Much sooner than I expected. Figured it'd be a couple of years before the AG was secure enough in their case to bring charges. This is MUCH faster than Madoff or Holmes.
Then again, he's been much more out in the open about everything. He pretty much laid the prosecution's case out to the public for them.
It's clear Caroline Ellison has turned against him. Stephanie Avakian, former SEC enforcement chief, is representing her in NY. I'm guessing they wouldn't have been able to file charges this quickly without Caroline becoming a cooperating witness.
Maybe they don't need a cooprerating witness or special deals. Apparently the companies were really badly run, with lots of clear-cut violations, making it very easy to file charges.
John J. Ray III, who has taken over for Bankman-Fried as CEO of FTX and whose credentials include supervising the corporate cleanup after Enron imploded, has already said, 'Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.'
If the charges include manipulating the prices of TerraUSD and Luna earlier in the year - that ironically probably caused the FTX implosion, it's hard how to see Caroline Ellison as head of Alameda wasn't heavily involved in major criminal activities.
I remember there was a picture of her in a NYC Starbucks in the past week. Someone predicted she had made a deal with DA and SBF would be indicted soon. Now it appears the prediction was spot on.
You're right. I was thinking of the 3 months between the arrest and the sentencing, not the collapse and arrest. You'll have to forgive a memory 13 years hence. ;)
> A spokeswoman for Mr. Bankman and Ms. Fried wouldn’t comment on whether they are giving their son legal advice. Their friends, some of them legal scholars themselves, have said Mr. Bankman-Fried’s frequent media appearances are a mistake that could put him deeper in legal jeopardy.
“They want him to protect himself, and he won’t,” said Larry Kramer, a former dean at Stanford Law and longtime family friend. “They’ve decided, ‘We’re not going to fight with our son.’”
I was a victim, FTX the company definitely stole assets from my brokerage (not bank) account which their terms and conditions said they would not. The trickier bit is showing personal responsibility of SBF rather than someone else in the company. That's why no one got locked up for the 2008 crash - the companies obviously did bad stuff but it was hard to pin on an individual. I imagine in this case they have some personal evidence SBF was in on it.
The requirements to prove white collar crime are very different. You have to prove the person did the criminal action knowingly. It's not like proving a case for literal bank robbery where you just need to play the tape. Because of this prosecutions of white collar crime tend to take longer. In this case though I suspect that things like discussing your criminal activity in a chat channel called wirefraud tended you accelerate things.
I kind of had hopes the Bahamas are moving fast. As a tax haven, and arguably black money haven, you cannot have people abusing your lax financial regulations by stealing other peoples money, can you? After all, all the money people are parking at your banks teust you that it will still be there later. Also, in order to keep your freedom you have to keep the US authorities, and the EU, of your back.
Still surprised they moved that fast, I thought they'll wait for a demand from the DoJ.
Edit: According to vice.com, the US asked for his arrest.
Though I assume that if the suspect is abroad and seemingly unwilling to travel to the US, the DOJ would likely try to secure their return early, vs a person of interest in the US, who would be told to not leave the country during the investigation.
Has he confessed? I though his line was still "I'm not a fraudster, I've just been colossally incompetent"[1]. Although if he really believes that, he's going to be disappointed when its pointed out to him that some of his incompetence led to him defrauding people...
[1] Then following that admission with "and if people just give me another 8 billion dollars, I can fix everything" does perhaps point to him being a bit out of it. Or looking for the dumbest of marks.
The Zoom calls he did where he pretty much confesses to defrauding customers didn’t help.
I hope this is a lesson to those who think they can just talk their way out of things. The moral arc of the universe is long, but it bends toward justice.
Seems the investors of FTX never asked for a detailed balance sheet. Companies that FTX bought out were often compensated with significant strings attached.
Holmes at Theranos was giving investors tours of it all working while doing it manually and with more blood behind a curtain.
After adjusting my tinfoil hat, I can only conclude this is to preclude any direct testimony tomorrow. If he’s going to talk to the US authorities, the Bahamians are going to be the mediator.
Regardless of what it the actual reason for the strangely timed arrest in Bahamas, he can now take the 5th for any future committee hearing and it would be perfectly normal for someone who is under indictment.
This guy had a big mouth and poor motor control over his tongue. Who knew what he would spew? Maxine is relieved, is my opinion.
FWIW, most of the presige media (NYTimes, WaPo, WSJ) have been running puff pieces which parrot SBF's claims of ignorance without much if any fact checking or investigation.
I'm not sure reporting that Alameda + FTX had little to no financial controls, terrible accounting, and unaccounted for deposits is really puffery, unless you stretch the definition. And I've seen stories about SBF spending FTX money on personal loans and Bahamas real estate all over the legacy media. Even the restructuring CEO couldn't account for all the lost funds until recently
The Times and Washington Post perhaps but I haven't seen any puff pieces from WSJ about SBF. In fact quite the opposite. The WSJ seems to be decidedly anti-crypto. The most recent piece concerning him before this announcement was titled:
It's the testimony they are going to read tomorrow. It's a good idea to have something prepared so you don't stumble over yourself like SBF is everytime he speaks.
I skimmed the entire document and didn’t see any new information and in particular i didn’t see any evidence of a particular crime that could be pinned on SBF, other than negligence. (I’m sure he’s guilty of many crimes, i just didn’t see new evidence in this document)
This is his intro statement to the Congressional Committee. One wouldn't expect that it has much new, and given his role as "repo man", it wouldn't be focused on SBF's specific crimes, but on what he can do now to clean it up. But the tone is absolutely damning and it's clear that he is saying that illegal shit went on.
> Damian Williams, the U.S. Attorney for the Southern District of New York, said on Twitter that the federal government anticipated moving to “unseal the indictment in the morning.” The charges include wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering, according to the New York Times, citing a person familiar with the matter.
> Meanwhile, the Securities and Exchange Commission has initiated a separate set of charges against Bankman-Fried, relating to “violations of our securities laws, which will be filed publicly tomorrow in the Southern District of New York,” enforcement director Gurbir Grewal said in a statement.
This is good for Crypto. Seriously. Because SBF is probably going to help the US make their case against Binance and that will flush out all the bad actors. Many coins will go to zero. The entire ecosystem will wither and die, but if Crypto survives it will be because there is some fundamental value to it besides digital beanie babies.
Illegal transactions and money laundering isn't going to disappear. A generation of engineers obsessed with crypto will not suddenly stop caring even if a bunch of coins go to zero. The potential prize (control of a global currency/commodity) at the cost of just writing a bunch of code is too potentially lucrative to make people stop trying.
Crypto was much more legitimate when it was used just for illegal transactions. But it was not the "not your wallet, not your coins" folk that made valuation skyrocket, it was these scams.
When speculators were pouring billions into the field, it wasn’t a surprise that a lot of engineers went after high pay checks and the chance of even greater returns on speculative vehicles. The easy money drying up is going to shrink their number a lot, however – especially since the traditional finance sector is building the things people actually use. The number of people using inappropriate architectures is going to plummet when there isn’t a personal financial incentive from their use.
I think most of these engineers are interested in the high compensation that the blockchain space has been able to offer so far. If high compensations disappear, I suspect engineers will switch too.
Bad actors will keep on existing as long as crypto is useful, which it will remain for the foreseeable future, specially considering the ever more restrictive personal banking regulations.
In the absence of regulation, fraud is a comparative advantage. We can point to specific instances of fraud as moral failings. But fundamentally, if people are incentivized towards fraud, then there will only be fraud.
If you flush these particular bad actors, others will simply take their place
New bad actors will replace the old ones, this has all happened before, this will all happen again. Replace SBF with Mark Karpeles and the discourse is exactly the same, except at least back then the critics didn't have a legacy of fraud to point to.
It actually might be regulation that kills crypto because once you take out the high risk, you take out the high reward as well, and people are only in crypto for the high rewards
First because it seems that everything needs to be flushed out. FTX was highly regarded. Binance is the largest exchange. What shouldn’t be flushed by that logic? Bitcoin? Maybe Ethereum?
It also makes a weirdly naive distinction, between the « good actors », people who are selflessly coding and building things for the good of humanity (and who also don’t exist), and the « bad actors », who are there for hidden motives.
Why is crypto the only place where people make this distinction? We don’t make it for banks, or coffee shops, or car makers, with fantasmatic and ephemeral « good actors» (where nobody agrees on which they are) and bad self-interested bad actors.
And secondly because it doesn’t work like that. Bad things don’t get flushed until the good remains. Newer bad things come and replace them, on and on, until things get regulated.
I see a lot of people saying that they think he'll get off or get a slap on the wrist. But I think that misunderstands what happened here. SBF perpetrated a massive fraud for years. In order to put him in jail prosecutors don't need to prove that. All they need to do is identify a small handful of actions that count as wire fraud and prove those cases. The saying is "Don't break the law while you're breaking the law"- there is simply no way that SBF was competent enough to actually carry all this business on without fucking up enough to incriminate himself, and now every single dollar that he transacted in this last 5 years will be under a fine tooth comb. To say SBF won't face jail isn't to say he's going to get away with his massive fraud, it's to say he'll also get away with every tiny fraud he committed along the way, and there's just no chance that's the case.
For all the struggles facing the democratic world, it's nice to know there is a stream of justice that prevails.
In certain other large counties, this man would either be protected or jailed depending on what party he aligns to. Sure, you can say the same for USA, but with far less immediacy. Over time things tend to sort themselves out.
A lot of the money that was lost came from institutions and some public funds as well. Ontario Teachers’ Pension Plan, BlackRock, Circle, Sequoia Capital, Binance, SoftBank,...
SBF is a crazy character, he somehow must have thought he was above it all. If he'd done what all these finance companies do, scamming the little man, he'd probably still be free. Alex Mashinsky yet has to be arrested for example. And people like Vladimir Tenev aren't even prosecuted, many of them get off with a slap on the wrist.
Don't feel bad for Blackrock/Sequoia/Softbank etc. These are professional investors, yet they invested in a finance company that didn't even have proper financial sheets. To let that slide is pure negligence, and, frankly, should put them on the hook for the monetary loss from the FTX customers.
SBF's public conduct over the past weeks, and alleged conduct over the past years, reinforces an image of unintelligence. Be it genuine stupidity, stimulants or both, he isn't top-of-the-doghouse material. (Granted, easy to say ex post facto.)
The elephants in the room are Binance and Tether, together with certain high-profile investors. Taking some of these out could likely be worth a plea bargain. (For optics, he has to go to jail. But sending him to jail for a long time while letting the others go free for lack of evidence is a bad trade.)
My opinion is that it's all faux stupidity. I think his whole "I really didn't know what was going on" spiel is going to fall apart quickly in court. Anyone with a couple brain cells to rub together would know to shut the hell up. He seems desperate enough to try lying and manipulating his way out of hot water. That's what his whole media tour has been about. He's not giving interviews to people that will give him tough questions and follow up on his responses. He's giving interviews to people that are going to ask "so, what happened?" And follow up his half-baked response with "Wow, you didn't know what was happening, that's wild!"
It’s a little bit innocent to think that SBF isn’t intelligent; he’s extremely adept at lying and manipulating. And on top of that, intelligent enough to create a large crypto exchange. It’s his morals and impulses that got him into trouble.
He’s the latest example of why many RPGs have separate stats for intelligence and wisdom. He’s clearly not stupid but his lawyers must be sitting at their desks sobbing “stop giving interviews!”
He could be intelligent but distressed (who wouldn't?) or he could be just a front for more sinister people.
> Binance and Tether
Binance is the elephant in the room. They might have their finances in order, however. The fact that they were enabling shady deals doesn't mean they were cooking their own books. For Tether, I think it's more solid than you think. These guys have been cooperating with NYAG from day one.
It is a feature of social media society that there is such a large body of actual evidence ex post facto that is so damning. I am thinking of SBF tripping on stimulants on meet the press, the CEO of a multi billion $ hedge fund talking about how many of their investments were scammy.
Yet these raised no red flags, and were even cited as proof of their genius, how this time it is different - you can pitch at a 30bn valuation while tripping on drugs and playing a game at the same time. Genius (or Idiot?)
Being intelligent at math is quite different than handling a crisis well. IMO he's spent the last few years with everyone sucking his nuts and going on about how smart he is and it's gotten to his head.
For those saying "what took so long?", this is incredibly quick. It's still quicker than I thought it would be. But it is an open-and-shut case. As soon as you steal custodial assets (meaning customer assets that you'r eholding in trust), it's game over.
Additionally, the US claims jurisdiction on pretty much anything that touches the US financial system. It's how the US can exert pressure on, say, European banks (eg the Swiss settlements for withholding taxes for US citizens).
Given the scale of the fraud (ie $billions), I honestly expect him to spend the rest of his life in prison. It's that large and that egregious. Was it worth it?
I'm curious to find out if Caroline Ellison was (or will be) a cooperating witness in this case as some speculated when she was spotted in a Starbucks recently in Lower Manhattan close to the SDNY office.
> I honestly expect him to spend the rest of his life in prison
Yeah a lot of people are saying this and citing Madoff for comparison. I guess we'll all wait 2 years and see, but I doubt he's getting this kind of time.
How similar can he make his story look to Nick Leeson's? He'll say he just got in over his head, tried to trade his way out of it, used funds he shouldn't have and lost in his gambles. Leeson got 6 1/2 and served 4. My prediction is SBF gets 11 and serves 7 or so.
Nick Leeson was prosecuted in Singapore though, very difficult to compare to that to the US. There's a good chance Nick Leeson would've gotten a harsher sentence was he charged by the Southern District of NY..
Readit News
Then again, he's been much more out in the open about everything. He pretty much laid the prosecution's case out to the public for them.
From The Verge article about the arrest of Bankman-Fried ( https://www.theverge.com/2022/12/12/23506483/sam-bankman-fri... ) :
John J. Ray III, who has taken over for Bankman-Fried as CEO of FTX and whose credentials include supervising the corporate cleanup after Enron imploded, has already said, 'Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.'
https://www.nytimes.com/2022/12/07/business/ftx-sbf-crypto-m...
Getting one of two culpable people to testify against the other and let them off the hook seems a dreadfully lazy approach to prosecution.
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From the WSJ:
https://archive.ph/2022.12.12-111902/https://www.wsj.com/amp...
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Still surprised they moved that fast, I thought they'll wait for a demand from the DoJ.
Edit: According to vice.com, the US asked for his arrest.
Madoff was arrested before the news broke.
And Madoff was more out in the open. He confessed everything to his sons, and the very next day he was arrested.
Madoff was less than 11 days after discovery of his fraud:
https://www.theguardian.com/business/2009/mar/12/bernard-mad...
[1] Then following that admission with "and if people just give me another 8 billion dollars, I can fix everything" does perhaps point to him being a bit out of it. Or looking for the dumbest of marks.
I hope this is a lesson to those who think they can just talk their way out of things. The moral arc of the universe is long, but it bends toward justice.
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With Holmes the prosecution probably had to do a hell of a lot of legwork to prove crap like intent, damage, etc.
I dunno. Wonder what other people think.
Seems the investors of FTX never asked for a detailed balance sheet. Companies that FTX bought out were often compensated with significant strings attached.
Holmes at Theranos was giving investors tours of it all working while doing it manually and with more blood behind a curtain.
This guy had a big mouth and poor motor control over his tongue. Who knew what he would spew? Maxine is relieved, is my opinion.
https://www.pointoforder.com/2013/05/22/taking-the-fifth-bef...
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I no nothing about law, but I can imagine the pressure on Southern District to act after the cast was outlayed so well in social media.
Feds were probably gathering evidence from Day 1, and the restructuring CEO seems to have found it: https://docs.house.gov/meetings/BA/BA00/20221213/115246/HHRG...
"The Rise and Fall of Respectability":
https://archive.vn/AiEEO#selection-109.5-109.40
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Seems SBF won’t be attending after all…
> Damian Williams, the U.S. Attorney for the Southern District of New York, said on Twitter that the federal government anticipated moving to “unseal the indictment in the morning.” The charges include wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering, according to the New York Times, citing a person familiar with the matter.
> Meanwhile, the Securities and Exchange Commission has initiated a separate set of charges against Bankman-Fried, relating to “violations of our securities laws, which will be filed publicly tomorrow in the Southern District of New York,” enforcement director Gurbir Grewal said in a statement.
Source: https://www.cnbc.com/2022/12/12/ftx-founder-sam-bankman-frie...
I think most of these engineers are interested in the high compensation that the blockchain space has been able to offer so far. If high compensations disappear, I suspect engineers will switch too.
Bad actors will keep on existing as long as crypto is useful, which it will remain for the foreseeable future, specially considering the ever more restrictive personal banking regulations.
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If you flush these particular bad actors, others will simply take their place
Once you take the utility of a product away it becomes worthless.
First because it seems that everything needs to be flushed out. FTX was highly regarded. Binance is the largest exchange. What shouldn’t be flushed by that logic? Bitcoin? Maybe Ethereum?
It also makes a weirdly naive distinction, between the « good actors », people who are selflessly coding and building things for the good of humanity (and who also don’t exist), and the « bad actors », who are there for hidden motives.
Why is crypto the only place where people make this distinction? We don’t make it for banks, or coffee shops, or car makers, with fantasmatic and ephemeral « good actors» (where nobody agrees on which they are) and bad self-interested bad actors.
And secondly because it doesn’t work like that. Bad things don’t get flushed until the good remains. Newer bad things come and replace them, on and on, until things get regulated.
In certain other large counties, this man would either be protected or jailed depending on what party he aligns to. Sure, you can say the same for USA, but with far less immediacy. Over time things tend to sort themselves out.
SBF is a crazy character, he somehow must have thought he was above it all. If he'd done what all these finance companies do, scamming the little man, he'd probably still be free. Alex Mashinsky yet has to be arrested for example. And people like Vladimir Tenev aren't even prosecuted, many of them get off with a slap on the wrist.
Compare that to being vanished, and/or having your family roped in.
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The elephants in the room are Binance and Tether, together with certain high-profile investors. Taking some of these out could likely be worth a plea bargain. (For optics, he has to go to jail. But sending him to jail for a long time while letting the others go free for lack of evidence is a bad trade.)
The fact that he’s done this would give his stupid guy story credence... if there wasn’t already a boatload of other evidence that he’s a conman.
> Binance and Tether
Binance is the elephant in the room. They might have their finances in order, however. The fact that they were enabling shady deals doesn't mean they were cooking their own books. For Tether, I think it's more solid than you think. These guys have been cooperating with NYAG from day one.
Yet these raised no red flags, and were even cited as proof of their genius, how this time it is different - you can pitch at a 30bn valuation while tripping on drugs and playing a game at the same time. Genius (or Idiot?)
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Additionally, the US claims jurisdiction on pretty much anything that touches the US financial system. It's how the US can exert pressure on, say, European banks (eg the Swiss settlements for withholding taxes for US citizens).
Given the scale of the fraud (ie $billions), I honestly expect him to spend the rest of his life in prison. It's that large and that egregious. Was it worth it?
I'm curious to find out if Caroline Ellison was (or will be) a cooperating witness in this case as some speculated when she was spotted in a Starbucks recently in Lower Manhattan close to the SDNY office.
Yeah a lot of people are saying this and citing Madoff for comparison. I guess we'll all wait 2 years and see, but I doubt he's getting this kind of time.
How similar can he make his story look to Nick Leeson's? He'll say he just got in over his head, tried to trade his way out of it, used funds he shouldn't have and lost in his gambles. Leeson got 6 1/2 and served 4. My prediction is SBF gets 11 and serves 7 or so.