Sam Bankman-Fried Arrested
Dear Reader,
It appears there’s a limit to what money can buy…
On Tuesday, the Securities and Exchange Commission (SEC) filed an action against Sam Bankman-Fried (SBF), the former CEO of centralized cryptocurrency exchange FTX.
The details of this multibillion-dollar fraud get worse by the day, so it wasn’t at all surprising to see the charges. Here’s a statement from the SEC filing:
Bankman-Fried 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.
Hours after the filing, SBF was arrested Tuesday night at a fancy resort in the Bahamas by Bahamian authorities. I hope he enjoyed his last meal living large on other people’s money.
U.S. prosecutors have charged SBF with eight counts of fraud and conspiracy. The charges include wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering.
The U.S. Attorney for the Southern District of New York also indicated that SBF faces additional charges for campaign finance violations. SBF was the second-largest Democratic Party donor after George Soros, and even donated much smaller amounts of money to some Republicans through dark pools so as to avoid discovery from the Democratic Party.
Somewhat surprisingly, Caroline Ellison – the current CEO of Alameda Research, which was SBF’s hedge fund that was tightly intertwined with this fraud – and Sam Trabucco, the former co-CEO of Alameda who stepped down earlier this yet, were also named in the SEC filing.
But they haven’t yet been arrested.
There’s already been some speculation that Ellison, and perhaps even Trabucco, turned state’s evidence and went to the Feds in advance to snitch on SBF in the hopes of getting their own future sentences reduced. They were both intimately involved in this massive financial fraud, so it wouldn’t be surprising if they turned on one another.
The fact that the SEC filed its suit less than a month after FTX collapsed – and have already arrested SBF – suggests that prosecutors had help from at least one inside party, perhaps two, that accelerated the process.
Ellison lawyered up with former SEC official Stephanie Avakian, who was an enforcement division chief at the SEC.
And SBF has hired notorious attorney Mark Cohen, who’s famous for representing child sex trafficker and pedophile Ghislaine Maxwell. Cohen also previously represented Joaquin Guzman, also known as “El Chapo,” the famous former Mexican drug lord.
Quite an interesting choice by SBF. It’s even more ironic considering that SBF’s parents are both law professors at Stanford. They both enjoyed the benefits of other people’s money, as they’re the owners of multimillion-dollar real estate in the Bahamas that was purchased by their son with embezzled funds.
Neither one will be teaching at Stanford any longer, for very obvious reasons. Whether they were aware of the fraud their son was committing is beside the point. Just the affiliation and the direct link to the fraud is toxic for any organization.
Now the battle begins in what will almost certainly be a long and drawn-out drama.
The U.S. will obviously seek SBF’s extradition from the Bahamas. But matters have become quite complex, as FTX’s lawyers have accused the Bahamian government of working with SBF after the bankruptcy filing to siphon off hundreds of millions of dollars before assets became frozen. Those assets are now believed to be under the control of Bahamian regulators.
Who needs fiction when we have a story like this playing out in real life?
Jeff Brown
The Bleeding Edge