After a long and cozy slumber, which allowed FTX’s Sam Bankman-Fried (SBF) to embark on an ambitious media tour to profess his innocence, the wheels of justice have finally recovered from their stupor, and a conman is now headed to a well-deserved sojourn in prison.
— zerohedge (@zerohedge) December 12, 2022 Sam Bankman-Fried has now been arrested by the authorities in the Bahamas after the United States Attorney for the Southern District of New York shared a sealed indictment with the Bahamian government. The indictment is a precursor to SBF’s extradition to the US to stand for a trial and includes charges related to wire fraud, securities fraud, and money laundering.
— U.S. Securities and Exchange Commission (@SECGov) December 13, 2022 Separately, the US SEC has authorized the filing of securities law violation charges against Sam Bankman-Fried. Meanwhile, the Bahamas is also expected to continue its own regulatory and criminal investigations into the collapse of FTX. For the uninitiated, the crypto exchange FTX maintained an undisclosed synergetic relationship with Sam Bankman-Fried’s crypto trading arm, Alameda Research, replete with commingled funds at the Silvergate bank, which allowed Alameda the convenience of borrowing FTX client funds after posting collateral in the form of illiquid tokens, including FTX’s in-house FTT coin. This house of cards, however, collapsed when Alameda’s outsized exposure to the FTT token became public knowledge in early November, prompting Binance to dump its own FTT holdings, collapsing the token’s price. Amid this fracas, the then-CEO of Alameda Research, Caroline Ellison, gave away the trading firm’s floor price on the FTT token, inviting a veritable onslaught of speculative attacks. With Alameda’s ability to pay off its liabilities impaired as its collateral of illiquid tokens quickly lost their inflated values, and with surging client withdrawals resulting in a bank run, FTX had no choice, in the end, to declare bankruptcy.
He seemingly appeared to suggest new uncovered concerns, particularly along wire transfers, tokenized stocks and that money was never properly moved to FTX customer accounts. This is unusual. — unusual_whales (@unusual_whales) December 12, 2022 Interestingly, Sam Bankman-Fried has spent much of the intervening time giving media interviews. All of these public appearances, however, maintained a constant undertone: that SBF did not really know what was happening, that he was innocent and a victim of an unfortunate series of events. Just yesterday, the disgraced former CEO of the now-defunct FTX appeared in a virtual Twitter Space interview by UnusualWhales to answer pertinent questions on the collapse of the FTX, all the while playing a video game. We noted last week that Sam Bankman-Fried was required to attend two back-to-back Congressional hearings this week. The US House Committee on Financial Services is scheduled to conduct a hearing on FTX’s collapse on the 13th of December. Then, on the 14th of December, the US Senate’s Committee on Banking, Housing, and Urban Affairs is scheduled to hold a separate hearing. In anticipation of the Congressional hearing, FTX’s new CEO, John J. Ray III, a veteran lawyer who oversaw Enron’s bankruptcy, leveled serious allegations against Sam Bankman-Fried in his prepared remarks, including improper security protocols around FTX client assets, allowing Alameda the facility of borrowing FTX funds without “any effective limit,” commingling assets, the lack of proper documentation vis-à-vis nearly 500 investments made by FTX, and the absence of any independent governance throughout FTX.
— Charles Gasparino (@CGasparino) December 12, 2022 However, now that Sam Bankman-Fried has been arrested, his appearance at these Congressional hearings is quite unlikely. On an interesting note, SBF had communicated his willingness to attend the hearing on the 13th of December, led by House member Maxine Waters, but declined to attend the one being conducted by the US Senate on the 14th of December. This development had precipitated the view that SBF might face “softball” questions in the House hearing, judging from the willingness of the usually recalcitrant former CEO of FTX to attend and his cozy relationship with some of the ranking members of the House Committee. Of course, today’s arrest has placed further melodrama around SBF on hold, for now at least. Do you think FTX clients will ever be made whole again? Let us know your thoughts in the comments section below.
Update: The SEC has now charged Sam Bankman-Fried
— @annmlipton@esq.social (@AnnMLipton) December 13, 2022 The US SEC has now charged Sam Bankman-Fried for defrauding investors of $1.8 billion.
