FTX Dust Settles, Soiling Everyone

by | Dec 19, 2022 | Banks, Blog Articles, Crypto, Finance, New York

After weeks of speculation as to whether former billionaire now hapless adolescent actor Sam Bankman-Fried would be arrested for fraud surrounding FTX, the cryptocurrency exchange he ran into the ground, the mystery is over. The man widely known as SBF surrendered to Bahamian custody last week while awaiting extradition to the United States.

Following a grand jury inditement, SBF has been charged by the Southern District of New York, the Securities and Exchange Commission, and the Commodities and Futures Trading Commission on a variety of charges related to wire fraud, commodities fraud, securities fraud, money laundering, material misrepresentations, conspiracy to defraud the Federal Election Commission and to commit campaign finance violations.

The SEC alleges that SBF orchestrated “a years-long fraud to conceal from FTX’s investors” the diversion of FTX customer funds to Alameda Research, a hedge fund owned by SBF, the special treatment afforded to Alameda, such as unsecured and unlimited lines of credit, and FTX’s exposure to Alameda’s “significant holdings of overvalued, illiquid assets such as FTX-affiliated tokens.” The SEC complaint also alleges that SBF commingled FTX customers’ funds and used them to fund unrelated investments, purchase real estate, and make large political donations. The vast majority of these donations found their way into the coffers of the Democratic Party’s political machine, potentially impacting the outcome of 2022’s midterm elections. The CTFC filing further alleges that SBF, FTX, and Alameda Research “caused the loss of over $8 billion in FTX customer deposits.”

The arrest brought to an ignoble end SBF’s long-winded and pathetic apology tour, in which he claimed he had made mistakes of omission and negligence, for which he was deeply sorry, but had not committed fraud. The arrest came just one day before SBF was to testify before the House Financial Services Committee, whose chair, Congresswoman Maxine Waters, had deemed it “imperative” that SBF appear.  Shockingly, Rep. Waters had previously been seen offering SBF a loving air kiss and wave of the hand following congressional testimony, in apparent gratitude for donations made to the cause.

The timing of the arrest, i.e., one languid month after the fraud had been revealed and FTX had collapsed, but then suddenly one day before his scheduled testimony, raised many eyebrows. Why wouldn’t the Department of Justice, the SEC, and the CFTC all have been curious to hear what SFB had to say? Most prosecuting attorneys would salivate at the prospect of SBF tightening the noose around his own neck with the verbal diarrhea that was sure to come forth in this public venue, especially considering what he’d already said in disdain of his lawyers’ and others’ advice to please shut up and stop making it worse for himself and everyone he had harmed.

Some sober minded legal commentators have speculated that the timing of the arrest was intended to prevent SBF from doing just that, potentially including revealing the criminal and conspiratorial web that had been spun with leading members of the Democratic Party, to which SBF fraudulently donated the vast majority of the $40 million in political contributions he made in this election cycle. To be clear, this $40 million now appears to have been FTX customers’ money, not SBF’s.

The SEC, or at least its chairman, Gary Gensler, may have also sought to avoid too much fuss being made over the several times that Gensler and his staff had met in consultation with SBF to plot how to bring crypto regulation under SEC authority, in exchange for giving FTX special treatment which would put FTX ahead of its competitors.

In an apparent attempt to shift the narrative, Chairman Gensler alleged, “Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto.” He goes on to warn all crypto platforms, wherever they may be domiciled, that they must come into compliance with U.S. laws. Fair enough. FTX was a fraud, and other crypto platforms should take notice.

Yet U.S. Rep. and House Financial Services Committee member Tom Emmer lays much of the responsibility at Chairman Gensler’s feet, noting, “We need to get to the bottom of this. We need to understand why Gary Gensler and the SEC were not doing their job. We need to understand how this was allowed to get to the point where people and their savings are getting hurt. That’s exactly what the regulator’s supposed to be taking care of.”

The SEC has some explaining to do, but so do the numerous political actors within the Democratic Party who received and used stolen funds. A few have already sought to return the money or to donate it to charity. But these examples remain rare. Most recipients have remained silent amidst the scandal, perhaps hoping it will all go away, forgotten amidst some newer crisis or media’s and the public’s attention shifting elsewhere.

While we don’t yet have enough detailed information to run this to ground, the fraud which was FTX appears to reach into the highest orders of political power in this country. The scandal of FTX is an early domino to topple in what may be a long line of downfall, an exposure which evidences the vast corruption that has come to characterize the ruling political regime.

For background on the FTX scandal, check out my previous articles on the subject, including “Falling Meteorite FTX Scorches Crypto Landscape” and “FTX Collapse Illustrates Dark Side of Technology Revolutions,” here with The Epoch Times.

Read this article on The Epoch Times

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