The latest news of the FTX affair is revealed in the Southern District of NY unsealing the indictment of Sam Bankman-Fried as a classic fraud. The Indictment alleges that he “knowingly co-mingled” funds in the FTX/Alameda Research fraud case because it’s not really about crypto but about fictitious capital manipulated in the old fashioned way: “they earned it”. Digital bread now becomes analog toast.
Misappropriation of customer funds occurred with funds from one walnut shell swapped into another hedge fund exchange shell and the float spent on luxury goods and even political contributions. Institutional investors got rooked. Politicians who received donations are returning funds so as not to be caught by the SEC and FEC.
It’s a Madoff-like classic Ponzi scheme: a million clients representing $50 billion in assets, managed in Quickbooks software? The relative isolation of crypto contained a slightly indirect relation to the financial system. Sam Bankman-Fried’s lack of risk-management is only one bit of negligence as a subsequent run on assets revealed the lack of funds supporting investments. It sounds more complex because of the use of crypto and crypto-coinage in one aspect, but it’s still about money laundering, fraud, and theft.
Prosecutors allege in the indictment that the former billionaire was engaging in criminal activity that began as far back as 2019 and continued through last month.
Bankman-Fried deliberately and knowingly "agreed with others to defraud customers of FTX.com by misappropriating those customers' deposits and using those deposits to pay expenses and debts of Alameda Research," the indictment alleges.
It also accuses Bankman-Fried of conspiring with others to defraud FTX's lenders "by providing false and misleading information to those lenders regarding Alameda Research's financial condition."
Prosecutors also allege he conspired with others to make illegal donations to political candidates, using the names of other persons to mask and augment political giving.
www.cnbc.com/...
Sam Bankman-Fried, the disgraced founder of the collapsed cryptocurrency exchange FTX, was arrested in the Bahamas on Monday after U.S. prosecutors filed criminal charges.
“S.B.F.’s arrest followed receipt of formal notification from the United States that it has filed criminal charges against S.B.F. and is likely to request his extradition,” the government of the Bahamas said in a statement.
The arrest was the latest stunning development in one of the most dramatic falls from grace in recent corporate history. Mr. Bankman-Fried, 30, was scheduled to testify in Congress on Tuesday about the collapse of FTX, which was one of the most powerful firms in the emerging crypto industry until it imploded virtually overnight last month after a run on deposits exposed an $8 billion hole in its accounts.
Prosecutors for the Southern District of New York confirmed that Mr. Bankman-Fried had been charged and said an indictment would be unsealed on Tuesday. Separately, the Securities and Exchange Commission said in a statement that it had authorized charges “relating to Mr. Bankman-Fried’s violations of our securities laws.”
The criminal charges against Mr. Bankman-Fried included wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering, said a person with knowledge of the matter.
Mr. Bankman-Fried, who was the only person charged in the indictment, was taken into custody by the Bahamian authorities, the person said. He was arrested shortly after 6 p.m. at his apartment complex in the Albany resort in the Bahamas, according to a statement from the Bahamian police. The timing of when Mr. Bankman-Fried might be moved to the United States was unclear. While the Bahamas has an extradition treaty with the United States, the process can take weeks, and sometimes far longer if a criminal defendant contests it.
www.nytimes.com/...