JUSTICE – In recent weeks, American Sam Bankman-Fried has become prominent as the main suspect in the biggest scandal in cryptocurrency history. Extradited on Wednesday, December 21, to the United States from the Bahamas, where he had been staying until now and had been imprisoned in early December, however, he has just been released by a federal judge in New York. This by paying a large bail… of $250 million.
A sum that is all the more surprising since at the end of November, in the middle of the FTX affair scandal, the company he led, which went bankrupt, Sam Bankman-Fried (nicknamed SBF), indicated, that he only had $100,000 available.
Result: After the payment of this deposit, SBF was released from a federal court in Manhattan on Thursday, December 22, when he was charged with massive fraud and criminal conspiracy in the United States. The judge approved the release of the defendant for 30 years because, according to him, he presents a risk to escape “minimal” and has never been convicted before. The $250 million bail was partially guaranteed by Sam-Bankman Fried’s parents’ California home, where he will be under house arrest pending trial.
Up to $8 billion embezzled
That’s because the online platform he founded, FTX, is accused of embezzling nearly $8 billion in funds deposited by customers and users worldwide.
Until November 2022, FTX, a cryptocurrency exchange platform headquartered in the Bahamas, allowed investors, individuals or companies from around the world to buy cryptocurrencies such as Bitcoin or Ethereum and resell them or speculate on them.
Issue: It was shown in November 2022 that Sam Bankman-Fried, in conjunction with associates who managed FTX with him from the Bahamas, had used these deposited funds to conduct speculative financial transactions with another of his firms, Alameda Research. It has been estimated that nearly $5 billion has been invested in companies and investments that are considered highly speculative or phantom. The platform has also disbursed, in loans or payments, more than $1 billion intended for individuals within the company.
The money from FTX customers would also have been used by Sam Bakman-Fried to invest in real estate in the Bahamas and to make large donations to politicians who are members of the Democratic Party – including Joe Biden during his campaign.
The thousands of FTX customers around the world were unaware that their funds were being used in this manner and that the money posted to their FTX accounts was not backed by any tangible monetary reserve.
After the collapse of belief in the reality of the accounts held by FTX and the company’s quick bankruptcy filing on November 11, they lost access to their accounts overnight and the amounts they had invested in their cryptocurrency portfolios, that was managed by the platform. The losses for individual French investors may have amounted to several tens of thousands of euros, some have said Parisian.
“Castle of Cards”
For years, Sam Bakman-Fried has been considered an iconoclastic genius in the cryptocurrency world. His fortune was estimated at $26 billion at the start of 2022, thanks to the success of the FTX platform and its influence in the world of cryptocurrencies.
His charges for his highly suspected responsibility for the FTX bankruptcy and associated embezzlement now risk seeing him spend the rest of his life in prison. Five of the eight charges against him each carry a maximum sentence of 20 years in prison.
The Wall Street regulator, the Securities and Exchange Commission (SEC), had on December 13, the day after the arrest of SBF in the Bahamas, communicated to condemn “a house of cards based on deception” speaking of FTX.
New FTX chief John Ray, who has overseen several bankruptcies, including the former US energy giant Enrons, summed up the case in these words: “The collapse of the FTX group appears to be the result of the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals who have not implemented any of the systems or controls required of a business, where other people’s money or assets are entrusted.
Two other defendants
In his defense, since FTX’s bankruptcy on November 11, Sam Bankman-Fried has repeatedly claimed that he no longer headed Alameda Research and that other FTX executives were responsible for the mechanisms that led to the embezzlement of client funds .
It is in this context that Manhattan federal prosecutors indicated on Wednesday, December 21 that two other key people in the FTX file had also recently been charged with fraud and criminal association.
They are Caroline Ellison, former head of the company Alameda Research, and Gary Wang, co-founder of FTX, accused “in connection with their role in the fraud that contributed to the collapse of FTX”.
The latter has pleaded guilty and is actively cooperating with the US government in the ongoing investigations, which means they can incriminate Sam Bankman-Fried. Caroline Ellison and Gary Wang have also been sued by the two main US financial market regulators, the SEC and the Commodity Futures Trading Commission (CFTC), which are responsible for regulating the exchanges.
The two defendants have agreed to cooperate with the SEC and have admitted the facts imputed to them by the CFTC, which should earn them a lighter sentence in both cases.
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