Commodity Futures Trading Commission Archives

Sam Bankman-Fried hearing results: $250 million bail and exile to family home

Larry Jansen on January 2, 2023

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Sam Bankman-Fried: The FTX creator can now be released on a $250 million bond thanks to a decision made on Thursday by a federal judge in New York.

He is currently being tried for fraud and other offenses.

The news

At roughly 2:00 p.m., Sam Bankman-Fried, his parents, lawyer, and court security exited the Manhattan US District Court.

The prosecutors and his attorneys accepted the bail conditions for Bankman-personal Fried’s recognizance.

The 30-year-old’s next hearing will be heard on January 3 in New York City under the direction of Judge Ronnie Abrams.

He will answer the charges there and enter a plea.

Bond

A written pledge from the defendant to show up in court in response to a summons is known as a recognizance bond.

Sam Bankman-Fried won’t have to provide all the collateral for the bail to be released.

The equity in his family’s home served as security for the bond signed by his parents and two additional parties with significant holdings.

The prosecution billed the $250 million package, which also includes an electronic monitoring bracelet, as the largest ever pretrial bond.

He must consent to receive therapy for his mental health and promise not to visit the Southern, Eastern, or Northern Districts of California or New York.

In the court

Bankman-Fried would need ongoing supervision after being allowed to go back to his parents’ California home, according to Judge Gabriel Gorenstein.

In the courtroom were SBF’s parents, who are both Stanford law professors.

Two US marshals in blue jackets and brown shoes were around the FTX founder.

While in the courtroom, he switched his ankle shackles for an ankle monitor.

Sam Bankman-Fried only said something once the court asked whether he knew what would happen if he violated the terms of his bail.

“Yes, I do,” said SBF.

Additionally, opening new credit accounts with a balance of more than $1,000 is not permitted for Bankman-Fried.

As they wait for the trial to begin, federal regulators call him a “brazen” fraud at his crypto-empire.

Assistant US Attorney Nicolas Roo stated during the court proceedings that SBF was the center of “a fraud of epic dimensions.”

Roos claimed that SBF had drastically reduced his financial assets, freely returned to the US, and had never attempted to flee.

Former $32 billion bitcoin tycoon Sam Bankman-Fried allegedly claimed that he only had $100,000 in his bank account.

The result was the man’s quick fall from grace.

Accusations

According to Sam Bankman-Fried’s accusations, he is guilty of:

Perpetrating a multibillion-dollar fraud on his investors
Using customer funds to purchase properties
Funding political donations
Backstop trades at his hedge fund Alameda Research

The Commodity Futures Trading Commission filed new charges against SBF, FTX, and Alameda Research on Monday.

They asserted that Bankman-Fried broke the Commodities Exchange Act and that FTX messed up customer funds.

Alameda Research allegedly had access to more than $8 billion in client money.

Alameda has had access to and used FTX customer funds for its operations and activities from the company’s creation in 2019, including:

Trading
Funding
Investment
Borrowing/lending

The CFTC concurred with the SEC’s allegations that Sam Bankman-Fried ran his empire as a fraud from the beginning.

On November 11, FTX filed for bankruptcy protection in Delaware.

Sam Bankman-Fried’s replacement as CEO of FTX, John Ray III, stated he had never witnessed such a loss of corporate control.

SBF’s lieutenants

Gary Wang, a co-founder of FTX, and Caroline Ellison, a former co-CEO of Alameda Research, both entered guilty pleas to federal charges on Wednesday.

Gary Wang admitted the following charges:

Conspiracy to commit wire fraud
Wire fraud
Conspiracy to commit commodities fraud
Conspiracy to commit securities fraud

The following was what Caroline Ellison had done:

Two counts of wire fraud
Two counts of conspiracy to commit wire fraud
Conspiracy to commit commodities fraud
Conspiracy to commit securities fraud
Conspiracy to commit money laundering

On Wednesday, news of their plea deals was made public.

SBF

The US Attorney charged Sam Bankman-Fried with eight offenses, including money laundering and securities fraud.

On Wednesday night, he was flown from the Bahamas to New York.

Compared to other federal white-collar defendants, SBF has a much higher bond.

Bernie Madoff obtained a $10 million bail in anticipation of his imminent trial for running a Ponzi scheme.
Former Enron CEO Jeff Skilling posted a $5 million bond.
Elizabeth Holmes, the Theranos founder, posted a $500,000 bond.

Reference:

FTX founder Sam Bankman-Fried to be released on $250 million bail, will live with his parents

CFTC piles on new charges against Bankman-Fried, FTX and Alameda

FTX’s Gary Wang, Alameda’s Coraline Ellison plead guilty to federal charges, cooperating with prosecutors

FTX associates plead guilty to federal court charges

Greg Jackson on December 26, 2022

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FTX: Gary Wang, a co-founder of FTX, and Caroline Ellison, a former co-CEO of Alameda Research, both pleaded guilty to federal charges on Wednesday.

The charges

According to US Attorney Damian Williams, the two FTX associates pleaded guilty in the Southern District of New York.

The following offenses were those to which Gary Wang pleaded guilty:

Conspiracy to commit wire fraud
Wire fraud
Conspiracy to commit commodities fraud
Conspiracy to commit securities fraud

Caroline Ellison, however, had a broader list of charges, which included the following:

Two counts of wire fraud
Two counts of conspiracy to commit wire fraud
Conspiracy to commit commodities fraud
Conspiracy to commit securities fraud
Conspiracy to commit money laundering

Their charges were made public the evening that Sam Bankman-Fried, the former CEO of FTX, was supposed to be traveling from the Bahamas to New York.

The same federal prosecutors who approved the plea agreements for Ellison and Wang are accusing him of eight federal crimes.

Their plea agreements were finalized on Monday before SBF’s scheduled departure for the US following a turbulent court appearance in the Bahamas.

“As I said last week, this investigation is very much ongoing,” said Williams in a prerecorded message.

“I also said that last week’s announcement would not be our last. And let me be clear, once again, neither is today’s.”

SBF

Following an arrest in the Bahamas last week, Sam Bankman-Fried was charged in the Southern District of New York.

Whether or not he would agree to his extradition to the US has been the topic of intense court proceedings over the past few days.

He was transported to a Bahamas jail following a heated courtroom scene on Monday in which a rumored plan for him to refuse his extradition to the US stalled.

Later that day, according to media accounts, he instructed his Bahamian lawyer to proceed with the extradition process.

Sam Bankman-Fried is slated to appear in court again later this week.

According to earlier reports, he would consent to extradition, but SBF gave a different story on Monday.

He insisted on seeing a copy of his federal indictment before agreeing to return to the United States.

However, Bankman-Fried returned to Fox Hill prison rather than surrender to US authorities.

The SEC

The Commodity Futures Trading Commission and the Securities and Exchange Commission both filed civil complaints against Gary Wang and Caroline Ellison.

According to the SEC, a “multiyear scheme to defraud equity investors in FTX, the crypto trading platform co-founded by Samuel Bankman-Fried and Wang,” was at play.

Charges made in the CFTC’s expanded complaint read as follows:

“Ellison with fraud and material misrepresentations in connection with the sale of digital asset commodities in interstate commerce.”

According to the indictment, Wang is accused of fraud “in connection with the sale of digital asset commodities in interstate commerce.”

According to the CFTC statement, Wang and Ellison agreed to the charges brought against them.

Caroline Ellison was singled out for artificially manipulating FTT (FTX’s self-issued token) to enhance Alameda Research’s available collateral for loans.

Ellison and Wang are cooperating with the ongoing investigation, claims the SEC.

FTX and Alameda

Alameda Research was linked to numerous loans from well-known crypto businesses that filed for bankruptcy, most notably Voyager Digital and BlockFi Lending.

However, Damian Williams didn’t elaborate on the allegations against Ellison and Wang.

According to the SEC, they reportedly assisted Sam Bankman-Fried in defrauding FTX clients in their respective roles at Alameda and FTX.

Alameda reportedly had access to consumer funds through the FTX platform through a software backdoor that Wang allegedly added.

Sam Bankman-Fried led Alameda before Caroline Ellison and Sam Trabucco took over in 2021 until Trabucco left the company in August 2022.

Ellison, 28, and Wang, 29, were the second and third people charged concerning the FTX collapse.

Sam Bankman-Fried, 30, was accused of a federal violation earlier this month.

“Bankman-Fried and Wang thus gave Alameda and Ellison carte blanche to use FTX customer assets for Alameda’s trading operations and for whatever other purposes Bankman-Fried and Ellison saw fit,” said the SEC.

They said that Trabucco was not associated with any misconduct.

Meanwhile, Wang’s attorney released a statement, saying:

“Gary has accepted responsibility for his actions and takes seriously his obligations as a cooperating witness.”

References:

FTX’s Gary Wang, Alameda’s Caroline Ellison plead guilty to federal charges, cooperating with prosecutors

FTX founder Bankman-Fried sent back to Bahamas jail in day of courtroom chaos

Sherrod Brown, US senator, suggests crypto ban

Anna Evans on December 19, 2022

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Sherrod Brown: US Senator Sherrod Brown recently suggested that US federal agencies should consider banning cryptocurrencies.

He especially alluded to the Securities Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

The news

During an NBC’s “Meet the Press” session, Brown acknowledged that while he made the ban suggestions, he also acknowledged it would be “very difficult.”

The US senator cited that the crypto industry could go offshore.

He also referred to several regulators based in the United States, saying:

“We want them to do what they need to do at the same time – maybe banning it.”

“Although banning it is very difficult because it will go offshore and who knows how that will work.”

Sherrod Brown highlighted several incidents to back his claims, including “the threat to national security from Korean cyber criminals to drug trafficking and human trafficking and financing of terrorism and all things that can come out of crypto.”

The FTX collapse was also a prime example.

The FTX collapse

In early November, crypto exchange FTX collapsed and filed for bankruptcy.

The company announced it was filing for Chapter 11 bankruptcy to start a process to review and monetize assets.

Sister company and trading firm Alameda Research also filed for bankruptcy.

However, other conglomerates weren’t part of the filing, such as:

Ledger X LLC
FTX Digital Markets Ltd.
FTX Australia Pty Ltd.
FTX Express Pay Ltd.

The announcement included confirmation that founder Sam Bankman-Fried stepped down as the CEO.

John J. Ray III took over and said:

“The FTX Group has valuable assets that can only be effectively administered in an organized, joint process.”

What happened

Sam Bankman-Fried was considered a celebrity in the crypto space, but he lost his status almost overnight.

Binance started selling its FTT (FTX’s native exchange token) token holdings, holding it as part of an equity exit from the firm last year.

When the token plummeted, investors started withdrawing their funds from the FTX, prompting the platform to pause withdrawals and citing panic.

Brown’s sentiments

Earlier this month, Sherrod Brown called for a collaborative approach from different government bodies about reeling crypto.

He released a statement saying, “Single regulatory agencies currently generally do not have a comprehensive view of crypto asset entities’ activities.”

Brown has held a Democratic seat in Ohio since 2007, and he isn’t the only senior figure in the US government calling for stricter crypto regulation.

Senator Elizabeth Warren revealed a new bill earlier this month that governs cryptocurrencies.

The bill is titled the Digital Asset Anti-Money Laundering Act.

It strives to force crypto asset providers to offer audited financial statements.

Additionally, the bill seeks to impose bank-like capital requirements that align with what’s expected from traditional financial institutions.

Finally, the bill would give the SEC increased powers to regulate the asset class.

Offshore crypto movement

Contrary to the US Senator’s statement, the uncertain regulatory future in the United States is already prompting the crypto industry to move operations offshore.

In November, Coinbase CEO Brian Armstrong addressed the situation, tweeting:

“FTX.com was an offshore exchange not regulated by the SEC.”

“The problem is that the SEC failed to create regulatory clarity here in the US,” he continued.

“So many American investors (and 95% of trading activity) went offshore.”

Armstrong also noted that the situation of the punishment on US companies made no sense.”

After FTX’s collapse, Brian Armstrong shared his desire for US lawmakers to step up and lead the global race to crypto regulation.

He said Coinbase has been a strong advocate for the regulation of cryptocurrencies, contrasting the approach of his platform with Bahamian-based “offshore exchange.”

References:

Banking committee chair: US regulators should ‘maybe’ ban crypto

FTX files Chapter 11 bankruptcy, SBF steps down as CEO

FTX crisis an ‘opportunity’ for US to clarify crypto regulations: Coinbase CEO