During press conference on allegations against FTX founder Sam Bankman-Friedthe United States Attorney of Manhattan, Damian Williams defined the case “one of the largest financial frauds in American historyand said investigations into the alleged Ponzi scheme were “ongoing”.
Bankman-Fried has denied knowingly committing fraud in numerous media interviews, most recently to the New York Times just a few weeks ago. Mark Cohena New York attorney and defense counsel for the founder of FTX, said on Tuesday that his client is “reviewing the allegations with her legal team and considering all of her legal options“.
Prosecutor Williams did not elaborate on how US authorities plan to bring Bankman-Fried from the Bahamas back to the US to face as many as eight charges filed against him. In his first appearance since his arrest, Bankman-Fried told a Bahamian judge that he would not waive his right to an extradition hearing. In other words, as was also confirmed in his legal defense, Bankman-Fried intends to fight against being sent to the United States.
The eight charges against him include wire fraud, conspiracy to commit securities fraud, charge for allegedly misappropriating billions of dollars in FTX customer funds for personal use and risky bets by affiliate company, Alameda.
For John J. Ray, CEO of FTX, this is old-fashioned embezzlement
John J. Raycurrent CEO of FTX and sole witness on the House Financial Services Committee panel told lawmakers the company had not “no record keeping“. FTX under the leadership of SBF has using accounting software QuickBooks to keep track of his multi-billion dollar portfolio.
“This is really old-fashioned embezzlement. This is taking money from customers and using it for their own purposes. Not sophisticated at all”, Ray said during testimony that lasted more than four hours. “Sophisticated, perhaps in the way they hide something, frankly, in front of their eyes. The FTX case is just an embezzlement. Old school, old school.
FTX filed for Chapter 11 bankruptcy last month after transferring billions of dollars in FTX client funds to Bankman-Fried’s hedge fund, Alameda Research.
On Tuesday morning, the Securities and Exchange Commission charged former cryptocurrency guru, Bankman-Fried with “orchestrating a scheme to defraud equity investors in FTX Trading”.
Bankman-Fried allowed about 1,500 people in the Bahamas to withdraw $100 million 24 hours before the company filed for Chapter 11, while other investors’ accounts were frozen, Ray confirmed to lawmakers.
Furthermore, Ray confirmed that much was still uncertain, but “what we do know is that the liquidation proceedings in the Bahamas were indeed filed hours before the Chapter 11 filing. During that time period the accounts were only unblocked in the Bahamas and over $100 million has been released to approximately 1,500 customers in the Bahamas.”
US disputes over donations to political parties
Prior to FTX’s bankruptcy, Bankman-Fried nearly gave away 40 million dollars to selected candidates, campaigns and political action committees in the run-up to the 2022 midterm elections. Most of the publicly disclosed contributions went to the Democratic party. While, Ryan Salameco-CEO of FTX Digital Markets, donated 23 million dollars, with the majority of his contributions going to the republicans.
According to prosecutors, one of the reasons SBF made such contributions was to influence the direction of policies and laws affecting the cryptocurrency industry.