Quick, Crazy Facts on Esoteric Crypto Traders – plus: Self-administerd help
Today, an overwhelming wave of FTX news flushed thru the news terminals. Here a briefing about the known and unknown facts–also, self-managed help for victims is starting to take off.
Yesterday night, the Royal Bahamas Police Force (not the FBI, not Seal Team Six) arrested Samual Benjamin Bankman-Fried aka “SBF” in a raid in his Nassau luxury apartment. Hours later, an unprecidentent series of major law enforcement actions started—and this is just the beginning. U.S. prosecutors charged FTX founder Sam Bankman-Fried with eight counts of fraud and conspiracy, in what they called a scheme to defraud his crypto exchange’s customers and his hedge fund’s lenders. So far, FTX conjured “in excess of $7 billion” away.
Fact Summary (may change over the next weeks rapidly):
1.????No Exchange, Never Ever
To be very clear: FTX never has been a regulated exchange. Hence, speaking and writing about an “crypto exchange” is simply wrong. It was technically an unregulated (OTC) marketplace—never an exchange. No trade oversight, no controls, no verified trade bulletin etc.
2.????Free Ride to U.S. Correction Facilities
The indictment, brought by the U.S. attorney’s office for the Southern District of New York, accuses him of misappropriating FTX.com customers’ deposits and using those to pay expenses and debts of Alameda Research, his crypto hedge fund. Mr. Bankman-Fried is charged as well with defrauding the U.S. and violating campaign finance rules for conspiring with others to make illegal political contributions. Also, wire fraud was brought up. Currently, a month-long odysee thru N.Y. State Correction Facilities seem to become the sober truth–instead of a $30 million Bahamas condo. According to today’s lawyer rumors, Bankman-Fried could be facing life in federal prison, without the possibility of supervised release, if he’s convicted on a single wire fraud offense.
3.????Complete Accounting Chaos
The new CEO of FTX (aka administrator), John J. Ray III, today revealed the internal chaos in FTX’s bookkeeping. Mr. Ray said FTX employees communicated invoicing and expenses via Slack, a famous chat tool, while the firm used Intuit Inc.’s QuickBooks to do its accounting. Really, QuickBooks is a nice tool but not for a 5 billion company with 2.7 million users on FTX’s U.S. platform and 7.6 million users on its international platform.
4.????Complex like Madoff
It seems that the crisscross of SBF and his FTX entourage, ?specifically diverting customer funds from the start of his cryptocurrency exchange to support his hedge fund, Alameda Research, and to make venture investments, real-estate purchases and political donations, is highly complex and hard to track fast. According to Mr. Ray, “we’re dealing with a paperless bankruptcy. It makes it very difficult to trace and track assets.” Hence, the full unwinding operation may take years–similar like the Madoff Victim Fund, which repossessed almost 90% of the assets after 10 years.
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5.????No Money Back?
The new FTX CEO, Mr. Ray, said at today’s congressional hearing that FTX’s U.S. customers may not get a single dollar back. “There may be wallets that don’t have our names and we don’t know where they are,” stated Mr. Ray. Also, he didn’t rule out that U.S. customers' funds may have been commingled with Alameda Research, striking a contradiction with earlier statements made by Sam Bankman-Fried. Unfortunately, American (and most global) customers’ funds might need a long breath and professional support to get their money back.
6.????Political lobbying
As always, lobbying was also part of the game. FTX founder Sam Bankman-Fried and members contributed more than $70 million to election campaigns ahead of the 2022 midterm elections. Congressman Brad Sherman cited reports that FTX executive Ryan Salame, who donated more than $20 million to mostly-Republican campaigns, received a $55 million loan from the company.
7.????A family business?
It turned out that SBF’s father, Joseph Bankman, and his mother, the Stanford Law professor Barbara Fried, were more than just supportive parents backing their child’s business. Mr. Bankman senior was a salaried FTX employee who traveled frequently business class to the Bahamas, where the operations were based. Ms. Fried did not work for the company, but her son was among the donors in a political advocacy network that she orchestrated. Mr. Bankman-Fried’s business and political empire was always a family affair. According to the New York Times, SBF was a prolific political donor, and he was part of a network of contributors who gave money to groups recommended by Mind the Gap, people familiar with the organization said. He also helped bankroll a nonprofit organization called Guarding Against Pandemics that was run by his 27-year-old brother, Gabe Bankman-Fried. And nobody of a well-educated family ever smelt the smoke of a misguided billion-dollar bomb?
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As to today, it seems almost like the script of a Netflix drama or like the Greek tragedy of Icarus. Probably, Sam Bankman-Fried has flown way to too close to the hot sun, and had his crypto wings completely singed.
If you or your clients suffered financial damages and have accounts with one of the FTX or Almeda companies, get in touch with me to consider joining the FTX Victim Fund.
This is a self-managed private action group seeking to repocesses as much money as possible.
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