Sam Bankman-Fried had nothing to lose: The story about the FTX collapsing scandal in the Bahamas and why Binance should be investigated

At the end of the ad, David learns about FTX, “a safe and easy way to get into crypto.” A dismissive David says, “Ehhh, I don’t think so. I am never wrong about this stuff.

Officials claim that Bankman-Fried spent years lying about the financial state of FTX, an exchange that collapsed in November in one of the most spectacular financial implosions. Bankman-Fried is currently in the Bahamas, where FTX operated from, and is awaiting an extradition hearing.

Approximately $1.14 billion was withdrawn from Binance on Tuesday, as the crypto world digested news that FTX’s founder, Sam Bankman-Fried, had been arrested in the Bahamas, along with a report about government scrutiny of Binance.

“People feel duped,” Brian Armstrong, the CEO of rival crypto exchange Coinbase, told CNN in a phone interview on Friday. “On the surface, FTX was able to garner a lot of attention. But when people looked at it, there wasn’t anything there.

The defendants and Bankman Fried knew that FTX allowed Alameda to use customer funds to make riskier investments than treasuries.

The Bankman-Fried financial hole: Why the money went away after FTX collapse? A comment from CZ, MSB, CNN, and CNN

A large portion of that total has since disappeared, they said. One source put the missing amount at about $1.7 billion. The other said the gap was between $1 billion and $2 billion.

According to the two sources, the financial hole was revealed in records Bankman-Fried gave to other senior executives last Sunday. The records provided an up-to-date account of the situation at the time, they said. Both sources held senior FTX positions until this week and said they were briefed on the company’s finances by top staff.

Earlier Tuesday, Binance had already seen its “highest daily withdrawals since June,” according to Nansen’s analysis. The firm’s data shows that the rates of withdrawals and net outflows have remained roughly the same.

That Sunday, Bankman-Fried held a meeting with several executives in the Bahamas capital Nassau to calculate how much outside funding he needed to cover FTX’s shortfall, the two people with knowledge of FTX’s finances said.

The documents showed that between $1 billion and $2 billion of these funds were not accounted for among Alameda’s assets, the sources said. The spreadsheets did not indicate where this money was moved, and the sources said they don’t know what became of it.

The Royal Bahamas Police Force stated in a statement that a team of financial investigators from the financial Crimes Investigation Branch were working with the Securities Commission to investigate if any criminal activity occurred after the collapse of FTX.

CZ, as he’s known, was speaking at a conference in Indonesia on Monday. He said last week that comparing the current crypto turmoil to the 2008 global financial crisis is “probably an accurate analogy.”

Emily was a policy advisor at the US State Department and wrote and edited for The Wall Street Journal before becoming executive director of global content at CoinDesk. She wrote “Now I Know.” Who My Comrades Are: Voices From the Internet Underground.” The opinions in this commentary are her own. Read more opinion at CNN.

For the crypto industry, the lesson here is to stop looking for saviors. Bankman-Fried’s meteoric rise was not simply based on his own doing – he was buoyed by many others. He raised millions of dollars from high-profile investors, was showered with media attention, and with few exceptions just wasn’t questioned all that much. It is important that there isn’t only one person who should be responsible for hope and responsibility. It goes against the representations that have been made about it.

It was not supposed to be this way. Bitcoin, the world’s first major cryptocurrency, came into the world on the heels of the 2008 financial crisis, which led to a deep disappointment in bankers and politicians. In light of the distrust in financial institutions, the basic idea was that this new system didn’t require you to trust anyone at all. Everyone can see that the transactions are recorded on a ledger called a Blockchain, which should stop anyone from trying to alter them.

Bankman-Fried: Not a Scam or Spontaneous Crime, But a Tool for Preventing Other Skeptics

The entire fiasco is completely unsurprising, and in many ways could have been foreseen — as indeed some did. After all, this is hardly the first case of alleged fraud we’ve seen from a figure like Bankman-Fried. And, as opposed to what any lawyer would advise, SBF, as he is commonly known, didn’t remain silent. He went on an apology tour, tweeting, speaking to reporters and even virtually participating in the yearly DealBook Summit in New York last month where he said he “didn’t ever try to commit fraud on anyone.”

There is a cult of personality problem. There is also a technology that is leaderless and decentralization in social media. The world’s richest man has a say in how the social network is run.

In that sense, Bankman-Fried may be no different than his predecessors. Bankman-Fried is a new example of an old story, but hopefully the start of change in the industry with the kind of regulations and transparency needed to prevent other scam artists, or criminals, from simply.

The crisis in the market deepened over the weekend, pushing prices of digital currencies down again. Bitcoin, the world’s biggest cryptocurrency, has plummeted about 65% so far this year. It was trading at about $16,500 on Monday, according to CoinDesk. Analysts think that it could fall below a certain level.

It is not faring much better than Ether, the world’s second most valuable coin. The data showed it was at $1,230 on Monday, having sunk over 20% in the last week.

Binance: How FTX was destroyed in the 2008 Lehman-Memory collapse and how investors see the rest of the crypto industry

The company’s demise has been linked to a Lehman moment, referring to the 2008 collapse of the investment bank.

The episode has not just destroyed confidence in the crypto industry, but will also embolden global regulators to tighten the screws. Some of the biggest names in the business said they will welcome the scrutiny if it helps reestablish faith in the industry.

“As has been reportedly widely, regulators are doing a seeping review of every crypto company,” a Binance spokesperson told NPR, in an e-mail. “This industry has grown very quickly and has shown it’s commitment to security and compliance.”

FTX moved its headquarters from Hong Kong to The Bahamas last year, with former CEO Sam Bankman-Fried hailing it as “one of the few places to set up a comprehensive framework for crypto” at the time.

But up until last week, Bankman-Fried was seen as a white knight for the industry. Bankman-Fried, the person likely to fly in with a rescue plan when the altcoin industry was on the verge of collapse, had been doing that for a long time. When online trading platform Robinhood was in financial straits earlier this year — collateral damage from the decline in stock and crypto prices — Bankman-Fried jumped in to buy a stake in the company as a sign of support.

FTX Inclusive Bankruptcy: How the Crypto Market got Its Owned And Its Runs Like a Bank

FTX moved its digital assets offline due to precautionary steps on Friday, according to General Counsel Ryne Miller. The process was expedited Friday evening “to mitigate damage upon observing unauthorized transactions.”

As scrutiny of big players increases, Singapore-basedcrypty.com has accidentally sent more than $400 million in ether to the wrong account.

CEO Kris Marszalek said Sunday that the transfer of 320,000 ETH was made three weeks ago to a corporate account at competing exchange Gate.io, instead of to one of its offline, or “cold,” wallets.

We have strengthened our process and systems to better manage internal transfers. The platform’s native token has fallen in value.

Marszalek said Monday that his firm has acted as a “responsible, regulated player since inception” and will soon “prove all the naysayers …wrong with our actions.”

He said that it was normal for a bank to move user assets in order to make money. If a crypto exchange operates that way it is “almost guaranteed to go down,” he said. adding that the industry collectively had a role to play in protecting consumers.

Swan Bitcoin: From the First Tsallaire to the World’s First Tilt to Cryptically Secure Bankman-Fried

Bankman- Fried was indicted in the US this week on eight criminal charges. Separately, US markets regulators also charged Bankman-Fried with defrauding investors and customers.

“I care because it’s retail investors who suffer the most, and because too many people still wrongly associate bitcoin with the scammy ‘crypto’ space,” said Cory Klippsten, CEO of Swan Bitcoin, who for months raised concerns about FTX’s business model. Klippsten is publicly enthusiastic about bitcoin but has long had deep skepticism about other parts of the crypto universe.

Sequoia Capital, which invested in Apple, Cisco, Google, Airbnb and YouTube, described their meeting with Bankman-Fried as likely “talking to the world’s first trillionaire.” The partners of Sequoia were enthusiastic about Bankman- Fried after a meeting. After several more meetings, Sequoia decided to invest in the company.

I don’t know how I know. Business journalist Adam Fisher wrote a profile of Bankman- Fried and referred to him as SBF’s winner. The article, published in late September, was removed from Sequoia’s website.

In a terse statement, the Ontario Teachers’ Pension Fund said, “Naturally, not all of the investments in this early-stage asset class perform to expectations.”

Source: https://www.npr.org/2022/11/14/1136482889/ftx-sam-bankman-fried-shockwaves-crypto

The rise and fall of Jeffrey T. Bankman-Fried, the king of cryptography, and the mastermind of Ponzi schemes: Sheila Bair tells CNN it all feeds on itself, not Paxo

The purchase of the assets of a bankrupt firm brought relief to accountholders, whose assets have been frozen since the firm’s failure. That rescue is now in question.

As king of crypto, his influence was starting to pour into political and popular culture. FTX bought prominent sports sponsorships with Formula Racing and bought the naming rights to an arena in Miami. He pledged to donate $1 billion toward Democrats this election cycle — his actual donations were in the tens of millions — and prominent politicians like Bill Clinton were invited to speak at FTX conferences. Tom Brady invested in a company.

Sheila Bair, a top regulator during the 2008 financial crisis, told CNN there are eerie similarities between the dramatic rise and fall of Bankman-Fried and FTX and that of infamous Ponzi scheme mastermind Bernie Madoff.

Bair notes that 30-year-old Bankman-Fried, like Madoff, proved adept at using his pedigree and connections to seduce sophisticated investors and regulators into missing “red flags” hiding in plain sight.

He was known as a wizard on Wall Street. He was the former chairman of the Nasdaq Stock Market, served on Securities and Exchange Commission advisory panels and managed money for the rich and the famous.

Better Markets CEO Dennis Kelleher said in a statement on Monday that FTX had a strategy of “revolving door hires” from the Commodities Futures Trading Commission (CFTC) and elsewhere “to use their knowledge, influence and access at the agency and in Washington to move FTX’s agenda.”

You get a herd mentality where if your peers and marquee names are investing, you need to as well. And that adds credibility with Washington policymakers. Bair spoke for herself, not Paxos, when she said that it all feeds on itself.

What happened to Madoff’s VIPs? Telling FTT about what happened to Lehman Brothers in 2008 and now, and what will we learn from it?

Madoff offered investors marvelous returns that were remarkably consistent and an improbable track record that later proved to be made possible by an elaborate scheme that involved repaying existing clients with new client deposits.

The good news is the former FDIC chair is not worried about the FTX implosion threatening the entire financial system the way Lehman Brothers did in 2008. Crypto is still a relatively small part of the broader economy and financial market.

“There’s no reason, if you’re in crypto, not to create tokens,” says Hilary Allen, a professor at American University Washington College of Law. “You can use thin air to make a token.”

“I think of it like airline miles,” says Ariel Zetlin-Jones, who teaches economics at Carnegie Mellon University. “Like points for using the exchange.”

In other words, those “VIPs” handed over real money to buy a purely digital token from FTX, and all that was the basis for making risky and speculative investments.

This inappropriate and unseemly practice evaded scrutiny in the largely unregulated world of crypto, which Securities and Exchange Commission Chair Gary Gensler, the top cop of Wall Street, has compared to the “Wild West.”

The financial practices were murky with no transparency, no investor protection, and no financial guardrails, says Prasad, a professor of economics.

“The moment there is the slightest whiff of concern about the token, the value of that token can vanish to practically nothing a flash,” Prasad said. “Which is what happened here.”

“I think there is the expectation that once one sifts away all the embers from this conflagration, there will be some value left in the exchange,” Prasad says. “There will be some assets that will still be left over that will have marginal value, and the token can be used in order to derive value from those assets.”

He expects FTT’s value will fall more in the coming days as we learn what happened to the $30 billion company.

“People buy up Zimbabwean trillion-dollar bills because it’s an anecdote and they might like these as collectibles,” Zeitland-Jones says. “Perhaps FTT is the new collectible that we’ll marvel at 100 years from now.”

How Did Binance Get Its Highest Outflow? A Tale of Two Coins and One Coin: The American Kleptocracy

Investors withdrew as much as $3 billion from Binance on Tuesday, according to blockchain analytics firm Nansen, as the world’s largest cryptocurrency exchange confronted investor jitters amid a deluge of negative headlines about the industry.

Binance was also in the headlines. According to the report on Monday, the US prosecutors were considering indicting individual executives including founder Changpeng Zhao for alleged money-laundering.

In his Twitter post, the billionaire sought to strike a sanguine note, suggesting that it was “a good idea” for each crypto exchange to generally face “stress test withdrawals.” He later said that Tuesday was not among the company’s highest outflows.

A writer and investigative journalist named CASEY MICHOT covers dark money networks across the globe. He is the author of “American Kleptocracy: How the US Created the World’s Greatest Money Laundering Scheme in History,” and is at work on a book investigating foreign lobbying in Washington, DC. The opinions expressed in this article are his own. Read more opinion at CNN.

In some ways, these kinds of cases, many of which resemble traditional Ponzi schemes, are as old as American capitalism itself. They often pair a lack of regulation and oversight with promises of easy wealth schemes, all predicated on proprietary technology that seems to generate returns out of thin air.

Just look through American history, and the same story repeats itself, over and over. The American economy was destroyed in the initial Great Depression of 1873 when speculative investors operating without any oversight of the railroad industry led to a series of bank failures.

Changpeng Zhao and Genesis: A Cryptotangle on What Happens When Binance Becomes Uneasy and Weighs Its Coins

The company’s CEO, Changpeng Zhao, who is better known as “CZ,” dismissed the outrush of cash as “business as usual” for the world’s largest crypto exchange.

There were also signs, though, of uneasiness, when Binance halted withdrawals of a so-called “stable coin” called USDC, for about eight hours on Tuesday.

In a memo to employees obtained by NPR, he indicated that Tuesday was not only a one-off in the industry, where he reigns as a celebrity and influencer, but also a historic moment.

“While we expect the next several months to be bumpy, we will get past this challenging period,” he wrote. “And we’ll be stronger for having been through it.”

Another part of the crypto tangle is Genesis, which is facing the possibility of bankruptcy. It said in a tweet last month its derivatives business had about $175 million locked in an FTX account.

One of its units was named on Thursday to a creditors committee in the FTX bankruptcy case by the Department of Justice’s U.S. Trustee, giving it power in shaping how FTX will pay off its debts.

The company hired the accounting form Mazars to review its numbers, and it provided an assessment of its finances to customers, which it is characterizing as a “proof of reserves.”

The case of Mr. Bankman-Fried for stealing an FTX asset in the first two years of its existence in the United States

The moves by Ms. Ellison and Mr. Wang could spur more high-ranking FTX executives to strike plea deals in exchange for their testimony. Mr. Bankman-Fried will be in even more legal jeopardy now that he’s in the United States.

Ms. Ellison and Mr. Wang were against Mr. Bankman-Fried. While Mr. Bankman-Fried has said repeatedly — including at the DealBook Summit last month — that he wasn’t aware of what was happening at Alameda, the exchange’s trading affiliate, documents filed yesterday by the authorities claim otherwise.

The S.E.C. accused Ms. Ellison of manipulating the markets for FTX and the digital asset it used to invest in other companies to prop up its price. It also accused Mr. Wang of creating software that allowed the diversion of FTX customer funds to occur without detection.

Ellison told the judge she had agreed to borrow billions of dollars from FTX to repay the loans.

Mr. Wang also entered his plea on Monday, several hours before Ms. Ellison’s court appearance. Mr. Wang told Judge Abrams that he knew what he “was doing was wrong,” according to a transcript of the proceeding, which also was unsealed on Friday.

Much of crypto did graze the stratosphere at the start of 2022, when enthusiasm was astronomically high, but a few months later it all came crashing back down to Earth.

The ads were all over the place, even in fortune cookies. Crypto companies spent tens of millions of dollars on marketing, swamping the Super Bowl with commercials. The currencies and tokens may have been virtual, but crypto became more real for many Americans in the early months of the year.

The industry seemed to reach “peak hype” in January and February, says Molly White, a fellow at Harvard University who is a crypto skeptic. She runs the site Web3 is Going Just Great.

The Federal Reserve raised interest rates to fight high inflation, and that was enough to cause the price ofcryptocurrencies to tank.

The Case for a New Crypto-Art Industry Spokesman: Lee Reiners’s Explanation for the “Crypto Winter”

The audience seemed a bit perplexed when she promised, Oprah-style, to give each of them an NFT — another kind of digital asset that is basically cartoony crypto art. They applauded when Fallon seemed to be blown away.

“You know, we’ve been living in the ‘crypto winter’ for the better part of a year,” says Lee Reiners, who teaches cryptocurrency law at Duke University.

He says it exposed a bunch of firms who were overextended, poor risk management, and engaging in fraudulent activity.

Financial regulators started to crack down, as well. They even went after another big-name celebrity for how she touted “EMAX tokens.” Kim was one of the people who had to settle with the SEC for more than $1 million.

The 30-year-old was so successful at bringing crypto to the masses that he was considered the industry’s unofficial spokesman. He is under house arrest at his family’s home in Palo Alto.