Sometime in the past few years, Sam Bankman-Fried, founder of cryptocurrency exchange FTX, was reportedly worth about 26 billion dollars. At the beginning of last week, it was reported that this number was 16 billion dollars. Now it’s about zero dollars and zero cents. And it must hurt, but what worries “SBF,” as he’s known, is probably more that he could potentially go to jail following the stunning, epic collapse of his company, which filed for bankruptcy on Friday, days after he assured customers that “FTX is fine.”
The The Wall Street Journal reports that the US Attorney’s Office in Manhattan has opened an investigation into the FTX explosion, according to people familiar with the matter. Currently, prosecutors are probably focusing on one thread, according to diary, is that FTX allegedly loaned billions in clients to Alameda Research – a crypto firm also owned by SBF – to finance risky trades. Like Magazine comments: “Using client funds for your own business or lending them out – without investor consent – is generally prohibited in regulated securities and derivatives markets.” While such protection does not exist in the unregulated crypto market, such as Magazine points out that FTX’s terms of service expressly told users that they had the cryptocurrencies in their accounts; the terms of service document reads: “None of the digital assets in your account are the property of, or shall or may be loaned to, FTX Trading.” Like Magazine‘s Gregory Zuckerman reported last week that revelations about the use of client funds not only shocked Bankman-Fried’s “fans” and employees, they “torn a hole in FTX’s finances” and “laid the groundwork for the exchange’s precipitous collapse.”
FTX is also reportedly under investigation by the Securities and Exchange Commission and the Securities and Exchange Commission.
According to prosecutors, using customers’ money for purposes that were not clearly reported can be the basis for charges of fraud or embezzlement. “What it will boil down to is, were there deliberate lies to convince savers or investors to part with their assets?” Samson Enzer, a former federal prosecutor in Manhattan, said Magazine. “Were statements made that were false and the person making those statements knew they were false and made with the intent to deceive the investor?” Feds could also point to SBF’s tweet last week, just before the company collapsed, in which he wrote that FTX was “fine” and so were its assets, especially given that he later deleted such claims.
Like Magazine says: “The authorities would have to show Mr. Bankman-Fried intended to mislead customers when he wrote these tweets,” and while intent can be difficult to prove, prosecutors may point to alleged covert efforts by SBF to support Alameda. “This is all potentially powerful evidence of intent.” Aitan Goelman, former federal prosecutor, said Magazine. Over the weekend, Reuters reported that out of approx. Of the $10 billion in customer funds SBF transferred from FTX to Alameda, at least $1 billion, and possibly as much as $2 billion, would have “gone.” The outlet also wrote that Bankman-Fried secretly “transferred” the money; in response, he texted Reuters to say he “disagreed with the characterization” of the move, writing: “We didn’t move secretly. We had confusing internal markings and misread them.” Asked about the funds said to be missing, he replied, “???”
Reuters also reported:
In her texts to Reuters, Bankman-Fried denied implementing a “backdoor”. On Friday, hey tweeted that he was “pieceing together” what had happened at FTX, adding: “I was shocked to see things unravel the way they did earlier this week.” I’ll be doing a more complete play-by-play post soon.” At 10pm on Sunday in the Bahamas, where SBF is based and FTX was operating, he tweeted: “What. Almost an hour later he tweeted the letter H. On Monday, he appeared to be outspoken Happened, although in the afternoon he would have done so just got to the letter n.