back to article FTX CTO and Alameda Research CEO admit fraud, pair 'cooperating' with Feds

Two members of Samuel Bankman-Fried's inner circle have pleaded guilty to defrauding equity investors in the moribund FTX cryptocurrency trading platform. Yesterday the US Securities and Exchange Commission announced that it was charging Gary Wang, former CTO and co-founder of FTX, and Caroline Ellison, former CEO of sister …

  1. First Light
    FAIL

    That must hurt

    Ms. Ellison was SBF's on-off girlfriend, so I guess that's finally over. She claimed to enjoy a "Chinese imperial harem" model of polyamory. I wonder what model she will enjoy in prison.

    It strikes me about all of these characters that they were massively overconfident. Did no one ever tell them they weren't half as smart as they thought they were? I suppose they're only figuring that out now, but I suspect they will continue to find others to blame for their mistakes. Also looks like SBF's Stanford Law professor parents will support their little darling no matter what, even paying for his legal defense. I guess that's where the delusional self-confidence and lack of concern for consequences comes from.

    https://www.theguardian.com/technology/2022/nov/19/polyamory-penthouses-and-plenty-of-loans-inside-the-crazy-world-of-ftx

    https://www.nytimes.com/2022/12/12/technology/sbf-parents-ftx-collapse.html

    1. Pascal Monett Silver badge

      Re: That must hurt

      It's just another proof of the Dunning-Kruger effect in full swing.

      When you're too stupid to know that you're stupid, you end up on the wrong end of the plank.

      They can thank their lucky stars that they weren't dealing with Russian Mafia. That would have put a serious limit on their life expectancy.

      1. Claverhouse Silver badge

        Re: That must hurt

        As opposed to those nice benign kindly American or Sicilian Mafias, who laugh off losses ?

        1. Yet Another Anonymous coward Silver badge

          Re: That must hurt

          >As opposed to those nice benign kindly American or Sicilian Mafias, who laugh off losses ?

          There is no such thing as the Mafia. Some nice gentlemen from the Italian-American Fraternal Business Association will explain to you - like they did to Mr Coppola

    2. iron Silver badge

      Re: That must hurt

      Nothing like regular amphetamine use to make you an overconfident dumb fuck.

      I've seen the results, its not pretty and the business always crashes and burns sooner rather than later.

      1. Yet Another Anonymous coward Silver badge

        Re: That must hurt

        >Nothing like regular amphetamine use to make you an overconfident dumb fuck.

        No it's perfectly safe https://www.globalsecurity.org/org/news/2002/021222-gopills01.htm

    3. Youngone Silver badge

      Re: That must hurt

      The massive over confidence comes from being born into the ruling class.

      They've been told they were special since they were born and probably never really had to face any real consequences until now.

      I'm sure its all come as a huge shock.

      1. Anonymous Coward
        Anonymous Coward

        Re: That must hurt

        Yes, it always gets painful when reality and consequences arrive. I've seen someone else recently pay $44bn for that lesson..

    4. Rol

      Re: That must hurt

      If a villain isn't running their dodgy operation through a myriad of British companies scattered among a clutch of British dependencies, then they're just rank amateurs and deserve the Darwinian pruning we're all baying for.

      For Christ's sake, we left the EU to allow such things to continue unchecked, so why is it London only manages the accounts of just 75% of the worlds most unscrupulous subhumans that crawl this Earth, and not 100%. I have sleepless nights worrying about that disparity - just what is it about the UK that is so distasteful that 25% of financial fraudsters will not lower themselves to do their dodgy business through the usual London channels? Is it the obligatory political donation, that they find morally repugnant? Perhaps we need a change of government, one that doesn't overtly work for Beelzebub, just quietly, in the background, like it always use to do.

      1. martinusher Silver badge

        Re: That must hurt

        You appear to have articulated the reason behind Brexit. The EU was in the process of bringing in regulations that would have put a serious crimp in the UK's financial sector. With the dominance of the financial sector and the amount of money involved the investment needed to deal with a referendum (the result was close, just not close enough). It doesn't really matter that the entire exercise has cost the UK 30 billion or so -- they're not paying for it.

      2. Justthefacts Silver badge
        Thumb Down

        Re: That must hurt

        Your rant makes no sense. SBF and most of the crypto bros operate out of USA primarily, and China secondarily. What’s the Brexit angle? Or the EU angle? Or the UK angle?

        And where does your claim come from that London manages the 75% dirtiest accounts? It’s not clean by any means, but by definition that’s a very difficult statistic to come by. I’m perfectly aware of the Russian issue, but try going to a good restaurant in Nicosia or French Riviera speaking anything but Russian and see how far you get.

        Perhaps the best metric could be number of SARs, which places the following global banks at the head:

        JPMorgan Chase, HSBC, Standard Chartered, Deutsche Bank and Bank of New York Mellon.

        Two US, one UK, one German, one APAC.

        That list passes the foul smell test, which is a start, although I’m surprised not to see UBS in there. Socgen probably has the reputation of being the dirtiest major bank in the world (being the simultaneous go-to of every African dictator and catering to such luminaries as Lords Army, Al Shabab etc) , but it just doesn’t have enough total assets under investment to bat against the Big Five Grubbiest.

        I’m not seeing the evidence that UK is the dirtiest, let alone 75%, just that it is a major player in a dirty industry. If anything, having even one in top five Worlds Dirtiest Bank is quite an achievement for the EU, given it’s rather minuscule place in global banking. Latin America has a similar global banking presence, with a much worse reputation for corruption, and yet has completely failed to put up serious contenders against the EU national champions Deutsche Bank and SocGen. It’s reasonable to point out that neither Deutsche nor Socgen are even *financially viable* without their dirty money, which you wouldn’t say about HSBC for example.

        Something to ponder, that.

        1. Strahd Ivarius Silver badge

          Re: That must hurt

          For SocGen, the disreputable operations are managed from Jersey, because they would be illegal in EU...

          (the barely legal ones are managed from Luxembourg)

    5. tmTM

      Re: That must hurt

      First to squeal gets the best deal.

      No love or loyalty when the feds come a knockin'

  2. Anonymous Coward
    Anonymous Coward

    Billionaire now?

    No , that all disappeared the other week.

    On the positive side of SBF and MsEllison were an item or friends with benefits, we should be happy that they didn't get the chance to breed.

    1. Michael Wojcik Silver badge

      Re: Billionaire now?

      Hey, now. They weren't "friends with benefits". How crass. They were members of a polyamorous collective.

      Queen Caroline's fall from grace must have her creepy pro-authoritarian fanbase up in arms. Figuratively speaking, I hope, since that's a personality type which is often inclined to random violence.

  3. AndersH

    "both cooperating"

    Now the about-face and agreeing to quick extradition makes sense. SBF needs to get in there and "cooperate". I enjoy watching these (I suppose I better say, "alleged") scammers throwing each other under the bus.

    1. BOFH in Training

      Re: "both cooperating"

      I hope I don't run out of popcorn while this proceeds.

      1. Yet Another Anonymous coward Silver badge

        Re: "both cooperating"

        I'm assuming Netflix now start filming the series about the downfall of company-X about the time they finalise their series-A round ?

        1. Anonymous Coward
          Anonymous Coward

          Re: "both cooperating"

          Speaking of which, would this not be an excellent time for new subtitles for Hilter's downfall?

          Ah, wait, someone was way ahead of me.*.

          Excellent.

          * My pleasure is somewhat ruined by the fact that I'm fluent in German but it's still funny :)

    2. DS999 Silver badge

      Re: "both cooperating"

      SBF can't "cooperate", the mob boss can't make a deal like that because there's no one higher on the food chain to rat out.

      He's basically fucked, if they are cooperating they will turn over all their emails, encrypted chat logs, etc. and no doubt SBF has incriminated himself with his own statements a thousand times over because he didn't think it would ever catch up to him.

      1. bombastic bob Silver badge
        Megaphone

        Re: "both cooperating"

        Never underestimate the ability of a high paid schlickmeister attorney to get Sammy Brain-Fried acquitted.

        News update: Brain-Fried is out on $250 million in bail. Apparently his parents put up equity in their Palo Alto home ($17mil I think) as a security for the bail bond. So where the HELL did this family of Stanford college professors get enough money to OWN a home like that? Or, did Brain-Fried recently pay CASH for that [in which case it should go to the bankruptcy court to cover FTX losses, In My Bombastic Opinion].

        Short conclusion, Brain-Fried has more than the $100k he claims he was left with after the aftermath. Right. Apparently there is enough money squirreled away in various places, and it's probably paying the lawyers. AND there are the millions in "gifts" for "charity" to various politicians, from very liberal Democrats to RINO Republicans (apparently Brain-Fried was trying to affect outcomes of Republican primaries this year).

        This kind of "throwing money about" and then - miraculously - NOT knowing where it all went, suggests there was a LOT more planning on HIS end than people want to see (or admit to).

        Meanwhile, Sammy Brain-Fried is home for Christmas - with an ankle bracelet, living with mommy and daddy like a good basement dweller. It's only a short step down from living in a multi-million dollar hippy commune in the Bahamas, but hey, Sammy Brain-Fried is just having a bad month...

        (if they do not put this guy in prison for LIFE, he WILL BE BACK - guarantee it!)

      2. Anonymous Coward
        Anonymous Coward

        Re: "both cooperating"

        Of course he can cooperate. I'm sure they've got a cushy non-prosecution agreement lined up, if he gives half his stash back. No admission of guilt or liability etc etc. Because it's just SO HARD to prosecute white collar crime.

    3. Fred Flintstone Gold badge

      Re: "both cooperating"

      I enjoy watching these (I suppose I better say, "alleged") scammers throwing each other under the bus.

      The rate at which this is happening makes me finally understand the US fascination with monster trucks. A normal bus would have already lost most of its undercarriage - you need *serious* shock absorbers to handle that sort of volume..

  4. Boris the Cockroach Silver badge
    FAIL

    Guess

    he stole the wrong people's money

    Lose a couple of billlion in little people's retirement funds and the official response is 'meh'

    Lose a multi-billioniare 1% of his wealth in a foolish investment scam and the perp is given a short ride to 25 yrs in the slammer

  5. Howard Sway Silver badge

    FTX CEO, CTO and Alameda Research CEO

    "Fried Wang Ellison" : sounds like a database mogul after an unfortunate barbecuing accident.

    1. lidgaca-2

      Re: FTX CEO, CTO and Alameda Research CEO

      Or No 23 from my local takeaway ...

      1. Yet Another Anonymous coward Silver badge

        Re: FTX CEO, CTO and Alameda Research CEO

        Do they charge an ongoing licence fee ?

      2. spireite Silver badge

        Re: FTX CEO, CTO and Alameda Research CEO

        That's the cell number from where to collect the soap

  6. Pascal Monett Silver badge

    Reminds me of a saying

    Something to do with rats and sinking ships . . .

    1. bombastic bob Silver badge
      Unhappy

      Re: Reminds me of a saying

      standard FBI 'RICO' tactic - nail lower level people on something that frightens them into cooperating. I think the girl is looking at 110 years...

      Sometimes it is the only tactic that works, with major organized crime and [alleged] scams like FTX, junk bonds, Ponzi schemes, etc. etc.

      (IMBO: if she cooperates with the FBI, Ellison may get out of prison before she hits menopause)

      but of course what would SICKEN me is if their cooperation is NOT enough to put Sammy Brain-Fried in the iron bar hotel PERMANENTLY. He literally (allegedly) created a 'run on a bank' by (allegedly) deliberately putting assets at risk in a HEDGE FUND, where basically EVERYTHING is "at risk" and the chances of LOSING are greater than the chances of WINNING, when you dollarize it. So if they predict wrong, ALL money is lost and possibly a debt remains for paying off of short/long sales that still remain (as one example)

      The model I am thinking of: you agree to sell stock on a short sale at a value of x, but you do not buy the stock. If the stock value goes up, you have to buy it at 'x + y' and sell it for 'x' according to the contract. If it goes up MORE than your hedge fund can manage, you lose it all AND still have a debt for all of that stock loss. Get it wrong, you can lose REALLY BIG, for only a small potential gain if you are RIGHT.

      [this is why I do not like hedge funds nor those who make their money with them - it implies, In My Bombastic Opinion, market manipulation, insider trading, and a zero-sum gain of the worst kind - making others LOSE so you can "WIN")

  7. Andy 73 Silver badge

    Good... now keep going.

    The more serious concern is that many people who are trusted as investors and financial reporters saw much of this behaviour first hand. Not only did they fail to raise any alarm, many of them encouraged others or directly themselves invested in FTX. This isn't just money from 'crypto-bros' - it's every day pension funds, mortgages and savings.

    Whilst it's good to see justice being served, some very serious questions should be asked of the news outlets that turned a blind eye to the excesses and very obvious lack of experience or skill of those at the core of FTX. There are allegations of generous donations from SBF that should be fully investigated.

    In addition, the competency of "skilled investors" who saw frat-house behaviour from a group of inexperienced kids, yet were more than happy to give them astronomic amounts of money should be called into question.

    As with some other very high profile "tech titans" it seems that too many influential people are too damn terrified to call out incompetence and fraud while the con-artists are "winning". No-one wants to be seen as making a bad call. So the grifters continue to get away with it for far too long.

    1. Yet Another Anonymous coward Silver badge

      Re: Good... now keep going.

      > it's every day pension funds, mortgages and savings

      Almost certainly not. Ordinary Americans had to jump through a lot of hoops to 'invest' in this - it was probably easier to buy drugs online

      Some VCs put some money in, but VC's job is to lose money so nobody cares

      The good news for regular punters is that it was mostly rich or idiot's money, the bad news for the defendants is that it was mostly rich+idiot's money.

      1. Andy 73 Silver badge

        Re: Good... now keep going.

        Hmmm...

        Pension fund Ontario Teachers was an investor (nearly $100 billion), alongside the usual big institutional names such as Blackrock, SoftBank, Sequoia, Tiger Global etc. etc.

        It's not a case of "some VCs" - billions were put in by a wide range of investment funds that were essentially gambling with other people's money without the slightest bit of due diligence.

        1. Stork Silver badge

          Re: Good... now keep going.

          What puzzles me is that all these big names want to put money into crapto in the first place.

          There is no good reason it should increase or even keep value.

          You can say much the same about gold, but gold has thousands of years of track record.

        2. Andy 73 Silver badge

          Re: Good... now keep going.

          I'm going to reply to myself because I can't edit the post above. For accuracy, I should point out the typo - Ontario Teachers invested $100 million (with an m) not billion (with a b). Still a significant amount of other people's money being gambled.

        3. keithpeter Silver badge
          Pint

          Re: Good... now keep going.

          "The Toronto-based pension manager put $75 million into FTX's international and US divisions in October 2021 through its venture capital arm, known as Teachers' Venture Growth, and invested $20 million more in FTX.US in January."

          https://www.pionline.com/pension-funds/ontario-teachers-marks-down-95-million-investment-ftx-zero

          Embolding mine. The pension fund risked 0.05% of its investment capital on this new crypto thing (because BLOCKCHAIN!) via its venture capital arm (aka the ones who do the risky stuff). I'm betting they won't do that again.

          Edit: Andy got there first with the s/b/m/illions. These big funds need a mix of risky high return, mediumish and safe low return investments. I suppose that is how startups can exist.

          Merry Christmas all.

  8. F. Frederick Skitty Silver badge

    "Nothing like regular amphetamine use to make you appreciate how dumb a lot of normal, non-medicated human experience is"

    Wow. Just wow. I guess that explains the over confidence and ridiculous levels of risk taking. I know someone who was a speed user, and it has destroyed his health. Missing most of his teeth, weakened bones and an irregular heartbeat. He claimed to be super productive as a musician while high, but the cost was higher.

    1. Boo Radley

      Amphetamine

      I assume you mean prescription amphetamines, like Adderall, not methamphetamine. Personally, prescription amphetamines never brought me the promised concentration and focus, meth, on the other hand...

      1. FIA Silver badge

        Re: Amphetamine

        ‘Speed’ is (one of) the uk street term for amphetamine sulfate.

        It’s not quite as bad as meth, but still won’t do you much good long term.

        ‘Speed’ is generally about 20% pure, with ‘base’ and ‘paste’ increasing in purity.

    2. martinusher Silver badge

      All you need to know about using this stuff is encapsulated in this little ditty:-

      https://youtu.be/rLONI7LEHX8

      Its a very old song now but its got lots of truth in it (if a little exaggerated). Chronic amphetamine use makes people a bit weird, they think they know everything, so overconfident, but they also tend to become paranoid.

      FWIW -- The idea of issuing it to the military is, AFAIK, a German one. Amphetamine infused chocolate ("soldiers chocolate") was issued to the Wehrmacht, it was given to officers to issue to the ranks when necessary. Its widely assumed that one reason why Blitzkreig was so successful is that the troops didn't get tired, they were all speeding out of their brains. (...and it also explains some of the pauses in their attacks -- speed use has rapidly diminishing returns, you've got to stop periodically otherwise you'll cross that line between confidence and chaos!)

      1. F. Frederick Skitty Silver badge

        The British and Americans issued amphetamines to their armed forces in WWII as well, particularly to pilots on long missions. The German stuff was in pill form as well, and distributed to allies such as the Finns. There's a famous incident when one Finnish soldier, Aimo Koivunen, took too many and went on a week long bender.

  9. Anonymous Coward
    Anonymous Coward

    Net worth of £30bn

    And the best he could pull was that?

    1. herman

      Re: Net worth of £30bn

      The best he could pull - It wasn't enough to buy Twitter.

  10. man_iii

    YouTube debunkers

    Surprising to hear Reg talk about youtubers as reliable sources. I've always watched coffeezilla and upper echelon regards to gaming scams and on the side nfts scammers. It was mostly for entertainment and not real FBI and most wanted stuff going down

    1. Excellentsword (Written by Reg staff)

      Re: YouTube debunkers

      I included the linked videos because Coffeezilla was on the Twitter calls and directly questioned SBF on a few occasions. The way SBF squirms throughout suggests Coffeezilla was the only one present asking difficult questions.

  11. dinsdale54

    Institutional embarrassment

    The cynic in me says that the speed this is progressing means the aim is to give the various parties a quick slap on the wrist and then pretend it didn't happen. There are too many supposedly smart people looking really dumb who would like all this to go away.

    I _really_ hope to be proven wrong.

  12. Fruit and Nutcase Silver badge

    SBF out on bail

    FTX founder must remain under strict supervision at parents’ California home

    https://www.theguardian.com/business/2022/dec/22/sam-bankman-fried-new-york-court-charges-ftx

    1. Anonymous Coward
      Anonymous Coward

      Re: SBF out on bail

      He’s not the messiah, he’s a very naughty boy …

      1. Fruit and Nutcase Silver badge

        Re: SBF out on bail

        Mama B-F: Gives SBF a slap around the ear - Go to your bedroom and don't come out until I call you for dinner. And NO internet for you.

        Now, what would make things even better is if Mama Musk does the same with her Elon

  13. flayman Bronze badge

    Hanlon's Razor

    These people are royally f*cked. SBF gives the impression of someone who genuinely believes he has merely been guilty of incompetence. I have to wonder about that. Did he really direct these two to commit fraud, or are they throwing him under the bus? Maybe he did direct fraud without suspecting that he was breaking the law. Ignorance is no excuse. Have a nice life, you three absolute stars.

  14. Winkypop Silver badge
    Facepalm

    If only people had warnings about how risky Crypto is

    (Shakes head)

    1. gnasher729 Silver badge

      Re: If only people had warnings about how risky Crypto is

      It’s basic maths that the sum paid in by crypto investors is higher than the sum paid out. On average, investors lost. Which doesn’t mean some didn’t win big, but more lost big.

      And all the exchanges not only let you “buy high, sell low” but they also made tons of money just disappear. So I’m not sure what warnings were needed.

      1. Winkypop Silver badge

        Re: If only people had warnings about how risky Crypto is

        It was a joke.

        Obviously not a good one.

    2. Justthefacts Silver badge
      Mushroom

      Re: If only people had warnings about how risky Crypto is

      The real problem as an investor is that it was beginning to be hard *not* to be unwillingly invested in crypto. Because most funds with “risk + growth” in it had an exposure.

      There’s an equivalent problem in several areas. For example, say you don’t want to invest in tobacco firms (I don’t). Ho, that’s easy, right? Just invest in “Environmenal Social” Funds? Errr, no. 100x no. I did *not* say I wanted to throw my money away on building windmills, or giving it to fraudsters promoting the hydrogen economy, or Bicycles Made From Bamboo, and I *do* want to be invested in the pharma sector (only the sickest of societies would categorise innovating to save human life as being unethical investing, due to animal testing, and we do indeed live in that sickest of societies).

      I have one, and only one, goal. I don’t want to give several millions of pounds investment to one of five companies that are collectively responsible for 7 million dead annually due to smoking. That’s it. Nothing else. And you can’t do it, it’s just not possible, the market does not provide. The only way, and it’s what I do, is work out your exact exposure of the normal passive funds to big tobacco…..and then actively short those firms to a calculated match.

      Now imagine trying to do the same thing with managing your crypto exposure individually to hundreds of BogusCoins. Every time you get off the loo, another SBF you haven’t heard of has arisen and persuaded your passive funds to fund their Ponzi. It’s a serious problem.

  15. Trotts36

    Not quite free and clear

    SBF will no doubt hire the best defence lawyers money can buy for the trial (if he survives that long - as many have said SBF didn’t kill himself in the next year) and I think they will have a field day with these dullards version of events that SBF was the brains behind the operation.

    My take is that they are all as bad as each other and all willingly under took this Ponzi scheme.

    Although I’m sure the brain damaged elf girl probably hastened the collapse through ridiculous trading strategies.

  16. Ashto5

    Popcorn shortages

    Popcorn shortages

    We need to invest in popcorn ASAP

    Corn will be like the new money that doesn’t require a bank

    VC virtual corn could be the way forward anyone know somebody with time in their hands that could help build an exchange?

    1. Strahd Ivarius Silver badge
      Devil

      Re: Popcorn shortages

      I have created BitCorn, if you are willing to invest...

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