Ina possibility The holiday season in the Joseph Bankman and Barbara Fried household was like any other. Adult children who escaped the nest often return home for the festive season. Her son, Sam Bankman-Fried, the founder of ftx, a now-defunct crypto exchange, did the same. He flew to Palo Alto, California on December 22, departing just after the New Years.
However, he did so under slightly different circumstances than most. Following the collapse of his crypto empire in November, Mr. Bankman-Fried was arrested in the Bahamas before being extradited to New York to face him fraud and money laundering allegations. He flew to California on Dec. 22 after a judge in New York’s South District Court agreed to release him on a $250 million “appearance bail,” which his parents and two others agreed to pay if he did not comply with the conditions. These require him to appear in court, wear an ankle monitor, and live with his parents. On January 3, he returned to New York — this time to plead not guilty to the various charges he faces.
When and if his case will go to court is unclear. It is possible that Mr Bankman-Fried, who continues to claim that he did not intentionally defraud anyone, will reach a settlement with prosecutors. If there is a trial, he will have to face testimonies from his former colleagues: Caroline Ellison, who ran Alameda, the hedge fund Mr. Bankman-Fried founded and majority-owned, and Gary Wang, a co-founder of ftx, both of which are now working with the authorities. On December 21, Ms Ellison pleaded guilty to seven counts, which could carry a maximum sentence of 110 years in prison, including wire fraud and conspiracy to commit money laundering. Mr Wang, meanwhile, pleaded guilty to a charge of fraud that could carry a maximum of 50 years.
Evidence provided to prosecutors by Ms. Ellison and Mr. Wang helped settle the criminal charges against Mr. Bankman-Fried and the civil complaints filed by the Securities and Exchange Commission (sec) and the Commodities and Futures Trading Commission (cftc), two regulators. Your inputs suggest that since then ftx Founded in 2019, Mr. Bankman-Fried abusively routed customer deposits to Alameda. They also suggest that he instructed Mr. Wang to develop software to rid the hedge fund of important ones ftx Procedure. The rules were designed to ensure that trades that clients had borrowed money to open were closed when trades moved against them. The exemption allowed Alameda to have a negative balance on the stock exchange; In other words, it let the company borrow customer assets.
Additionally, the complaints against Ms. Ellison suggest that Mr. Bankman-Fried instructed his business partner (and former romantic partner) to prop up the price of the ftt Sign. Mr. Bankman-Fried created this cryptocurrency himself and gave it to Alameda for free so that the hedge fund could use it to borrow even more money from other crypto institutions. After creating numerous opportunities for Alameda to borrow as much as possible, Mr. Bankman-Fried then used the firm as his “personal piggy bank,” according to the company sec—Paying out political donations, acquiring real estate and venture investments. Ms Ellison and Mr Wang appear willing to confirm that these events took place.
Given the information that has since been revealed ftx collapsed, the most interesting question about the demise of Mr. Bankman-Fried’s firm and empire is no longer what happened. It’s clear that billions of dollars in customer money ended up at Alameda, either because it was directed there or because the company enjoyed special treatment. The bigger question that still remains unanswered is why Mr. Bankman-Fried and his colleagues did exactly that and how they expected it to end.
Mr. Bankman-Fried’s plea of not guilty sets the stage for a possible trial that could bring observers closer to the answer. Or maybe the truth will come out in another way. Another notable feature of the holiday season in the Bankman-Fried household is that the parents and son are said to have been visited by Michael Lewis. The acclaimed journalist has been accompanying Mr. Bankman-Fried since the middle of last year in preparation for a book. The purpose of his last visit was apparently to discuss film rights. ■
