Damian Williams, the U.S. attorney, made the announcement in a video late Wednesday. The bad news for Bankman-Fried is that the executives say they broke the law at his direction.
Bankman-Fried, also known as SBF, was engaging in a media tour to win hearts and minds with his gee-shucks, how could I ever make such a mistake.
Gary Wang pleaded guilty to wire fraud, conspiracy to commit wire fraud, and commodities fraud. At high school, the 29-year-old met the SBF, who was also at the camp. ABC News says Wang could face 50 years in prison.
Ellison pleaded guilty to seven charges, including wire fraud, conspiracy to commit wire fraud, conspiracy to commit securities fraud, and money-laundering. They worked together at Jane Street. There is a chance that the 28-year-old could be sentenced to over 100 years in prison.
SBF was arrested in the Bahamas last week and has been indicted in the U.S. for wire fraud, money laundering, and making illegal political donations. SBF, who was a very public supporter of Democrats and a private supporter of Republicans, had been in jail in the Bahamas and was planning to fight his deportation to the US.
SBF tried to claim during his media tour that he did not know what was happening at Alameda Research. SBF claimed he didn't co-mingle funds between Alameda and FTX, but the explanation was bullshit because he admitted in those same interviews that FTX users would send money to Alameda to see their accounts debited on the coin. What's the reason? Nobody would open a bank account for FTX. The name Alameda Research was chosen to make it sound boring and respectable, which allowed it to open a bank account.
The host of the show asked if there was a reason why the name Research was there.
It doesn't sound bad, I don't know, it's sort of a quick back story.
I don't want to give banks reasons not to give us accounts, especially in 2017: if you named your company, like, "we do Cryptocurrencies," no one will give you a bank account.
The Department of Justice has criminal charges against Wang and Ellison. The fraud began from the beginning, bilking investors out of billions of dollars.
The SEC filed a civil complaint.
FTX raised more than $1.8 billion from investors, including U.S. investors, who bought an equity stake in FTX believing that FTX had appropriate controls and risk management measures. Unbeknownst to those investors (and to FTX’s trading customers), Bankman-Fried was orchestrating a massive, years-long fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire. Defendants were active participants in the scheme and engaged in conduct that was critical to its success.
According to the SEC, Wang funneled FTX customer funds to Alameda. He doesn't know how to code, so he denied that there was a back door. The SEC says the back door was legit.
Wang created and participated in the creation of the software code that allowed Alameda to divert FTX customer funds. Ellison, in turn, used the misappropriated FTX customer funds for Alameda’s trading activity. And Bankman-Fried used those customer funds to make undisclosed venture investments, lavish real estate purchases, and large political donations.
FTX was described as a "run on the bank" by many news outlets. It obscures the real reason for FTX collapsing. A large stake in FTX was bought by a rival exchange. FTX bought out CZ's share in the company with $2 billion of their native token. FTX couldn't provide the cash value of the worthless token, which tipped over the first dominoes.
Kevin O'Leary, who was paid fifteen million dollars to promote FTX, is angry at the move. The man was asking to cash out his chips. Even though CZ is sitting on his own house of cards that could collapse at any moment, he just called SBF's bluff. The third largest variable priced token in the world is the one from bianney.
The SEC complaint sheds more light on what SBF was doing with the FTT token.
Beyond its “line of credit” with FTX, Ellison, at Bankman-Fried’s direction, caused Alameda to borrow billions of dollars from third party lenders. Those loans were backed in significant part by Alameda’s holdings of FTT—an illiquid crypto asset security that was issued by FTX and provided to Alameda at no cost. Ellison, acting at the direction of Bankman- Fried, engaged in automated purchases of FTT tokens on various platforms in order to increase the price of those tokens and inflate the value of Alameda’s collateral, which allowed Alameda to borrow even more money from external lenders at increased risk to the lenders and to FTX’s investors and customers, all in furtherance of the scheme.
Did you catch the part that says "at Bankman- Fried's direction"? That is the type of language that gets drawn up when one party is talking to the prosecutors and the other party is only trying to win.
The SEC claims that SBF was so bad at trading with Alameda that his bad bets caught up with him when the market soured.
When prices of crypto assets plummeted in May 2022, Alameda’s lenders demanded repayment on billions of dollars of loans. Despite the fact that Alameda had, by this point, already taken billions of dollars of FTX customer assets, it was unable to satisfy its loan obligations. Bankman-Fried, with Defendants’ knowledge, directed FTX to divert billions more in customer assets to Alameda to ensure that Alameda maintained its lending relationships, and that money could continue to flow in from lenders and other investors. Ellison then used FTX’s customer assets to pay Alameda’s debts.
The SEC says that it all collapses.
Even in November 2022, faced with billions of dollars in customer withdrawal demands that FTX could not fulfill, Bankman-Fried and Ellison, with Wang’s knowledge, misled investors from whom they needed money to plug a multi-billion-dollar hole. This brazen, multi- year scheme finally came to an end when FTX, Alameda, and their tangled web of affiliated entities filed for bankruptcy on November 11, 2022.
It is not clear if Wang's bail has been set at the same price as Ellison's. Ellison could be deported after serving her sentence if she is not a citizen of the U.S. Ellison is thought to be born in the U.S., but she may have given up her American citizenship to avoid paying taxes.
Powerful and connected people use cryptocurrencies to extract wealth from people who put a small amount of money on a lottery ticket in the hopes of getting rich. The game is rigged in favor of the house. You are a stupid casino manager. Donald Trump tried to run casinos. SBF is likely to go down in history as one of the many frauds of this era. It may take a while before they are exposed.
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