Attorney Jay Clayton believes the FTX founder’s handling of the exchange constitutes bad behavior from a general perspective.

Former U.S. SEC Chairman and American attorney Walter “Jay” Clayton III has condemned how Sam Bankman-Fried, the founder of now-bankrupt exchange FTX, handled the firm. According to Clayton, there was a great deal of bad behavior regarding how SBF handled customer funds from a general perspective.

Jay Clayton made these remarks while speaking in an interview hosted on a CNBC Squawk Box episode today. With Sam Bankman-Fried expected to make a testimony on the FTX implosion at a U.S. Senate Hearing tomorrow, CNBC Squawk Box host Andrew Sorkin asked Clayton if it is not unfair to judge the FTX founder when all the facts have not been laid bare yet.

“From what you’ve seen so far, may it be unfair to pre-judge given that we don't have all the facts?" @andrewrsorkin asks former @SECGov Chairman Jay Clayton on @SBF_FTX and the #FTXFallout. pic.twitter.com/iU5XSU7VfB

— Squawk Box (@SquawkCNBC) December 12, 2022

In response, Clayton noted that how SBF handled his empire was an obvious case of bad behavior. According to Clayton, this judgment is based not only on how financial agencies in the U.S. expect businesses to be handled but also on a general perspective concerning how any financial institution should be managed.

“I think there is obviously a great deal of bad behavior here […] from our perspective as to how you run a financial institution in the United States, but also, from a general perspective in how you handle any business,” Clayton responded.

Furthermore, Sorkin highlighted the possibility of subjectivity regarding U.S. securities laws and the global cryptocurrency industry. The 45-year-old American journalist asked if it is not possible that the securities laws native to the U.S. financial system would judge certain practices as a fraud when, in fact, they are not considered fraud elsewhere.

Commenting on the question, Clayton mentioned that American securities laws are built on “common law,” which is fairly prevalent in many jurisdictions and financial systems. According to Clayton, SBF’s misappropriation of customer funds which led to FTX’s eventual implosion, is considered fraud based on universal common law.

“We have an incredibly well-developed and rigorous legal system around securities markets, securities trading, all of those things. But its basis is in common law, and outside the United States, there is still a fair amount of common law built around fraud,” Clayton remarked.

Notwithstanding the universal common law that identifies fraudulent behavior, Clayton noted that the securities laws within the United States enact processes, requirements, transparency, and inspection that make detecting and preventing fraudulent activities within businesses much easier. 

“We are not saying that around the world, fraudulent activity isn’t policed. We just have what I would say, is an incredibly rigorous system for deterring it, detecting it, and – when it exists – punishing it,” he concluded.

SBF to Testify on Capitol Hill Tomorrow 

Recall that SBF last Friday personally confirmed that he would be attending a U.S. Senate Hearing on the FTX implosion tomorrow to testify on the circumstances surrounding the debacle. According to SBF, he would shed more insight on several things, including but not limited to what led to the crash, his failings, and pathways that could return value to users internationally.

The confirmation follows several calls to have him present on Capitol Hill tomorrow. SBF’s testimony would follow the U.S. CFTC Chair Rostin Benham’s testimony barely two weeks ago, which served as the first witness at the Senate Hearing on the FTX implosion on December 1.