FTX crash history and their consequences
2023.01.18 15:26
FTX crash history and their consequences
By Tiffany Smith
Budrigannews.com – Sam “SBF” Bankman-Fried, the former CEO of the major cryptocurrency exchange FTX, was detained on December 12 by Bahamian authorities following the collapse of the exchange in November 2022. A day later, charges were brought against him by the Commodity Futures Trading Commission and the Securities and Exchange Commission of the United States for allegedly defrauding investors and breaking securities laws.
On a $250 million bond that Bankman-Fried’s parents paid against the equity in their home, he was released on bail on December 22. In addition, he would be subject to “strict pretrial supervision,” which would include evaluation and treatment for his mental health. In the United States, the former CEO is charged with eight offenses, each of which carries a maximum sentence of 115 years in prison.
Although Bankman-Fried had been under house arrest since December 22, he had returned to New York for the plea hearing. He later pleaded not guilty to all criminal charges relating to the collapse of the cryptocurrency exchange during a court hearing on January 3. Wire fraud, securities fraud, and violating campaign finance laws were the charges.
For his arraignment, Sam Bankman-Fried has arrived at the court. He has indicated that he will deny each and every charge against him. pic.twitter.com/yakSLkOus8
In addition to Bankman-Fried, Caroline Ellison, the former CEO of Alameda Research, the bankrupt sister company of FTX, and Gary Wang, the former co-founder of FTX, were charged with fraud. The SEC claimed that Ellison influenced the price of FTX Token (FTT), which is referred to in the document as a crypto security token. The aforementioned manipulation took place between the years 2019 and 2022 and consisted of “purchasing large quantities on the open market to prop up its price.”
After pleading guilty to the fraud charges, Ellison and Wang also participated in the Justice Department’s investigation into Bankman-Fried. Additionally, Ellison agreed to a plea bargain in which she would only face criminal tax violations charges.
According to Doug Brooks, senior adviser at XinFin, Ellison has already provided prosecutors with evidence, presumably indicating that she will be a powerful witness in the Bankman-Fried case. Added Brooks:
In high-profile cases, U.S. prosecutors frequently build the case from the bottom up. In order to present the strongest possible argument against the primary target, this includes catching smaller fish and making deals where they are required. Given that Ellison has already admitted her guilt and offered to cooperate after declaring her “truly sorry,” it should not come as a surprise if she gets away with a lesser sentence for lesser charges. This is even more likely to happen if the evidence she provides against SBF is as explosive as we anticipate.
With the involvement of U.S. authorities and Bankman-Fried’s arrest, many investors and users of FTX had high hopes that something would be done to get some of their money back.
However, the turn of events surrounding Bankman-Fried’s bail, not-guilty plea, and Ellison’s plea deal have raised questions in many people’s minds. However, Banxa’s chief legal officer, Richard Mico, told that prosecutors are very serious about Bankman-Fried:
The staggering $250 million bail he was required to post alone would indicate the seriousness of the prosecution’s approach to this case. Additionally, Sam is not shielded from potential repercussions by regulators. The CFTC and SEC have both since filed civil complaints against SBF, despite the fact that SBF had a friendly relationship with regulators prior to his downfall.
While “it’s disheartening to see SBF out on bail now, I firmly believe that the crypto community will ultimately see justice,” Mico noted that there is a mountain of evidence that SBF mismanaged customer funds.
When Alameda-linked wallets began funneling millions of dollars just days after Bankman-Fried was released on bail, investors’ uncertainty grew even more. Although the manner in which these transactions were carried out raised many eyebrows, a total of $1.7 million was transferred. To conceal the transactions’ origin, the funds were routed through mixer services and decentralized exchanges.
According to reports, Bankman-Fried himself was connected to a portion of these funds in the future. An on-chain investigation conducted by decentralized finance educator BowTiedIguana reveals that he allegedly cashed out $684,000 in cryptocurrency to a Seychelles exchange while under house arrest.
SBF requested that ownership of the Sushiswap exchange be transferred to his Ethereum address, pic.twitter.com/vask9WqSHd, when he agreed to take over control from Chef Nomi, an anonymous founder, in August 2020.
BowTiedIguana’s analysis shows that Bankman-Fried’s public Ethereum address sent all of its remaining Ether (ETH) to a new address on December 28. BowTiedIguana claimed that in August 2020, SBF had agreed to take over the address that Chef Nomi, the creator of SushiSwap, had previously owned.
The new address received $367,000 in transfers within hours from 32 addresses that were identified as Alameda Research wallets, in addition to $322,000 from other wallets. The crypto bridge RenBridge and a cryptocurrency exchange in the Seychelles received all of the funds.
Modulus CEO Richard Gardner told, that the circumstances surrounding the bail should have been taken into account, explaining:
“Bail should never have been an option because he is the very definition of a flight risk. It’s important to keep in mind that SBF’s political contributions have a significant impact on the lives of a number of important people. The general public, in my opinion, has a strong desire for redress for the FTX mess. However, his political friends may be able to assist him in putting his thumb on the scale.
In the midst of the developing reports that Bankman-Broiled was behind the development of assets, the previous Chief tweeted that he didn’t have anything to do with it.
In the midst of the developing reports that Bankman-Broiled was behind the development of assets, the previous Chief tweeted that he didn’t have anything to do with it.
Beginning on October 2, Bankman-Fried will be put through a four-week trial that could have a long-term impact on the crypto ecosystem. At least for centralized organizations and service providers, a trial centered on one of the largest crypto exchanges of its time could be a turning point.
Due to Bankman-Fried’s leverage against him and desire to help himself rather than prioritize the crypto community’s goals, some observers believe he is the ideal puppet for prosecutors.
TRM Labs’ head of legal and government affairs, Ari Redbord, stated that FTX was more indicative of the demise of centralized institutions than of cryptocurrency, explaining:
It is essential to keep in mind that FTX is not about cryptocurrency but rather about corporate fraud and malfeasance. What took place with FTX is more like what happened with Enron, Lehman Brothers, or WorldCom. It is essential to distinguish the technology from the business because the fraud in this instance did not occur on blockchains but rather on opaque centralized financial institutions.
R. A. Wilson, chief technology officer at crypto exchange 1GCX, told, that the FTX fallout would most likely only affect centralized entities but would set a slippery slope for future regulations regarding the potential impact of Bankman-Fried’s prosecution.
“Regulation is best avoided as long as possible in favor of the free market, and it is only used to truly safeguard investors. Given the ways in which regulators have been looking for ways to gain jurisdiction and regulatory power over these innovative technologies, I anticipate that scenario is probably not the case.
