Since the fall of his crypto empire on November 11, almost everything has been said about Sam Bankman-Fried.
His crypto brethren called him a “criminal”. They accused him of lying to clients and investors of his companies FTX and Alameda Research, a hedge fund that also operates as a trading platform.
“They lied. FTX lied. I think Sam lied to its employees, its users, its shareholders, regulators around the world, and all users,” said Changpeng Zhao, founder and CEO of Binance, during an event on Twitter on November 14. “So yeah, he should take most of the blame.”
Binance is the largest crypto exchange in the world.
Regulators in the United States and the Bahamas, where Bankman-Fried lives and where FTX is headquartered, have launched investigations. He was questioned by Bahamian police on November 12, but remains a free man. Congress is planning a hearing to question him in December, but no date has yet been set.
“I would be afraid”
The Bankman-Fried regime was heavily criticized by new FTX CEO in charge of restructuring John Ray, who said the former trader and his two associates failed on every level.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as has occurred here,” John Ray wrote, in a 30-minute document. pages filed in the United States Bankruptcy Court in the District of Delaware.
“From the compromised integrity of systems and faulty regulatory oversight overseas, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented. “
FTX’s insolvency was due to a lack of liquidity when clients attempted to withdraw funds from the platform. The shortfall appears to have been the result of the transfer of $10 billion in client funds from FTX to Alameda Research by the founder of FTX.
Bankman-Fried remains free for the time being. No charges have been brought against him, despite the fact that FTX’s top 50 creditors are seeking $3 billion from the exchange and millions of retail investors may never recoup their investments.
But for billionaire Mark Cuban, Bankman-Fried should end up in prison. This is what he just told TMZ. He claimed jail was imminent for the former cryptocurrency king.
“I don’t know all the details, but if I was him, I would be scared of going to jail for a long time,” the Dallas Maverick owner said. “I spoke to the guy and thought he was smart.”
“I had no idea he was going to take other people’s money and put it to his own use.”
Personal loans
Bankman-Fried received a $1 billion personal loan from Alameda, according to Ray. The company also provided a personal loan of $543 million to Nishad Singh, FTX’s chief engineering officer, and $55 million to Ryan Salame, the co-CEO of FTX Digital Markets, one of FTX’s subsidiaries. FTX.
“I understand that there does not appear to be documentation for some of these transactions as loans, and that some real estate has been registered in the personal names of these employees and advisors in the Bahamian records,” the liquidator said. .
He further wrote that in order to be reimbursed for work expenses, employees only had to submit the request via chat and a supervisor would immediately approve with a personalized emoji.
As a crypto exchange, FTX executed orders for its clients, taking their money and buying cryptocurrencies on their behalf. FTX acted as custodian, holding clients’ cryptocurrencies.
FTX then used the crypto assets of its clients, through the trading arm of its sister company Alameda Research, to generate liquidity through borrowing or market making. Money borrowed by FTX was used to bail out other crypto institutions in the summer of 2022.
At the same time, FTX used the cryptocurrency it issued, FTT, as collateral on its balance sheet. This represented a significant exposure, due to the concentration risk and volatility of FTT.
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