Fraud in shorts and T-shirts: The case against Sam Bankman-Fried

The bikes of the American judiciary do not turn almost as quickly as the cryptocurrency markets. But in the last 48 hours they caught up in Sam Bankman-Fried to have committed the young king of the smashed FTX cryptoimpperium, who is now accused of committing one of the greatest financial fraud in the history of the United States.

A number of overlapping events on the Bahamas, in Washington and Manhattan left the 30-year-old Bankman-Fried in police custody and offered new insights like one of the dominant trading platforms of the digital token market suddenly lacked $ 8 $ banking.

for Bankman-Fried, the billing began on Monday, when he was arrested by the local police in his apartment in Nassau shortly after 6 p.m. in Nassau after the US Ministry of Justice applied for its delivery. It was by chance that it was 14 years ago in the same week when Bernard Madoff, the mastermind of the largest Ponzi system in Wall Street, was arrested due to US witness fraud.

Then Tuesday brought the reefrance of an indictment to eight indicators in which Bankman-Fried was accused of stealing customer money in practice since FTX was founded in 2019. These were allegedly transferred to authorities and then used to authorities and then for his own risk investment, real estate purchases and political donations.

"This is one of the largest financial fraud in American history," said Damian Williams, US public prosecutor for the southern district of New York, with the strengthened attitude of a federal prosecutor.

Williams was flanked by colleagues from the FBI, the Securities and Exchange Commission and the Commodity Futures Trading Commission. Behind it were shelves with legal rolls that, according to the world of adults and the consequences of the adults, formed a clear contrast to the carelessness of Banksman-Fried and his troops.

The fact that only he has been charged so far has led to speculation that his business partners may work with prosecutors.

The lawyer of Bankman-Fried said that he checked "the charges with his lawyer team and consider all his legal options".

Meanwhile, John Ray, the new CEO of FTX appointed by the court, described in Washington the astonished members of the Financial Service Committee of the House of Representatives the depths of mismanagement and the negligence that preceded the collapse of the company.

"As far as the lack of documentation is concerned, this is really unprecedented," said Ray, who gained reparation when he disguised the financial debris of the bankrupt energy dealer Enron. "There are no records literally."

Despite their claims of strict risk controls, the FTX transactions employees recorded Slack, the office chat software, and led the accounts to quickbooks, software that is widespread by freelancers and small companies. There was no board of directors who could exercise the supervision, large insurance gaps and payments to Bankman-Fried family, the new CEO told the legislator.

"This is not sophisticated at all," Ray concluded the alleged fraud. "This is just old embezzlement. Old school."

The members of the committee alternately rage against Bankman-Fried, whereby the California Democrat Brad Sherman called him "a big snake in a crypto garden Eden".

While Bankman-Fried was generally convicted, some refrained from attacking the wider crypto industry. The uncomfortable truth is that several campaign donations had accepted an up -and -coming industry that was determined to ward off stressful regulations. Bankman-Fried appeared from the dark and became the second largest donor for democratically oriented groups and distributed $ 36 million in the recent midterm elections.

It was expected to say at the hearing on Tuesday, but for his arrest. In his place, the representatives were treated with prepared comments in which he took the formalities of the institution with feet.

"I would like to start officially to say under oath: I built crap," he started.

The following explanation changed between a blurred reconstruction of the last days of FTX, based on "memory and extra -sort", and passages that read more like the excuses of a university student who had not given up a housework.

"I bitten more than I could chew and finally not focus on risk management," was his explanation. Bankman-Fried also blamed a full schedule this year, which meant that he was "less anchored in operational details than I did before".

In the entire explanation, he repeated his claim that FTX could have been saved by external investors if he had not been put under pressure to charge bankruptcy on November 11th. According to Bankman-Fried, he received a possible financing offer in billions of bills ten minutes later.

Mark Kasten, a lawyer at Buchanan Ingersoll & Rooney specialized in cryptocurrencies, found Ray's statement particularly devastating. "[Bankman-Fried] prepared to argue that he was only unable, not criminal. But Mr. Ray's statement today that there were simply no compliance controls, it certainly makes it more difficult," he said.

It is not clear when-or whether-Bankman-Fried will arrive in New York to answer the US editions. His lawyer contested his delivery. A judge on the Bahamas rejected his application for the deposit on Tuesday.

From a legal point of view, the indictment represents the most serious threat to him, since misconduct, including transfer fraud, conspiracy for the inspection of money laundering and violations of the campaign financing, is accused. But it was sparse in details.

A more comprehensive representation of the ascent and if of FTX took place in a associated SEC civil lawsuit. For example, it explained in detail how Bankman-Fried allegedly transferred money from FTX to Alameda, including 1.8 billion

In some cases, commercial customers who thought they were sending dollars to FTX to cover their crypto trades, according to the SEC, actually deposited these funds directly to Alameda's bank accounts. Agents were also rebuilt by allowed Alameda to take advantage of a practically unlimited credit line from FTX, added the SEC. In a quarterly record that was made available to external lenders, Alameda then listed this as "loan" without stating that it came from FTX.

When the crypto prices fell in May, the lenders began to demand repayment and the FTX fluctuated. Bankman-Fried has branched off another billion dollars of customer assets to keep the payments step. During the summer, when the situation became more and more precarious, Bankman-Fried redirected hundreds of millions of dollars more to Alameda, they said-some of whom were "borrowed" to him and other FTX executives.

On Tuesday afternoon, when this and other accusations were published, a reporter asked whether the youthful Bankman-Fried, known for his shaped hair and uniform from T-shirt and shorts, corresponded to the profile of a typical financial fraudster.

"You can commit fraud in shorts and T-shirts in the sun," replied Williams. "It is possible."