Sam Bankman-Fried (SBF) was scheduled to testify in front of congress on Tuesday. Forbes caught a copy of his testimony, which is available here. However, this testimony won’t be delivered. Instead, SBF got arrested in the Bahamas. The US Department of Justice (DoJ), in a joint conference with the SEC and CFTC, unveiled the following 8 charges:
- Conspiracy to Commit Wire Fraud on Customers
- Wire Fraud on Customers
- Conspiracy To Commit Wire Fraud on Lenders
- Wire Fraud on Lenders
- Conspiracy to Commit Commodities Fraud
- Conspiracy to Commit Securities Fraud
- Conspiracy to Commit Money Laundering
- Conspiracy to Defraud the United States and Violate the Campaign Finance Laws
CryptoSlate reported that “the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have both filed separate charges against the ex-CEO…The SEC has charged SBF with offering securities for sale and selling securities for fraud. Specifically, the charges fall under the Securities Exchange Act of 1934 and the Securities Act of 1933 pertaining to anti-fraud provisions…Further, the CFTC charged SBF with fraudulent misstatements and omissions.”
The SEC complaint is available here (and here is their press release). The CFTC’s complaint is available here (and here is their press release). The full press conference is available here.
Video #1 – Will SBF’s Ill Advised Media Tour contribute to his Downfall?
Since the November collapse, SBF has been giving interviews (e.g. NYTimes, ABC, WSJ, BBC). This is of course against the advice of counsel. Regardless, he has been talking up a storm, claiming to be the incompetent CEO and then apologizing for his screwups. That is, he was able to successfully bob-and-weave during these interviews and avoid admission of fraud.
That was until he was interviewed by Coffeezilla.
Coffeezilla admitted he too got outmaneuvered when he attempted to pin him down here and here. However, by reviewing his mistake and the mistake of others, he cornered SBF in this video and got him to admit to the lack of segregation of funds:
SBF, in contrast to his other interviews, got annoyed and accused Coffeezilla of monopolizing the interview time. Coffeezilla easily refutes this claim, noting SBF was factually incorrect. That being said, it would be surprising if this interview is not captured as part of the evidence that the DoJ, SEC, and CFTC will ultimately use against SBF.
Video #2 – WSJ Overview on the Players and Places
The following gives a good overview of what is happening. This includes the jurisdictions involved, the charges laid, and the Congressional hearings that are occurring in parallel.
See here for Coffeezilla’s analysis of the charges. The video also includes commentary from Legal Eagle.
Video #3 – Summary of the Criminality at FTX and Alameda
FTX’s CEO, John J. Ray III, testified before congress about his findings so far. Ray was the same CEO that managed the Enron bankruptcy and has previously said that he has never seen “a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred [at FTX]”. This video, from the Washington Post, seems to capture the essence of the criminality that was a foot at the crypto-exchange and the hedge fund:
Video #4 – Did the multi-Billion Dollar FTX use QuickBooks and Slack?
Video #5 – The Nature of Crypto is making it hard for Ray to Locate FTX’s Assets
Locating assets in a bankruptcy is usually a matter of following the paper trail. Admittedly, FTX has poor records as noted in the last video. However, the problem is compounded by the ethereal nature of crypto/digital assets. See WSJ’s summary of Ray’s testimony, which highlights this unique challenge within FTX’s bankruptcy proceedings:
The FTX story continues to evolve. There is definitely more to discuss, as additional details come to light. However, another story that will be explored in future post(s) is the contagion that has spread through the crypto-verse due to FTX and the other collapses in the nascent industry.
Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else.
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