Sam Bankman-Fried Co-Founder Of FTX Is Accused Of Scamming Investors
Sam Bankman-Fried, the creator of the cryptocurrency exchange FTX and a former chief executive officer of the company, has been charged with fraud, conspiracy to commit money laundering, conspiracy to defraud the United States, and conspiracy to violate laws governing campaign funding.
The US attorney’s office for the southern district of New York filed eight criminal charges against the 30-year-old former billionaire on Tuesday. These charges followed the filing of civil charges against the former billionaire by the US Securities and Exchange Commission (SEC), which accused Bankman-Fried of defrauding investors by building a company that was a “house of cards.”
According to Damian Williams, the United States Attorney for the southern district of New York, “This is one of the biggest financial frauds in American history.” He stated that even though only Bankman-Fried had been charged up to this point, “we are not done” with the investigation.
Following receipt of an official notification from the United States of criminal charges against Bankman-Fried, law enforcement officials in the Bahamas detained him on Monday. According to a report by the New York Times, a court in the Bahamas refused bail to Bankman-Fried on Tuesday after a prosecution said that he posed a threat of fleeing the country.
Bankman-Fried is accused of utilising the deposits made by FTX clients to settle debts and expenditures incurred by Alameda Research, which is his hedge fund. This is just one of the claims against him. In addition, the indictment asserts that Bankman-Fried and other individuals participated in a conspiracy to break federal regulations regarding political donations.
Although Bankman-Fried was one of the top supporters of the Democratic Party, he has admitted that he also contributed to the Republican Party under the guise of “dark money.” During their efforts to lobby legislators for favourable regulation of cryptocurrencies, other FTX firms sent monetary donations to both parties.
Before the failure of his firm, Bankman-Fried’s fortune was estimated to be worth $26 billion (or £21 billion). According to an investigation done by the Wall Street Journal, both he and FTX were substantial supporters to media organisations, charities, and politicians, providing at least $95,000 to legislators who are currently investigating FTX.
At a hearing held on Tuesday by the House Financial Services Committee, politicians voiced their shock and disgust at the magnitude of the disaster that has been created. John Ray III, the new chief executive of FTX, stated that he had “never seen such an utter lack of record keeping” at a corporation before.
According to Ray, who has over 40 years of experience and has been in charge of managing some of the largest bankruptcies in the world, including the fall of the energy company Enron, there were “absolutely no internal controls whatsoever.” When asked to compare the cases, Ray responded that the perpetrators of the crimes at Enron were “highly sophisticated,” but the executives at FTX had engaged in “old-fashioned embezzlement.”
The Democratic representative Brad Sherman told the hearing: “My fear is that people will look at Sam Bankman-Fried as one snake in a garden of Eden. But the fact is, crypto is a garden of snakes.”
Bankman-Fried was supposed to testify in front of the committee, but he was prevented from doing so when he was arrested. Bankman-Fried had intended to begin his evidence by telling Congress, “I fucked up.”
The Democratic representative Emanuel Cleaver called the testimony “absolutely insulting. I mean, there’s not a person up here who would like to show this to their children.”
The SEC charged Bankman-Fried with “orchestrating a scheme to defraud equity investors in FTX”. It said: “Investigations as to other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing.”
According to the SEC, Bankman-Fried hid his transfer of cash from FTX clients to Alameda Research while simultaneously attracting more than $1.8 billion from investors, including about $1.1 billion from approximately 90 investors residing in the United States.
“We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto,” the SEC chair, Gary Gensler, said on Tuesday. “The alleged fraud committed by Mr Bankman-Fried is a clarion call to crypto platforms that they need to come into compliance with our laws.”
The SEC further alleges that Bankman-Fried used FTX customer funds, commingled with Alameda’s own capital, “to make undisclosed venture investments, lavish real estate purchases, and large political donations”.
Unusually, Bankman-Fried has been addressing the failure of FTX in public even while investigations are still being conducted into the matter. In a conversation that took place in late November with Bloomberg’s Zeke Faux, he listed the $6.5 billion in losses that were incurred by FTX and Alameda, which led to the insolvency of both companies. These losses included “$250 million for real estate, $1.5 billion for expenses, $4 billion for venture capital investments, $1.5 billion for acquisitions, and $1 billion labelled ‘fuck-ups.'”
At a seminar held in New York earlier this month, he said, “Look, I screwed up.” However, he insisted that he “didn’t ever try to commit fraud” and claimed that he was “shocked” by the failure of his companies.
Mark Cohen, a lawyer for Bankman-Fried, said in a statement that his client “is reviewing the charges with his legal team and considering all of his legal options”.
Whilst many within this space are proclaiming the death of crypto, smart money is still backing the underlying blockchain and distributed ledger technology. Some are even heralding the genesis of a new financial system. One thing for sure is that this will force the regulation of all cryptocurrencies in the United States of America which is still the largest financial and economic marketplace on the planet.
online sources: theguardian.com, nytimes.com
Sam Bankman-Fried, the creator of the cryptocurrency exchange FTX and a former chief executive officer of the company, has been charged with fraud, conspiracy to commit money laundering, conspiracy to defraud the United States, and conspiracy to violate laws governing campaign funding.
The US attorney’s office for the southern district of New York filed eight criminal charges against the 30-year-old former billionaire on Tuesday. These charges followed the filing of civil charges against the former billionaire by the US Securities and Exchange Commission (SEC), which accused Bankman-Fried of defrauding investors by building a company that was a “house of cards.”
According to Damian Williams, the United States Attorney for the southern district of New York, “This is one of the biggest financial frauds in American history.” He stated that even though only Bankman-Fried had been charged up to this point, “we are not done” with the investigation.
Following receipt of an official notification from the United States of criminal charges against Bankman-Fried, law enforcement officials in the Bahamas detained him on Monday. According to a report by the New York Times, a court in the Bahamas refused bail to Bankman-Fried on Tuesday after a prosecution said that he posed a threat of fleeing the country.
Bankman-Fried is accused of utilising the deposits made by FTX clients to settle debts and expenditures incurred by Alameda Research, which is his hedge fund. This is just one of the claims against him. In addition, the indictment asserts that Bankman-Fried and other individuals participated in a conspiracy to break federal regulations regarding political donations.
Although Bankman-Fried was one of the top supporters to the Democratic Party, he has admitted that he also contributed to the Republican Party under the guise of “dark money.” During their efforts to lobby legislators for favourable regulation of cryptocurrencies, other FTX firms sent monetary donations to both parties.
Before the failure of his firm, Bankman-Fried’s fortune was estimated to be worth $26 billion (or £21 billion). According to an investigation done by the Wall Street Journal, both he and FTX were substantial supporters to media organisations, charities, and politicians, providing at least $95,000 to legislators who are currently investigating FTX.
At a hearing held on Tuesday by the House Financial Services Committee, politicians voiced their shock and disgust at the magnitude of the disaster that has been created. John Ray III, the new chief executive of FTX, stated that he had “never seen such an utter lack of record keeping” at a corporation before.
According to Ray, who has over 40 years of experience and has been in charge of managing some of the largest bankruptcies in the world, including the fall of the energy company Enron, there were “absolutely no internal controls whatsoever.” When asked to compare the cases, Ray responded that the perpetrators of the crimes at Enron were “highly sophisticated,” but the executives at FTX had engaged in “old-fashioned embezzlement.”
The Democratic representative Brad Sherman told the hearing: “My fear is that people will look at Sam Bankman-Fried as one snake in a garden of Eden. But the fact is, crypto is a garden of snakes.”
Bankman-Fried was supposed to testify in front of the committee, but he was prevented from doing so when he was arrested. Bankman-Fried had intended to begin his evidence by telling Congress, “I fucked up.”
The Democratic representative Emanuel Cleaver called the testimony “absolutely insulting. I mean, there’s not a person up here would like to show this to their children.”
The SEC charged Bankman-Fried with “orchestrating a scheme to defraud equity investors in FTX”. It said: “Investigations as to other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing.”
According to the SEC, Bankman-Fried hid his transfer of cash from FTX clients to Alameda Research while simultaneously attracting more than $1.8 billion from investors, including about $1.1 billion from approximately 90 investors residing in the United States.
“We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto,” the SEC chair, Gary Gensler, said on Tuesday. “The alleged fraud committed by Mr Bankman-Fried is a clarion call to crypto platforms that they need to come into compliance with our laws.”
The SEC further alleges that Bankman-Fried used FTX customer funds, commingled with Alameda’s own capital, “to make undisclosed venture investments, lavish real estate purchases, and large political donations”.
Unusually, Bankman-Fried has been addressing the failure of FTX in public even while investigations are still being conducted into the matter. In a conversation that took place in late November with Bloomberg’s Zeke Faux, he listed the $6.5 billion in losses that were incurred by FTX and Alameda, which led to the insolvency of both companies. These losses included “$250 million for real estate, $1.5 billion for expenses, $4 billion for venture capital investments, $1.5 billion for acquisitions, and $1 billion labelled ‘fuck-ups.'”
At a seminar held in New York earlier this month, he said, “Look, I screwed up.” However, he insisted that he “didn’t ever try to commit fraud” and claimed that he was “shocked” by the failure of his companies.
Mark Cohen, a lawyer for Bankman-Fried, said in a statement that his client “is reviewing the charges with his legal team and considering all of his legal options”.
Whilst many within this space are proclaiming the death of crypto, smart money is still backing the underlying blockchain and distributed ledger technology. Some are even heralding the genesis of a new financial system. One thing for sure is that this will force the regulation of all cryptocurrencies in the United States of America which is still the largest financial and economic marketplace on the planet.
Online sources: theguardian.com, nytimes.com
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