FTX CTO and Alameda Research CEO admit fraud, pair 'cooperating' with Feds
- Reference: 1671709569
- News link: https://www.theregister.co.uk/2022/12/22/ftx_alameda_research_fraud/
- Source link:
Yesterday the US Securities and Exchange Commission [1]announced that it was charging Gary Wang, former CTO and co-founder of FTX, and Caroline Ellison, former CEO of sister company Alameda Research, with fraud.
This was followed by a [2]statement from US Attorney for the Southern District of New York Damian Williams that said Ellison and Wang had admitted to their roles in the frauds that contributed to the collapse of FTX. He added that they are "both cooperating" with the investigation.
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Williams also said: "Samuel Bankman-Fried is now in FBI custody and is on his way back to the United States. He will be transported directly to the Southern District of New York and he will appear in court before a judge in this district as soon as possible."
[4]
[5]
The co-founder and CEO of FTX had gone to ground at his luxury private apartment complex in the exclusive Albany community in the Bahamas as his world came crashing down around him. He was [6]arrested by Bahamian police on Monday last week and a extradition request by Uncle Sam followed swiftly.
"Many individuals in the Bahamas and in the United States contributed to the swiftness of the defendant's return and I want to thank the Bahamas for its outstanding assistance and excellent coordination with us," Williams added.
[7]
"I also want to thank our partners at the United States embassy in the Bahamas and the Justice Department's Office of International Affairs. And finally I want to thank the FBI for moving mountains to get this done. This was a true team effort."
As for Wang and Ellison, the SEC contends that between 2019 and 2022, "Ellison, at the direction of Bankman-Fried, furthered the scheme by manipulating the price of FTT, an FTX-issued exchange crypto security token, by purchasing large quantities on the open market to prop up its price. FTT served as collateral for undisclosed loans by FTX of its customers' assets to Alameda, a crypto hedge fund owned by Wang and Bankman-Fried and run by Ellison. The complaint alleges that, by manipulating the price of FTT, Bankman-Fried and Ellison caused the valuation of Alameda's FTT holdings to be inflated, which in turn caused the value of collateral on Alameda's balance sheet to be overstated, and misled investors about FTX's risk exposure."
The complaint also alleges that "from at least May 2019 until November 2022, Bankman-Fried raised billions of dollars from investors by falsely touting FTX as a safe crypto asset trading platform with sophisticated risk mitigation measures to protect customer assets and by telling investors that Alameda was just another customer with no special privileges; meanwhile, Bankman-Fried and Wang improperly diverted FTX customer assets to Alameda. The complaint alleges that Ellison and Wang knew or should have known that such statements were false and misleading."
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Ellison and Wang are also accused of being "active participants in the scheme to deceive FTX's investors and engaged in conduct that was critical to its success. The complaint alleges that Wang created FTX's software code that allowed Alameda to divert FTX customer funds, and Ellison used misappropriated FTX customer funds for Alameda's trading activity. The complaint further alleges that, even as it became clear that Alameda and FTX could not make customers whole, Bankman-Fried, with the knowledge of Ellison and Wang, directed hundreds of millions of dollars more in FTX customer funds to Alameda."
[9]FTX's Sam Bankman-Fried charged with fraud by just about everyone
[10]FTX's crypto villain Sam Bankman-Fried admits 'I made a lot of mistakes'
[11]FTX disarray declared 'unprecedented' by exec who cleaned up after Enron
[12]FTX collapse prompts other cryptocurrency firms to suspend withdrawals
SEC chair Gary Gensler said: "As part of their deception, we allege that Caroline Ellison and Sam Bankman-Fried schemed to manipulate the price of FTT, an exchange crypto security token that was integral to FTX, to prop up the value of their house of cards.
"We further allege that Ms Ellison and Mr Wang played an active role in a scheme to misuse FTX customer assets to prop up Alameda and to post collateral for margin trading. When FTT and the rest of the house of cards collapsed, Mr Bankman-Fried, Ms Ellison, and Mr Wang left investors holding the bag. Until crypto platforms comply with time-tested securities laws, risks to investors will persist. It remains a priority of the SEC to use all of our available tools to bring the industry into compliance."
Sanjay Wadhwa, deputy director of the SEC's Division of Enforcement, added: "As alleged, Mr Bankman-Fried, Ms Ellison, and Mr Wang were active participants in a scheme to conceal material information from FTX investors, including through the efforts of Mr Bankman-Fried and Ms Ellison to artificially prop up the value of FTT, which served as collateral for undisclosed loans that Alameda took out from FTX pursuant to its undisclosed, and virtually unlimited, line of credit.
"By surreptitiously siphoning FTX's customer funds onto the books of Alameda, defendants hid the very real risks that FTX's investors and customers faced."
SBF himself faces an eight-count [13]criminal indictment [PDF] for conspiracy to commit wire fraud and securities fraud; committing securities fraud wire fraud, and money laundering; and conspiracy to violate campaign finance rules.
The fluffy-haired 30-year-old former billionaire had a peculiar way of addressing the collapse of crypto's once most trusted exchange, participating in various Q&A sessions on Twitter. Some of these [14]car-crash [15]grillings have been saved for posterity by investigative journalist YouTuber Coffeezilla.
Just in April, the FTX-Alameda crew had hosted dignitaries such as Tony Blair and Bill Clinton at the Crypto Bahamas invitation-only conference. The execs' lifestyle was reportedly decadent.
"Nothing like regular amphetamine use to make you appreciate how dumb a lot of normal, non-medicated human experience is," Ellison [16]posted on Twitter earlier this year. ®
Get our [17]Tech Resources
[1] https://www.sec.gov/news/press-release/2022-234
[2] https://twitter.com/SDNYnews/status/1605745361842327552
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Y6SNLV0fJ0MzDrB35cGdOAAAAM8&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Y6SNLV0fJ0MzDrB35cGdOAAAAM8&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Y6SNLV0fJ0MzDrB35cGdOAAAAM8&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[6] https://www.theregister.com/2022/12/13/sbf_arrested/
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Y6SNLV0fJ0MzDrB35cGdOAAAAM8&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Y6SNLV0fJ0MzDrB35cGdOAAAAM8&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[9] https://www.theregister.com/2022/12/13/ftx_sam_bankman_fried_charged/
[10] https://www.theregister.com/2022/12/01/sbf_ftx_admits_mistakes/
[11] https://www.theregister.com/2022/11/18/ftx_disarray_declared_unprecedented_by/
[12] https://www.theregister.com/2022/11/15/ftx_collapse_cryptocurrency/
[13] https://www.documentcloud.org/documents/23450344-unsealed-indictment-in-us-v-bankman-fried-22-cr-673-abrams-as-sam-bankman-fried-of-ftx-heads-to-sdny-echoes-of-onecoin-and-un-bribery-cases
[14] https://www.youtube.com/watch?v=AfmBdKoqq1o&t=894s
[15] https://www.youtube.com/watch?v=4o_jPzBZSIo
[16] https://twitter.com/carolinecapital/status/1379036346300305408?lang=en
[17] https://whitepapers.theregister.com/
Re: That must hurt
It's just another proof of the [1]Dunning-Kruger effect in full swing.
When you're too stupid to know that you're stupid, you end up on the wrong end of the plank.
They can thank their lucky stars that they weren't dealing with Russian Mafia. That would have put a serious limit on their life expectancy.
[1] https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect
Re: That must hurt
As opposed to those nice benign kindly American or Sicilian Mafias, who laugh off losses ?
Billionaire now?
No , that all disappeared the other week.
On the positive side of SBF and MsEllison were an item or friends with benefits, we should be happy that they didn't get the chance to breed.
"both cooperating"
Now the about-face and agreeing to quick extradition makes sense. SBF needs to get in there and "cooperate". I enjoy watching these (I suppose I better say, "alleged") scammers throwing each other under the bus.
Re: "both cooperating"
I hope I don't run out of popcorn while this proceeds.
Guess
he stole the wrong people's money
Lose a couple of billlion in little people's retirement funds and the official response is 'meh'
Lose a multi-billioniare 1% of his wealth in a foolish investment scam and the perp is given a short ride to 25 yrs in the slammer
FTX CEO, CTO and Alameda Research CEO
"Fried Wang Ellison" : sounds like a database mogul after an unfortunate barbecuing accident.
Re: FTX CEO, CTO and Alameda Research CEO
Or No 23 from my local takeaway ...
Reminds me of a saying
Something to do with rats and sinking ships . . .
Good... now keep going.
The more serious concern is that many people who are trusted as investors and financial reporters saw much of this behaviour first hand. Not only did they fail to raise any alarm, many of them encouraged others or directly themselves invested in FTX. This isn't just money from 'crypto-bros' - it's every day pension funds, mortgages and savings.
Whilst it's good to see justice being served, some very serious questions should be asked of the news outlets that turned a blind eye to the excesses and very obvious lack of experience or skill of those at the core of FTX. There are allegations of generous donations from SBF that should be fully investigated.
In addition, the competency of "skilled investors" who saw frat-house behaviour from a group of inexperienced kids, yet were more than happy to give them astronomic amounts of money should be called into question.
As with some other very high profile "tech titans" it seems that too many influential people are too damn terrified to call out incompetence and fraud while the con-artists are "winning". No-one wants to be seen as making a bad call. So the grifters continue to get away with it for far too long.
"Nothing like regular amphetamine use to make you appreciate how dumb a lot of normal, non-medicated human experience is"
Wow. Just wow. I guess that explains the over confidence and ridiculous levels of risk taking. I know someone who was a speed user, and it has destroyed his health. Missing most of his teeth, weakened bones and an irregular heartbeat. He claimed to be super productive as a musician while high, but the cost was higher.
That must hurt
Ms. Ellison was SBF's on-off girlfriend, so I guess that's finally over. She claimed to enjoy a "Chinese imperial harem" model of polyamory. I wonder what model she will enjoy in prison.
It strikes me about all of these characters that they were massively overconfident. Did no one ever tell them they weren't half as smart as they thought they were? I suppose they're only figuring that out now, but I suspect they will continue to find others to blame for their mistakes. Also looks like SBF's Stanford Law professor parents will support their little darling no matter what, even paying for his legal defense. I guess that's where the delusional self-confidence and lack of concern for consequences comes from.
https://www.theguardian.com/technology/2022/nov/19/polyamory-penthouses-and-plenty-of-loans-inside-the-crazy-world-of-ftx
https://www.nytimes.com/2022/12/12/technology/sbf-parents-ftx-collapse.html