the regulators can prevent it from happening again i want to say that i'm pleased that the committee's efforts have pushed enforcement agencies across the country to take greater action against bad actors who misuse customers' funds. i also applaud the sec for authorizing separate charges relating to mr. bankman freed, and i look forward to additional actions to hold him accountable and make customers more whole again. i yield back i now recognize the ranking member of the committee, the gentleman from north carolina, mr. mchenry, for five minutes. >> thank you, madam chair. okay q & a right now from house financial services committee where current ftx ceo john ray is concerned let's bring in former sec chairman harvey pitt to discuss -- i mean there's so much news around ftx this morning. we appreciate your time. i want to start with where we

just were which is that testimony getting underway in the house right now. expectation we will see revelations, more revelations from that hearing today where ftx is concerned and what it could mean for future congressionally crafted regulation for cryptocurrencies in general >> my own view is that today's hearings are mostly sound and fury but not going to add a great deal of light to anything. the interim ceo, mr. ray, has fully disclosed the problems he has seen, and mr. bankman fried has gone public for reasons that escape my comprehension and talked about all sorts of problems and the way the system could be gained.

so i see very little coming out of this particular hearing, which is just seems to me to be intended to point some fingers and get a little publicity what is really needed here is a national policy, and the biden administration in november published a paper which i commend to everyone's reading which said cryptocurrencies need a regulatory environment that is dedicated to the functions that cryptocurrencies perform, and there's a need for rules of the road which no one understands. the sec is going after ftx, but it is reminiscent of the old

recipe for rabbit stew first, you have to start with a rabbit and it is not clear to me that these are securities. in any event, ftx wasn't registered with the sec and there's a need here for a concise and considered national policy that lays out the rules >> so to dig into some of what you just head, the fact we had this lockstep filing of charges, the sec, you had cftc this morning, sdny, i guess talk to me about that, the fact they all do seem to be doing this in tandem with each other specifically just to draw out what you just said about the sec, this idea of crypto trading platforms needing to comply with securities laws, u.s. securities laws, this is something current

chair gensler has basically stated and stated again, but this really seems like the first legal test of that position. do you think it creates legal precedent, especially given the fact that we don't have a broader national strategy for regulating cryptocurrency? >> i believe that that's what chairman gensler is hoping for but in a way it is the wrong approach the justice department has clear jurisdiction what happened here, based on everything that i have read, strikes me as a clear fraud and it needs to be pursued criminally as the justice department is doing. but to pursue this as a securities law violation raises all sorts of thorny issues the worst thing that could happen is for a court to look at

this and say, wait a minute, the sec doesn't have jurisdiction here the congressional research service, which is non-partisan, has published a paper which says the sec lacks jurisdiction in this area. these are currencies, they're not necessarily securities the best approach is let the justice department go after the fraud. let the administration come up with a national policy that lays out the rules of the road. that's what is required here >> so are you suggesting, harvey, that the sec should actually withdraw its complaint and simply let the fdny pursue the criminal charges >> i am suggesting that the sec jumping in here takes a broad

leap and it is more a play to ward off criticism why didn't the sec do anything the sec didn't do anything because it doesn't have jurisdiction here. and if the ultimate determination is made is that the sec is the agency that should implement national policy in this area, that's great, but congress needs to act. and for the last several years congress has done nothing. that's why i commend the administration's recent policy statement in november because it recognizes the need for a national policy. >> the timing of the releases fs these filings of charges, i mean we've seen sam bankman-fried

come out for weeks now and say he is still getting to the bottom of it, he is still trying to figure out what actually went wrong. the fact that we have these detailed filings now and that regulators did seem to move as quickly as they did in the midst of this bankruptcy case unfolding here, does this speak to the possibility there's a whistleblower in the company how should we be thinking about how information is being gathered behind closed doors right now? >> well, i think mr. ray is providing a lot of the data and details. his appointment was definitely a very sound move, and it gives people an inside look at exactly what was going on there. i think there will have to be more details provided and determined, but regulating cryptocurrencies is not a political issue. it is not republican, it is not democrat it is a national issue, and what

we need is bipartisan, intelligent concepts to deal with the regulatory regime that will make the most sense >> harvey, do you think that gensler in his public appearances up until now trying to argue that, in fact, crypto could be characterized as a security and that they did have enforcement, were those hollow arguments or were they not well received >> there are arguments that some of the offerings have been conducted in ways that make it appear that these are securities, but the nub of the matter and what is most important here is that there are valid uses for cryptocurrencies in blockchain technology what we need is a national policy what we don't need are

individual enforcement actions designed to expand an agency's jurisdictional turf. this is not the way to go about regulating, particularly when i believe the justice department will have a clear case of fraud based on everything i've red >> right do you expect any hiccups in extradition? do you think there's going to be difficulties with the bahamians? >> no. i think the only thing that shocked me was that mr. bankman-fried thought he could parade out his ignorance and speak publicly from the bahamas and not have anyone take any action against him, including the bahamian government >> yeah, it was fascinating,

harvey, to hear him over and over again sort of, as you say, professing his inability to fully understand everything that had occurred final question here just on the sec, and obviously you have indicated sort of you're questioning their strategy in some way, but do you feel they're trying to do this some simply freeze everything right now and potentially protect investors on exchanges that currently are still in existence but perhaps may be, you know, not fully representing or not as transparent as they should be? >> i think that there are a lot of good motivations behind the sec's enforcement division's actions. the concern i think is that if you have to stretch the law or you have to argue that there's coverage when, in fact, there is no coverage or there may be no

coverage, that puts you in a difficult posture. so in my view, i think the enforcement division is proceeding in a rational, sensible way, but i also believe that trying to knock these cases off on a one-off basis just leaves too much to chance and to the fact that courts will find, as the congressional research service paper that i mentioned indicates, that there actually is no jurisdiction on the part of the sec >> harvey pitt, former head of the sec. thanks for joining us today to add some analysis to this tidal wave of news that we are getting. we are awaiting, you can see on your screen there, we are awaiting president biden who is

supposed to be giving us some comments here shortly. in the meantime, we are seeing the markets rally, though off the highs of the morning on that softer-than-expected, cooler-than-expected cpi print for november the s&p is right now 4,054 the nasdaq is outperforming, up 2.3% the yields from the treasury come off and the dow is up 284 points right now it looks like every sector is in the green in terms of what is under performing specific name around specific news united airlines giving that boeing order we talked about, also trimble on the heels of an acquisition it is making down 6% in the s&p >> a little more scrutiny on the cpi print, how we managed to get a cooler than expected overall print with services still on file services, energy up .4, it is a

fresh 40-year high as the fed chief mentioned in his speech at brookings, you take a couple million people out of the labor force who probably are not coming back either due to retirement or to covid and that's going to keep -- that's going to make, even if services eventually lag and provide some relief, the question is will wages do the same thing. >> of course you know, immigration is factored in there, too something steve liesman did a big report on a couple of weeks ago. to your point that is what the fed cares about right now. even as we have seen used car prices continue to fall, and even this past month you have seen a dip in some of the travel-related prices as well, things like hotels and airfare it is really the labor component that is in focus for monetary policymakers right now as we do have that fomc meeting underway. >> we're going to await the president here in a minute while we wait let's get back to the hearing where q & a has begun. >> -- are detrimental to ftx if so, could you give us an

example? >> certainly thank you. you know, the operation of alameda really depended, based on the way it was operated, for the use of customer funds. that's the major breakdown here, funds from ftx.com, which was the exchange for non-u.s. citizens, those funds were used at alameda to make investments and other disbursements. >> did ftx have sufficient risk management systems and controls to appropriately monitor any leverage the business took on and the interconnections it had with businesses, like, again, alameda? >> there were virtually no internal controls and no separateness whatsoever.

while the hearing continues, let's get to the president commenting on cpi. >> -- news that provides a reason for optimism for the holiday season and i would argue for the year ahead we learned last month's inflation rate came down, down more than experts expected in a world where inflation is rising in double digits in many major economies around the world, inflation is coming down in america in fact, this new report is the fifth month in a row where annual inflation has fallen in the united states. inflation outside of food and energy, a key measure that economists use, also fell. make no mistake, prices are still too high we have a lot more work to do, but things are getting better, headed in the right direction. most americans can see the progress driving down the street, finding relief at the pump, as gas prices fall gas prices are now lower than they were a year ago and half of

the gas stations selling gas -- selling gas at $3.09 or less the most common price for gas prices across the country is $2.99. the decline in gas price giving consumers a break they need to keep the economy going when you have a two-car family they are saving hundreds of dollars a month. it is a big deal today's report contains another piece of good news food inflation slowed last month providing much-needed relief for millions of families at the grocery store. this is welcome news for families across the country as they get ready for holiday celebrations and family dinners. it is important we put today's news in broader context. when i took office we inherited a nation with a pandemic raging and an economy that was reeling. we acted quickly and boldly to vaccinate the country and put in place a new economic strategy, a strategy built on an economy that was based on from the bottom up and the middle out now 21 months later we can see

how our economic plan is working. we have added every single month -- every single month of my presidency we have added jobs, a total of 10,500,000 new jobs 750,000 of them are manufacturing jobs where is it written, as you have heard me say it before and i apologize for repeating it, where is it written america can't lead the world once again in manufacturing by the way, i continued to talk about the need to invest in research and development look what is going on in the department of energy, on the nuclear front. there's a lot of good news on the horizon. unemployment is down to 6.4% when i was sworn in -- down from 6.4% when i was sworn in now 3.7%, near a 50-year low we have done all of this while lowering the federal deficit in the two years we have been in office $1.7 trillion let me say that again. $1.7 trillion we've lowered the

federal debt no administration has ever cut the deficit that much. now inflation is coming down as well prices of things like television and toys are going down. that's good news for the holiday season used car prices fell for the fifth month in a row new car prices didn't go up this month. that savings is critical to so many families. it gives them just a little bit of breathing room for the holiday season all of this means that for the last several months wages have gone up more than prices have gone up. wages have gone up more than prices have gone up. i want to be clear it is going to take time to get inflation back to normal levels as we make the transition to a more stable and steady growth, but we can see setbacks along the way as well. we shouldn't take anything for granted, but what is clear is my economic plan is working and we are just getting started my goal is simple. get price increases under control without choking off

economic growth. bring inflation down while keeping our labor market resilient. build an economy from the bottom up and the middle out, an economy with good jobs, good wages, and for the long-run not a boom-or-bust economy because of my plan we are beginning to see historic investments that are leading companies to invest hundreds of billions of dollars -- let me say that again -- hundreds of billions of dollars to build semiconductor factories and other advanced manufacturing right here in america. it is going to create tens of thousands of good-paying jobs in the years ahead. by the way, a significant number of these jobs are expected to be jobs that pay an average of $125,000 a year. many don't require a college degree so things are looking up so what is next? because of my plan we are taking powerful interest to lower -- powerful actions to lower prescription drug costs and health insurance premiums and

energy bills in just a few weeks starting in january families will get a little more breathing room they've been told for some time since we passed the legislation that we're going to be able to lower the price of drugs let me give you just one example. coming january 1, seniors with diabetes on medicare are going to pay no more than $35 a month for prescription of insulin. up to now they've been paying as much as $400 a month that's a genuine savings for seniors. this matters to so many families with loved ones who have diabetes and rely on insulin to survive, going from an average of $400 down to $35 a month. in january they won't have to choose between paying for their insulin and in many cases putting food on the table. it matters it is real savings to people and it is just about to kick in. the same is true from health care to clean energy

by taking action we are making real progress in strengthening and stabilizing our economy, giving americans across the country some breathing room in the process. look, i know it has been a rough few years for hard-working americans and for small businesses as well, and for a lot of folks things are still pretty rough but there are bright spots all across america where we are beginning to see the impact of our economic strategy we are just getting started. i'll say it again, i have never been more optimistic about america's future and today's news gives me other reason to be optimistic about that future we are building a better america, an economy from the bottom up and the middle out, not the top down when the poor have a shot, the middle class do well, the wealthy always do very well. we just have to keep going i know we can get this done. god bless you all and may god protect our troops i will take questions. i'm going to be seeing y'all a

little later this afternoon. i'm not taking any questions right now. thank you very much. >> wouldu you say when you expt prices to get back to normal >> that's president biden making comments about the economy on the heels of the cpi report we got this morning talking about inflation and, as i just mentioned, the economy we will continue to monitor the markets which are trading higher this morning right now let's get back to the hearing on the hill surrounding ftx. >> the jurisdictions will cooperate with each other, the regulators and all of these jurisdictions i think realize everyone is there for an accounting purpose to protect the victims and recover assets for the victims of these situations >> how much have you been able to secure and where are most of these assets located >> we have been able to secure, you know, over a billion dollars of assets.

we have secured those to cold wallets in a secure location it is an ongoing process though, which will take, you know, weeks and perhaps months to secure all of the assets. >> are most creditors located in the u.s. or foreign jurisdictions? >> the majority of the creditors trade through the dot-com silo and are outside of this jurisdiction although there are some foreign customers that are on the u.s. silo and vice versa. >> so it is my understanding you established four silos can you explain why you believe establishing these silos and taking this approach will maximize asset recovery for creditors, and do you think this approach could help determine what happened to the $1 billion that has gone missing? >> yes so one of the reasons why we set

up the silos the way we did was to first focus on the ftx silo for the u.s. it is a relatively smaller trading volume, fewer users. it is truly meant to be for the u.s. customers that kind of silo was really for non-u.s. customers there's a logical reason why we separated those two out. the alameda fund, that's just the fund that, you know, drew resources from the exchanges so it is really separate it was not for customers per se. it was simply a hedge fund >> as we here in congress consider the possibility of legislation in this area, what is the one thing that you have seen in your short amount of time as ftx that you will urge us to keep in mind or is needed the most

>> you know, i don't want to speak to, you know, detailed regulations or make observations about regulations. that's certainly not an area of my expertise however, we are dealing with people's money and their assets and, you know, my basic observation is you need records, you need controls, and you need to segregate people's money. >> thank you >> it is that simple >> thank you madam chair, i yield back. >> the gentlewoman from missouri, mrs. wagner, is now recognized for five minutes. >> i thank you, madam chairwoman i thank you, mr. ray, for being here and the work that you are doing. mr. ray, you have compared ftx as worse than enron. can you please elaborate on some of the specific ways ftx is worse than one of the largest corporate frauds in history? >> the ftx group is unusual in

the sense that, you know, i have done probably a dozen large, you know, scale bankruptcies over my career including enron, of course every one of those entities had some financial problem or another. they have some characteristics that are in common this one is unusual and it is unusual in the sense that literally, you know, there's no record keeping whatsoever. the absence of record keeping. employees would communicate, you know, invoicing and expenses on slack which is, you know, essentially a way of communicating for chat rooms they used quick books. a multi-billion dollar company using quick books. >> quick books >> quick books nothing against quick books. it is a very nice tool, just not for a multi-billion dollar company. there's no independent board, all right. we had one person really

controlling this, no independent board. that's highly unusual with a company this size. it is made all the more complex because we are not dealing with widgets, you know, or something that is tangible we are dealing with crypto and the technological issues are made worse when you are dealing with an asset such as crypto >> mr. ray, mr. bankman-fried has apologized i will sub quote here, for mistake goes he has made based on your review, is there a way to know if the transfer of ftx customer funds to alameda research was done by mistake >> i don't find any such statements to be credible. >> reports suggest that ftx.com transferred more than half of its customer funds, roughly $10

billion, to alameda research is that accurate, sir? >> our work is not done. we don't have exact numbers for you today, but i will say it is several billion dollars, in that range. so we know that the size of the harm was significant >> mr. ray, ftx.com held itself out as having a sophisticated risk management system commenc commensurate with the size of its operation. based on your work to date, can you explain the sophistication of the risk management system? >> i can say that is absolutely false. there was no sophistication whatsoever there was an absence of any management >> mr. ray, mr. bankman-fried has been able to confuse interviewers by talking in

circles around the multiple business activities of ftx.com mr. ray, would you break down the different business "activities" of ftx.com? >> you know, much of this i have described. essentially they had two exchanges, allowed users to trade crypto then there was the hedge fund. it is as simple as that. the users, you know, were allowed to make a variety of investments. they got a more expansive ability to trade crypto, if you were a known u.s. citizen on the dot-com exchange i know it has been described publicly as very complex and it is to some extent, but essentially you had two exchanges and you had a hedge fund inside both the u.s. silos as i

mentioned and inside the silos for dot-com there were regulated entities we have regulated entities, for example, in japan that were solvent. those are sort of distinct from the other basic operations we had which were the two exchanges. >> i thank you, mr. ray. madam chair woman, i would like to submit an op-ed for the record describing an existing sec rule that could have prevented customer assets from being misused, and i appreciate my constituent, the president, ceo of stiffel, and i would like those entered for the record i thank you and yield back >> thank you very much the gentleman from california, who is the chair of the subcommittee on capital markets, is now recognized for five

minutes. >> for five years i have been trying to ban american investments in crypto. i am the only member of the house to get an "f" from the only crypto-promoting organization that rates members of congress. my fear is that we will view sam bankman-fried as just one big snake in a crypto garden of eden the fact is crypto is a garden of snakes. now, from the outside crypto just looks like a non-fungible token, an electronic pet rock for the 21st century, something that might be good to invest in even though it has no apparent value because you might get somebody else to buy it from you for even more. in reality the hope of crypto is to be a currency, to compete with the u.s. dollar and to announce its advantage over the u.s. dollar in that competition.

it puts the advantage right in the name, crypto, hidden currency well, is there a big market for that is there a big advantage that crypto has over the u.s. dollar if it actually became a currency, which it is not yet? well, there are drug there are drug dealers, human traffickers that will find that to be a good feature there is a hell of a market for bankruptcy liquidation but the big market is tax evasion. i know there are some on the other side who cheer every time a billionaire escapes taxes. the other announced purpose of crypto is to compete with the u.s. dollar as a world reserved currency, thereby enriching the corporate billionaire bros and taking thousands of dollars of advantage away from the american family because we benefit from being a reserve currency

now, sam bankment freed or inmate 14372 had one purpose in all of his efforts here in congress he was a well known figure only one wearing shorts. his one purpose was to keep the sec out of crypto r, to provide baby regulation from the cftc. i have one comment for my colleagues don't trash sam bankment freed and then pass his bill i fear that could happen because sam was not the only crypto bro with pacs and lobbyists. and there is no pac or lobbyist here to work for efficient tax enforcement or sanctions enforcement. now, i have heard from some on the other side criticizing the sec.

and in july in this room i criticized the head of the sec for -- the head of enforcement of the sec for not going after a crypto exchanges but the fact is that without objection i'd like to put in the record a letter signed by 19 republican members designed to push back on the sec, a brushback pitch, if you are familiar with baseball attacking the sec for paying attention to and, quote, the purported risks of digital assets and i'd like to put on the record without objection comments from eight members made in this room that were designed to attack the sec as being anti-innovation for their efforts. >> mr. ray -- >> you are going to be looking at ftx

we know sam bankment freed already faces criminal charges, but he did have help will you be looking for and turning over to u.s. law enforcement authorities information about the possible criminal actions by ryan s., carolyn wilson and the other folks in the fancy apartment >> we are doing a thorough investigation, and we will -- they have been cooperating with the u.s. regulators and law enforcement. we will turn over any information that will be relevant to them. >> thank you i will point out in particular that one of the counts, count eight, in the complaint or indictment is violation of campaign finance laws. and i hope what you will turn over is a list of the major bonuses and/or loans it is reported that ryan solome got a $55 million loan so that

law enforcement can piece together when those loans and bonuses were made and when they immediately preceded disguised campaign contributions can we count on you to do that >> yes, i can confirm that. >> my time is expired. >> thank you the gentleman from oklahoma, mr. lucas, is now recognized for five minutes. >> thank you, madam chairman, and thank you, mr. ray, for appearing before the committee this morning, particularly in light of the recent arrest of bankment freed i expected you would be cautious this morning in your answers and you have been very thorough and methodical and the committee and i appreciate that. first i'd like to discuss the bankruptcy process, mr. ray. it is our understanding that some of the ftx entities were not included in bankruptcy, including ledger x could you explain why those entities were not included and what might ultimately happen with them?

>> ledger x is a perfect example of the entities kept out of bankruptcy it is a regulated entity it is solvent. we believe there has been no harm there whatsoever. there is no reason to put it in a bankruptcy ultimately, we will look to sell ledger x and put it in the hands of a good stewart. >> and would you expand on how u.s. bankruptcy proceedings interact with international proceedings, for instance, like those in australia >> yes the system is really designed to have a cooperative relationship with liquidators in other jurisdictions. we share information we cooperate with each other relative to maximizing customer value. and ultimately facilitating distributions and, you know, over all facilitation of the completion of the scheme in order to render customers as

whole as possible. >> as we have all seen, of course, the sec has charged mr. bankment freed with defaulting investors, along with charges from the cftc and the southern district in new york in your testimony, you describe ftx group as having an acceptable manage of practices and you made the message clear in particular as to how mr. bankment freed is accused of the sec alleges one way he diverted funds to the research is by directing customers to deposit cash into alameda-controlled bank accounts can you explain how ftx was able to conceal that? >> you know, we're still somewhat early in our investigation, but we can confirm that funds were deposited directly into alameda, as opposed to ftx bank accounts. unfortunately, obviously, the

situation. >> one last question on the bankruptcy it's been reported that ftx digital and ftx australia were not included in the bankruptcy filing because local regulators already initiated their proceedings. is it true they could not have been included because of that? >> yes our filing occurred on november 11th and there was other filings that had occurred shortly before. >> one last thought. clearly your profession is cleaning up messes that other people have made that's a fair way to describe it not messes that you made but they made. how does this compare in your experience, magnitude-wise >> well -- >> the worst or the worst by magnitudes >> it's one of the worst from a documentary standpoint even in the most failed companies you have a fair road map of what happened we're dealing with literally a

paper less bankruptcy in terms of how they created this company. it makes it very difficult to trace and track assets, particularly as i have said in the crypto world it's really unprecedented in terms of the lack of documentation. >> bankman freed tried to show himself as the brightest of the bright being bright makes you neither honest or a fool, does it? thank you, mr. ray >> thank you the gentleman from texas, mr. green, who is also the chair of the subcommittee on overnight and investigations is now recognized for five minutes. >> thank you, madam chair. i thank the witness for appearing today. sir, i have in my left hand a sealed indictment from the grand

jury as it relates to mr. samuel bankment freed and in my right hand, the securities and exchange commissions' complaint filed against the same defendant let's put aside the civil complaint. i have one question, but first i would like to lay a predicate by going through these charges in the criminal complaint wire fraud on customers. conspiracy to commit wire fraud on lenders conspiracy to commit commodities fraud. conspiracy to commit securities fraud. conspiracy to commit money laundering and the list goes on with a few others i mention these things to you,

sir, because dr. king reminded us that nothing in all the world is more dangerous than sincere ignorance and conscientious stupidity. mr. bankment freed has pretty much indicated that he just made a big mistake, that he was doing the best that he could to be -- good tuesday morning we will get a tech check you have been listening to house financial services today on the collapse of ftx as knew ceo john ray takes the hot seat notably absent is the man of the hour, originally scheduled to take that stand but was arrested in the bahamas last night after u.s. prosecutors filed criminal charges against him. unsealed this morning, they include defrauding investors and customers and what the sec calls, quote, a house of cards on a foundation of decep