Sam Bankman-Fried arrested in Bahamas, charged with "massive" crypto fraud in US
FTX co-founder and former CEO Sam Bankman-Fried was arrested in the Bahamas yesterday and will face charges from the US Department of Justice, the Securities and Exchange Commission, and one other US government agency. Damian Williams, the Justice Department's US Attorney for the Southern District of New York (SDNY), announced that "Bahamian authorities arrested Samuel Bankman-Fried at the request of the US Government, based on a sealed indictment filed by the SDNY."
The SEC announced today that it charged Bankman-Fried "with orchestrating a scheme to defraud equity investors in FTX Trading" and that investigations into "other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing." The SEC said Bankman-Fried is also facing charges from the Commodity Futures Trading Commission (CFTC), a US agency that regulates derivatives markets.
Feds Charge Former FTX CEO Sam Bankman-Fried With Money Laundering and All Kinds of Fraud
Feds charge former FTX CEO Sam Bankman-Fried with money laundering and all kinds of fraud:
About 12 hours after we learned authorities in the Bahamas have arrested FTX co-founder and former CEO Sam Bankman-Fried (SBF), the US Securities and Exchange Commission (SEC) revealed the first of multiple sets of charges he'll face. Those were quickly followed by another civil lawsuit filed by the Commodity Futures Trading Commission (CFTC) and, finally, criminal charges filed by the US attorney's office for the Southern District of New York.
The criminal charges were filed last Friday and unsealed today. They include eight counts that cover allegations of wire fraud against customers and those who lent money to his firms, securities fraud, and money laundering.
The SEC complaint accuses Bankman-Fried of executing a "years-long fraud" while diverting customers' funds from FTX to his crypto trading firm, Alameda Research. These charges cite the more than $1.8 billion FTX received from equity investors since 2019, including $1.1 billion from investors in the US — key to establishing the SEC's jurisdiction since the main FTX exchange wasn't allowed to operate in the US.
The CFTC complaint echoes the SEC remark that the fraud was there from the beginning, and details SBF's communications within FTX and Alameda, accusing him of committing commodities fraud through his omissions and misrepresentations.
(Score: 0) by Anonymous Coward on Thursday December 15, @09:54AM (14 children)
Blah blah crypto blah blah techno blockchain.
He took people's money to hold in (say) Bitcoin but instead of doing that he gambled it and lost all of it.
(Score: 4, Insightful) by canopic jug on Thursday December 15, @10:29AM (3 children)
That's just the same as many of the existing financial firms. The problem here is that he was an outsider trying to pull the same stunt, just like that Usent guy in the early 1990s. Wait a few months and all the big money shops will be up to their ears in debt from cryptocurrency speculation using your money and asking for both tax breaks for it and bailouts to cover losses.
Money is not free speech. Elections should not be auctions.
(Score: 3, Informative) by PiMuNu on Thursday December 15, @12:12PM (2 children)
> That's just the same as many of the existing financial firms.
No it's not.
(Score: 2) by mcgrew on Friday December 16, @10:01PM (1 child)
Because of some unfortunate temporary backend S/N database problems, I'm unable to mod you "overrated". There is absolutely no real information in your post, just a biased, empty, unsourced statement masquerading as fact. It may indeed be true, but its inability to be verified makes it useless garbage.
Carbon, The only element in the known universe to ever gain sentience
(Score: 2) by PiMuNu on Saturday December 17, @07:24PM
> just a biased, empty, unsourced statement masquerading as fact
Much like the parent. I might add, the parent made an assertion, and the onus is on the parent to provide evidence to support their assertion.
(Score: 5, Insightful) by Thexalon on Thursday December 15, @12:20PM (9 children)
That's part of it.
The other part of it is that because FTX wasn't bound by either banking nor brokerage regulations, there was absolutely no guarantee that you would actually get back the assets you put in. It turns out that contrary to libertarian fantasies, institutions like the SEC, FDIC and CRUA are useful.
As a general rule, "Give me a pile of your money and I'll 100% guarantee you it will become a bigger pile of money quickly" is something you need to run away from.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 1) by khallow on Thursday December 15, @02:27PM (4 children)
They're also harmful in that they put a lot of pointless obstructions to investing. For example, we had the technology to do betting markets on serious subjects (politics, science development, etc) for a couple of decades now (I used to play on a play money version [ideosphere.com] in 1996-2009), but these idiotic regulations blocked creation in the US. Then when betting markets were set up in Ireland, the US government shut down banking transfers to them around 2010 (I don't remember the exact year). And then there's the "accredited investor" thing which ensures that only rich people have access to exotic investment approaches.
As to the people who would lose money from this? They'll lose it anyway on something else such as the FTX example shows. But now, we're paying a lot for government employees to look busy too.
(Score: 2) by Thexalon on Friday December 16, @12:31PM (3 children)
Betting markets aren't supposed to be what investing is about, so yes, they shut you down.
The purpose of investing is supposed to be to give real enterprises tools they need to expand or improve on what they're doing. For example, the point of commodities futures is that a business that is producing large quantities of some tangible good that takes a while to make knows that it will be sold and knows exactly what price they're going to get for it in advance, which reduces the risk considerably. The stock market is supposed to help companies either get starting capital (by issuing an IPO), or establish a value of the company that can then be used as collateral to borrow money. And the bond market is those companies borrowing money at a specific interest rate, so that they can use that money to help their business along.
Is that how it actually is all the time? No. But it is exactly what the agencies we're talking about are trying to make happen.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 1) by khallow on Friday December 16, @11:25PM (2 children)
Actually it is along with a huge variety of other investment strategies and behaviors. And no, it's not the SEC's job to decide what investing is True Investing.
Like consensus speculation on future events? Betting markets provide an important tool for anyone having to deal with future uncertainty - which is everyone.
Then we need better agencies.
(Score: 2) by PiMuNu on Saturday December 17, @07:28PM (1 child)
> And no, it's not the SEC's job to decide what investing is True Investing.
Well, actually it is:
https://www.sec.gov/about [sec.gov]
> The job of the SEC is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation
(Score: 1) by khallow on Saturday December 17, @11:55PM
(Score: 2) by VLM on Thursday December 15, @03:13PM (3 children)
Its not entirely clear how "effective" the Bahama's equivalent of those departments was in this case. It doesn't seem like anything was being regulated or audited until after collapse.
Its one of those jurisdictional things where this is/was a company in the Bahamas however they were offering services in the USA so exactly who regulates what can be murky. If you're in the USA and file a false report about a USA org you can get into considerable trouble, however, its sort of "push not pull" so if the SEC gets a false report and nobody points out its false then there's not much "looking for trouble" outside the USA territory as I understand it. There is a web of trust concept where AFAIK if you wanted to buy securities in Unilever or Rio Tinto in London, they brag extensively about their accounting audits so you can trust them even if you don't live in London, but if you're an exchange in the Bahamas and decide to just fake it all there's not much web and not much trust in the web of trust.
The SEC is quite involved with brokerage houses thru their trading and markets division. I don't think the FDIC cares too much about brokerage houses that's more a banking regulator. I think when you write CRUA you mean the NCUA which is pretty much the FDIC for credit unions, but whatever. Possibly you're thinking of the SIPC which is kind of the FDIC for brokerage cash accounts. We're getting DEEEEEEEP in the weeds but its possible for a brokerage to be involved in securities and commodities but SIPC only covers deposits related to securities. How do they handle a mixed acct? I don't know. I don't think SIPC would cover an exchange in the Bahamas anyway.
In summary you're barking at the wrong organizations in the wrong countries.
(Score: 2) by VLM on Thursday December 15, @03:30PM (1 child)
Following up on the "web of trust"
https://www.coindesk.com/layer2/2022/11/18/a-complete-failure-of-corporate-controls-what-investors-and-accountants-missed-in-ftxs-audits/ [coindesk.com]
In a way the financial paperwork was "kind of" honest in a weird way.
So, as a private company there's no legal obligation to do an audit. As a foreigner you're generally better off investing in a public company in general, etc. They did kind of a pseudo-audit with two really small time players then consulted with two of the big four then marketed extensively the implication they were audited by two of the big four not the small timers who supposedly psuedo-audited them. It would be like me claiming I own IBM, because I have a model M keyboard on my desk. If you read the marketing material carefully they technically were "working with PwC" which implies to people they're being audited by PwC but, uh, no.
There is an oddity that per the fake financial statements they seemed to be profitable enough to pay US income taxes, yet they filed apparently true tax paperwork that they had massive losses and as such I've read a claim they did not pay US taxes. Interesting they honestly put that lack of expense in their own fake paperwork. If a supposedly profitable company is refusing to pay taxes, that indicates either a massive IRS raid incoming or their profit is fake, either way its not looking good and is kind of interesting nobody looked for that until after the collapse, THEN they point out "oh yeah thats interesting". But it was public.
Another interesting thing you see in the fake financial paperwork is they were actually in the business of converting fungible cash to non-fungible ultra-thinly traded tokens.
My guess is the three issues above is how they'll walk on some technicalities or at least get off WAY easier than people think.
They'll all end up in sanctuary in Israel anyway for obvious reasons.
(Score: 0) by Anonymous Coward on Thursday December 15, @05:30PM
> They'll all end up in sanctuary in Israel anyway for obvious reasons.
Because of international Jewry and the elders of Zion?
(Score: 2) by Thexalon on Friday December 16, @12:34PM
I think you thought my point was the exact opposite of what it was, namely that financial regulatory institutions and all that boring bureaucracy exists for a reason, and dealing with an institution that's trying to avoid rather than comply with regulations is a recipe for trouble.
And yes, that includes trying to avoid US or EU or UK regulators by basing your business in the Bahamas, or the Caymans, or Cyprus, or Panama, all of which have been used as havens for various nefarious schemes over the years.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 2) by fab23 on Thursday December 15, @10:56AM
Some related humor, see Bitcoin is feeling up! [geekculture.com], The Joy of Tech comic published today.
So here is a start of a list of infamous names (feel free to add more):
Somebody with Bank in the name probably is a serious person. :-)
(Score: 2) by VLM on Thursday December 15, @02:58PM
The high level explanation of what happened is the blockchain techs being used make it impossible to hide anything or break a contractual obligation.
So when a crook gets involved and wants to do fraud, literally everything other than blockchain / crypto was fake. No accounting controls, no logs, the balance sheet was basically imaginary.
Naturally the result is a bunch of whining that the problem in the story is blockchain / crypto, when ironically that was the only part of the story that was not fraudulent, LOL. Almost makes the whole story read like some kind of setup.