US lawmakers want answers from the FTX founder
Amen. J. William Bankman-Fried, 30, is charged with multiple counts of conspiracy, fraud, and misdemeanoring
Mr. Bankman-Fried, 30, is facing multiple criminal charges stemming from what prosecutors said was a multiyear scheme that defrauded customers, investors and lenders. The authorities claim he masterminded a scheme that took billions of customer deposits, used them to fuel trading at Alameda, pay down loans, buy lavish real estate, and lend money to FTX executives.
The misuse of client funds and the collapse of the entities that owed billions of dollars were caused by you, according to the senators.
It was pointed out by Waters that this would be the first time Bankman-Fried had spoken publicly about the FTX debacle. Waters said she was surprised by the arrest. The public has been waiting for answers to be given under oath and the timing of this arrest denies the public that opportunity.
“There are still significant unanswered questions about how client funds were misappropriated, how clients were blocked from withdrawing their own money, and how you orchestrated a cover up.”
The Federal Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency were sent letters by two senators asking for an assessment on the banking system’s exposure to turmoil in thecrypto.
“Crypto firms may have closer ties to the banking system than previously understood,” Warren and Smith wrote. “Banks’ relationships with crypto firms raise questions about the safety and soundness of our banking system and highlight potential loopholes that crypto firms may try to exploit to gain further access.”
Gary Wang, the co-founder of FTX, and Caroline Ellison, who served as CEO of the hedge fund Alameda Research, pleaded guilty to multiple counts of conspiracy and fraud for their roles in the fraud scheme that led to the collapse of the crypto-trading platform.
Bankman-Fried stated in his statement to the paper that he was not aware of any market manipulation and never intended to do so.
According to the lawsuits filed by the markets regulators, Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings.
The Extradition of FTX CEO John Bankman-Fried to the U.S. After his Bankruptcy Decree
Waters replied to Bankman-Fried earlier this week that it was clear that the information he had so far was sufficient for testimony.
FTX and its sister trading house, Alameda, both filed for bankruptcy last month after investors rushed to pull their deposits from the exchange, sparking a liquidity crisis.
Bankman-Fried remains in the Bahamas, where FTX was based, and was arrested last Monday night. A judge in the island denied his bail request Tuesday, saying that he was a flight risk. His transfer to the United States is likely to take weeks.
Bankman-Fried was extradited to the United States Wednesday night, Bahamas Attorney General Sen. Ryan Pinder confirmed. The Foreign Minister of the Bahamas signed a warrant of surrender allowing his extradition to the United States, the Ministry of Foreign Affairs in the Bahamas confirmed in a statement.
The New York Times, citing a person familiar with the matter, reported that the charges against Bankman-Fried included wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering.
The United States has a treaty with the Bahamas that allows US prosecutors to bring defendants back to the US if they are charged with crimes in either country that result in imprisonment for at least a year.
Sam Bankman-Fried faces charges for conspiracy, wire fraud, and misuse of customer funds in the FTX collapse probed by the U.S. Senate
“I didn’t knowingly commit fraud,” he told the BBC over the weekend. “I didn’t want any of this to happen. I was certainly not nearly as competent as I thought I was.”
Waters said Monday night that they would get to the bottom of the matter, despite not being able to hear Bankman-Fried tomorrow.
While the probe isn’t completed, Ray said, FTX’s collapse appears to stem from the concentration of power “in the hands of a very small group of grossly inexperienced and unsophisticated individuals” who failed to implement virtually any corporate controls.
Bankman- Fried told DealBook that no person was in charge of the risk of customers on FTX. “And that feels pretty embarrassing in retrospect.”
Bankman- Fried denied any knowledge of that back door. “I don’t even know how to code,” he told cryptocurrency vlogger Tiffany Fong in an interview last month.
The arrest was made at the request of the U.S. government, based on a sealed indictment filed by the Southern District of New York, U.S. Attorney Damian Williams said in a tweet also on Monday night.
The Prime Minister of the Bahamas said that the country is cooperating with the law enforcement in the United States, but its own investigations into the collapse of FTX continue.
Bankman- Fried was involuntarily resignted hours before the bankruptcy filing and spent the last month on a charm campaign, painting himself as a guy who let things slide and didn’t deliberately commit fraud in a variety of media interviews.
As of late Monday night, the committee still had a notice of the hearing posted that listed Bankman-Fried as a witness and also included the written testimony of the hearing’s other witness, FTX’s CEO John Ray.
“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,” SEC Chair Gary Gensler said in a statement.
The criminal charges against Bankman-Fried include wire fraud, conspiracy to commit money laundered, and misuse of customer funds. He is going to plead not guilty. If he is convicted on all charges, he could face up to 115 years in prison.
Why did he screw up? The case of Tim Bankman-Fried, the CEO of FTX, was charged with eight counts of fraud and conspiracy
FTX achieved a $32 billion valuation by raising more than $1.8 billion since launching in May 2019, including from sophisticated investors such as BlackRock, Sequoia Capital and the Ontario Teachers’ Pension Plan. Star athletes and celebrities who backed FTX also reportedly received a stake in the company, including Tom Brady and Gisele.
“Look, I screwed up,” Bankman-Fried said during a virtual appearance at the New York Times’ DealBook Summit. “There are things I would do anything to do over.”
The arrest has sparked jubilation in crypto circles, after some nail-biting over his ostensibly generous treatment by “mainstream media” and speculation (by Twitter CEO Elon Musk, no less) that his political donations may earn him a free pass of sorts with US law enforcement.
And as if all that weren’t enough, Bankman-Fried’s successor, Ray, spent the day calling out the colossal mismanagement that took place before FTX and Alameda collapsed. When he spoke about the previous leaders being a small group of grossly inexperienced and unsophisticated individuals, Ray also showed that they had been negligent in running FTX, which was valued at more than $30 billion at its peak. Ray clarified that nothing was against the business software. It is a very nice tool. Just not for a multibillion-dollar company.”)
“The crimes that were committed [at Enron] were highly orchestrated financial machinations by highly sophisticated people to keep transactions off balance sheets,” Ray told lawmakers. FTX, on the other hand, was “not sophisticated at all.”
Last Tuesday, federal prosecutors from the Southern District of New York charged Bankman-Fried with eight counts of fraud and conspiracy. Bankman-Fried could face up to 115 years in prison if convicted on all eight counts against him, though he likely wouldn’t get the maximum sentence.
Several lawyers who are not involved in the case tell me that the speed of Bankman-Fried’s arrest signals that former FTX employees may be helping prosecutors.
According to Howard A. Fischer, a former SEC lawyer, one or more of the former employees had done so in order to be fast tracked to a cooperator. It would appear that the fact that one person has been charged so far indicates this.
Bankman-Fried, a failed crypto entrepreneur, is an executive and an entrepreneur: Can he skip out on bail?
Once he is stateside, Bankman-Fried will appear before a judge in Manhattan for a bail hearing. The timing of that hearing will depend on when he arrives in New York and is processed.
Bankman- Fried and others were charged with conspiring to violate federal election laws by making illegal political donations in excess of federal legal limits and in the names of other people.
A woman appeared to be holding a bag of personal belongings during the hearing. Bankman-Fried told the judge that he was an executive and anentrepreneur, and that his address was a little unclear.
The Bankman- Fried has been held in a prison that US officials have described as overcrowded, dirty and lacking medical care since he was arrested in the Bahamas. The crowded cells are often unsafe because of rats, ants, and insects.
Prosecutors and attorneys for Bankman-Fried are discussing an arrangement for his release, with conditions, that would enable the failed crypto entrepreneur to avoid spending time at the Metropolitan Detention Center. The pre-trial holding facility, commonly referred to as the MDC, has been accused of being inhumane by former inmates due to its overcrowding and lack of heat in the winter.
The judge said Bankman-Fried would be arraigned on the charges that he stole billions of dollars from customers of his crypto-trading platform at a future date.
A US marshal escorted Bankman- Fried into the courtroom, wearing a navy suit jacket and white shirt. The sound of his shackles being used on him could be heard as he arrived at the defense table.
When he was questioned about the consequences he would have if he skipped out on bail, Bankman-Fried replied, “Yes, I do.”
There are a number of bail conditions including surrender of firearms and mental health treatment, as well as prohibitions against opening new lines of credit, businesses or transactions over $1,000 without government approval.
Sam Bankman-Fried, aka Richard Ellison, was in the United States for court to answer a friend’s question: A not guilty plea on his behalf
Evidence against Bankman- Fried includes testimony of other employees of the companies, evidence of multiple cooperating witnesses, and evidence that was kept under wraps.
Ms. Ellison said she agreed to borrow several billion dollars from FTX to pay off the loans.
Mr. Bankman-Fried was going to the United States and as he arrived, Damian Williams, the U.S. attorney for the southern district of New York, said that Ms. Ellison and Gary Wang were also there.
Mr. Wang also entered his plea on Monday, several hours before Ms. Ellison’s court appearance. The transcript of the proceeding, which was kept under wraps on Friday, stated that Mr. Wang admitted that he knew what he was doing was wrong.
“There is serious cause for concern that the two additional sureties would face similar intrusions on their privacy as well as threats and harassment if their names appear unredacted on their bonds or their identities are otherwise publicly disclosed,” the letter states.
Wang faces up to 50 years in prison in accordance with federal sentencing guidelines referenced in court. Ellison faces up to 110 years in prison for the seven criminal counts she’s pleaded guilty to, per federal sentencing guidelines.
Bankman-Fried flew from California to New York to enter his plea in person during a court hearing at the U.S. District Court for the Southern District in Lower Manhattan.
An attorney entered the not guilty plea on his behalf as Bankman-Fried’s mother, a professor at Stanford Law School, sat two rows behind him with other family and friends at the packed courtroom. His trial is set to start on Oct. 2.
He has been accused of orchestrating the largest financial fraud in history and facing a life sentence, yet he has been giving interviews to the media and using social media to defend himself.
“It is common for defendants to do this,” said Christine Chung, a professor at Albany Law School. “A not guilty plea generally opens the door to the discovery process, which would give Sam Bankman-Fried a better idea of the evidence that the government has collected thus far in its investigation.”
According to James Park, a securities fraud expert at UCA Law, Bankman-Fried didn’t have many options going into Tuesday’s hearing, because of Wang’s and Ellison’s plea deals.
It’s an unusual strategy for a high-profile criminal defendant who oversaw a company that lost billions of dollars of customer money. And it has left lawyers not involved in the case aghast, since each quotation and tweet from Bankman-Fried is effectively a gift to prosecutors, who can use that material to build their case against him.
Rebecca Mermelstein said “every white-collar lawyer would say ‘Shut up: Keep your mouth shut and let us do the talking’.”
What Bankman-Fried has to say about his investigations into bankruptcy fraud: “I’m sorry, but I haven’t yet”
Bankman-Fried’s trail of communication,which includes several lengthy interviews with the media and a Substack newsletter, is already coming back to haunt him.
“All my Republican donations were dark,” he told Fong. “And the reason was not for regulatory reasons. It’s because reporters freak the f*** out if you donate to a Republican. They’re all super liberal, and I didn’t want to have that fight. I made all the Republican ones very dark.
Then, on Thursday, when federal prosecutors unveiled four additional criminal charges against Bankman-Fried, they included new details about their widening case against him.
In the latest indictment, prosecutors specifically cited the comments from that interview as part of their additional evidence for their charge on “unlawful political contributions.”
Bankman-Fried has found trouble with interviews, not the other way around. He is reaching out to current employees of FTX, that could lead to more consequences.
Source: https://www.npr.org/2023/02/26/1157528598/ftx-crypto-sam-bankman-fried-bankruptcy-fraud-criminal-charges
FTX CEO John Bankman-Fried: Can We Talk About What You’re Doing, and Why I’m Interested in It?
“I would really love to reconnect and see if there’s a way for us to have a constructive relationship, use each other as resources when possible, or at least vet things with each other,” they say he wrote. “I’d like to talk on the phone soon.”
Bankman- Fried was restricted from contacting current and former employees of FTX after the message came to light and the judge prohibited him from sending other messages that disappear after they are read.
Although Bankman-Fried has not made a public comment since Jan. 19, lawyers who have dealt with prominent white-collar defendants warn that it can be a challenge to keep them quiet for long, especially if they are accustomed to living in the spotlight.
That’s a potential problem for Bankman-Fried, who hobnobbed with people like former President Clinton and former quarterback Tom Brady at the height of his popularity.
Barbara McQuade, the former U.S. Attorney, said she’s seen politicians struggle with the temptation to talk.
“‘If I could just talk to you long enough, I can explain it all away,'” she imagines a defendant thinking. I can tell you that I was doing what I was supposed to do.
In his public statements, the former CEO of FTX has insisted that he is not a bad guy, even though he did not intend to spark losses for FTX’s customers.
The ABC News anchor asked the Bankman-Fried if he thought it was fair to compare him to one of the world’s most notorious fraudsters, when Bankman-Fried was arrested in the Bahamas.
Bankman-Fried doesn’t think that’s who he is. I get why they’re saying that. People lost money, and people lost a lot of money.”
Source: https://www.npr.org/2023/02/26/1157528598/ftx-crypto-sam-bankman-fried-bankruptcy-fraud-criminal-charges
The Story of Shkseli’s Dilemma: Towards a Remnant of a Lossy CEO
He first sparked controversy after his company bought the rights to a drug used to treat people with compromised immune systems, and then spiked the price dramatically.
He got into a public feud with Ghostface Killah and did several interviews against his lawyer’s advice. The trial got underway and Shkseli went into the press room and badmouthed the prosecution.
Fred Garcia, who teaches crisis management at New York University and Columbia University, says he can’t understand what Bankman-Fried “hopes to get out of it.”
The public image that helped him become a CEO is now against him. He played a video game at a venture capital firm and was widely known for wearing shorts and t-shirts.
Anthony D’Angelo says that the persona of that FTX customer is unlikely to play well anymore, now that they are afraid their fortunes have disappeared.
“Unorthodox is okay,” D’Angelo says. Losing $8 billion of people’s money is not going to help here, and whatever charm your cargo shorts and frizzy hair might have, it isn’t going to be a plus in other forums.
