back to article FTX's Sam Bankman-Fried charged with fraud by just about everyone

Police in The Bahamas on Monday nabbed Sam Bankman-Fried (SBF), former CEO of failed cryptocurrency exchange FTX and crypto hedge fund Alameda Research, at the request of the US government, based on charges filed by multiple federal agencies. On Tuesday, following that arrest, those charges were made public and are expected to …

  1. Anonymous Coward
    Anonymous Coward

    "A ban on crypto would be the most straight-forward way of protecting both investors and the financial system: it would end the uncontrolled creation of cryptoassets and also ensure that cryptoassets never require a bail-out"

    Buy that man a beer!

    1. tekHedd

      "A ban on alcohol would be the most straight-forward way of protecting both consumers and the service industry: it would end the uncontrolled drinking of beer and also ensure that your drunk friend never requires a bail-out."

      Let's ban everything. In the name of safety.

      1. bombastic bob Silver badge
        Devil

        your snark is appreciated

        Since "Bankman-Fraud" aka "Brain-Fried" is likely to go to prison for his loss of billions of dollars in other people's money by way of alleged fraudulent claims, alleged criminal mismanagement, etc. I would think that EXISTING laws and regs are just fine if the bad actors go to prison for allegedly violating them in such an allegedly gross manner.

        Some think he might follow the same fate as Epstein. I have to wonder if "knowing where the skeletons are" has anything to do with THIS...

        Note: never trust your life savings to an alleged hippy allegedly running an investment business from a multi-million dollar commune in the Bahamas, despite all of the alleged woke virtue signalling he's allegedly doing to convince you, especially when he (allegedly) visibly shakes like a meth-head in a TV interview and (allegedly) goes into a "Talking 'bout my generation" thought+verbal spin trying to explain things...

    2. Sorry that handle is already taken. Silver badge

      They don't even need to ban cryptocurrency; they just need to ban the on- and off-ramps

    3. martinusher Silver badge

      I was led to believe that the problem isn't actually crypto as such but rather that it became 'financialized' -- it became another virtual asset to be sliced, diced, leveraged and generally turned into tulip bulbs.Crypto itself may have problems -- I don't like its energy use and lack of underlying value -- but that's a different issue.

      SBF and friends made the traditional small trader error of putting their hands in the till. There's apparently a right and a wrong way to do it -- one way its a Ponzi scheme, the other just the normal gyrations of "the market".

      1. amanfromMars 1 Silver badge

        In Praise of Unintended Consequences and Subsequent Repercussions

        the other just the normal gyrations of "the market”. .... martinusher

        Yes, indeed, and that be the persistent advancing criminal threat that just keeps on giving increasing stealthy power and expanding credence to what is in effect crypto virtual gold .... Bitcoin ....... for "the market” is rigged and its gyrations are far from normal unless you think it being easily groomed is perfectly healthy and acceptable.

        Cross that red line great divide and all manner of wannabe master criminals in flash z00t suits will love you for the opportunity that green light presents to crash and plunder federal reserves and crooked cash stores and equity vaults.

      2. blackcat Silver badge

        Indeed, crypto was supposed to exist as a parallel but as you say has been sliced and diced by those looking to make a quick buck. Once you can trade item A for item B someone can make a profit from that trade.

      3. Peter2 Silver badge

        SBF and friends made the traditional small trader error of putting their hands in the till. There's apparently a right and a wrong way to do it

        Yes. You have a client account for client funds, and an company accounts for money that the company owns. If you have a billion quid deposited in your client account and you promise the client 1% interest but manage to make 2% by putting half a billion quid in a long term deposit scheme (with removal at short notice in case of emergency if you have a bank run) then you can give the client 1% extra in the client account and bank the other 1% in the company account.

        You do not take money for ongoing operations, holidays and other personal expenses from the client account!

    4. Anonymous Coward
      Anonymous Coward

      Lazy thinking. He was a fraudster running a Ponzi scheme, pure and simple. He happened to work in the crypto world, but what he did was basically the same as what Madoff and every other Ponzi creator did long before crypto ever existed.

      1. Michael Wojcik Silver badge

        You're right: that is some lazy thinking. Not every failure of every set of poor financial practices is a deliberate fraudulent scheme from the get-go. There are many paths to this sort of failure, and the probability that we'd only ever observe one is very low.

        The current evidence suggests that SBF and his gang of fellow ex-quant children started out sincerely believing that their companies would accumulate a lot of wealth. Alameda initially did make quite a bit of money (at least on paper) with SBF's Bitcoin-arbitrage trading and similar investment schemes. As more of their ill-conceived investments failed they began raiding customer accounts; at that point it became deliberate fraud. But as I wrote above, the current evidence suggests that initially it was naivety and abysmal accounting and management practices.

        For that matter, Ponzi himself likely did not know he was running a scam. He was essentially innumerate and had basically no accounting at all. Witness accounts say he had rooms with piles of cash – not even stacked, just thrown in piles on the floor – and absolutely no idea what came from new deposits and what from his postal-coupon arbitrage scheme. His close associates did know what was going on, but Ponzi, who'd founded the scheme and was its public face, apparently thought things were not only fine but perfectly above-board right up until the crash. Bulgatz has details.

    5. Anonymous Coward
      Anonymous Coward

      Yeah, because banning crypto will prevent investors from being fleeced.

      Oh wait...

      SEC Charges Eight Social Media Influencers in $100 Million Stock Manipulation Scheme Promoted on Discord and Twitter

      https://www.sec.gov/news/press-release/2022-221#.Y5orTN54g

      1. Michael Wojcik Silver badge

        We can't fix everything, so we shouldn't try to fix anything. Maybe you should get that on a t-shirt?

  2. Trotts36

    Conflict of interest

    Funny watching Maxine Waters running todays house hearing on FTX - bit of a conflict of interest there eh Maxine ?

    1. Trigun

      Re: Conflict of interest

      Just a bit. I would have thought that she would have recused herself straight away.

  3. Trigun

    It'll be interesting to see who and how many they eventually nail to the wall over this.

    I'd also love to see who the crediers are, but it seems that the judge in charge of that has granted them all anonymity...

    1. bombastic bob Silver badge
      Devil

      yeah it is not likely that creditors are at fault for making bad investment/loan/etc choices anyway. They simply must want their money.

      It's probably a number of private investors and firms that invest in lots of things like that. The world of finance.

      Kinda reminds me of an old fashioned "bank run".

      1. Trigun

        I'm mostly interested in the timing of FTX falling over and the recent shenanigans at Disney with their CEO and CFO. Might not be linked, but the timing...

  4. VoiceOfTruth Silver badge

    What is good for the goose

    -> A ban on crypto would be the most straight-forward way of protecting both investors and the financial system: it would end the uncontrolled creation of cryptoassets and also ensure that cryptoassets never require a bail-out,

    All them bailouts. All that so-called quantitive easing. Yeah. Never require a bailout. Bake that into the so-called financial system. All quietly forgotten about...

    1. Stork Silver badge

      Re: What is good for the goose

      It may have slipped your attention, but both the Fed and to a lesser degree the ECB are in the process of quantitative tightening at the moment, they are reducing the pile of bonds they hold.

      BoE was going to, but got other priorities after Trussonomics

      1. VoiceOfTruth Silver badge

        Re: What is good for the goose

        It did not escape my attention at all. But please don't try to pretend that QE was not a bailout. The idea that crypto so-called assets should not get a bailout while giving a free pass to the mainstream financial system shows how two-faced the financial overlords are.

        Agreed about Truss. She nearly collapsed the financial system. We were hours away from it.

        1. elsergiovolador Silver badge

          Re: What is good for the goose

          She nearly collapsed the financial system.

          More like WEF wanted to get rid of the PM going against Great Reset, so they threatened to collapse the pound if Truss is not defenestrated.

      2. elsergiovolador Silver badge

        Re: What is good for the goose

        process of quantitative tightening

        * imagines a thief slowly putting back the sack of gold into his other pocket *

        BoE was going to, but got other priorities after Trussonomics

        BoE is in bed with WEF. The stunt with shorting the pound and then getting WEF propaganda officers, sorry, journalists to sell the story that Truss crashed the economy around the world by announcing a budget that gives a boost for SMEs and growth, which is against WEF agenda.

        They got their way - you can't stand up against the rich - and so they got their man Sunak in, as planned for years.

        Of course first thing was getting his pet IR35 changes back in. You can't have little people running their own businesses, getting wealthy and in the future challenging the status quo! Oh no.

    2. tekHedd

      Ban on what?

      Just occurred to me: what if we simply ban /bailouts/? This will also ensure that *nothing* ever requires a bail-out and maybe make people think twice about who they're giving money to.

      1. Anonymous South African Coward Bronze badge

        Re: Ban on what?

        Just occurred to me: what if we simply ban /bailouts/? This will also ensure that *nothing* ever requires a bail-out and maybe make people think twice about who they're giving money to.

        *hollow laugh*

        I so wish we can implement that here in South Africa, virtually every SoE runs to daddy government when they need money for bonuses etc and call it "bailout"... or they made a big oops, and need a bailout...

      2. I ain't Spartacus Gold badge

        Re: Ban on what?

        Just occurred to me: what if we simply ban /bailouts?

        Banking is useful. OK, stop laughing at the back there!

        Banking does several socially useful things. It gives us a relatively safe place to keep our money, rather than under the mattress. It gives us relatively safe ways to move money around, and manage it.

        It also allows liquidity transformation. This is the act of turning lots of people's amounts of short-to-medium-term savings into large blocks of long term money that can be loaned-out in the form or mortgages or loans for business investment.

        The risk of this is that panics can cause everyone to try and withdraw their savings at once from a bank, and they can't get the mortgages paid back in the few days they have to meet that demand. Hence we have Central Bank guarantees to stop solvent but illiqid banks from going bust, and allow this socially and economically useful business to continue. It's very hard (to impossible) to get economic growth without investment.

        In order to be worthy of being trusted with this bail-out facility, our banks need to be heavily regulated and as boring as possible. Lending sensibly and usefully. Leaving the much riskier loans to the financial markets and investors who hopefully better understand the risks, and can cope with the inevitable losses.

        1. amanfromMars 1 Silver badge

          Re: Ban on what? @I ain’t Spartacus

          Banking is a racket, I ain't Spartacus, which is tolerated and supported because it can do a number of useful things, some of which you have conveniently highlighted. Such information though does not alter the fundamental fact of it still being a racket.

        2. Stork Silver badge

          Re: Ban on what?

          Absolutely. This is also why the exciting merchant banking was separated from dull retail banking. Unfortunately some legislators have been convinced to reduce this separation again

  5. elsergiovolador Silver badge

    Perspective

    In other words, it is claimed, FTX secretly funneled billions in people's private funds into Alameda, which then gambled – sorry – invested the money into a wide range of startups and projects as well as covering the org's expenses.

    In other words, it is claimed, Government openly funneled billions in people's % of salary into pension funds, which then gambled - sorry - invested the money into a wide range of startups and projects as well as covering the org's expenses.

    Difference is that people have no choice but to put money into pension funds.

    1. I ain't Spartacus Gold badge

      Re: Perspective

      elsergiovolador,

      You don't understand pensions.

      In the UK we pay taxes. National insurance (though not exclusively) is there to cover our pensions. It's not an investment. I've paid national insurance for over thirty years in order to pay the pensions of the people already receiving them. My pension will be covered by younger people, some of them not yet born - if I can manage to survive at least another 18 years... This is how governments cover their spending. We're living longer and having fewer children, so this is being corrected in richer countries by allowing more immigration and raising retirement ages.

      We then have private pension schemes. Which we aren't forced to pay into. Which are regulated. They invest on the stock market, but they also have significant holdings of safer bonds. They are heavily regulated. In the UK we now opt people into these schemes by default, in order to nudge them into saving more, but nobody is forced to join.

      1. elsergiovolador Silver badge

        Re: Perspective

        You have literally described a Ponzi scheme.

        1. I ain't Spartacus Gold badge

          Re: Perspective

          You have literally described a Ponzi scheme.

          No I haven't.

          From the OED: Ponzi Scheme - a form of fraud in which belief in the success of a non-existent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.

          Origin

          named after Charles Ponzi (died 1949), who carried out such a fraud (1919–20).

          I don't pay my taxes as an investment. I do it in order to fund the government. And, of course, becuase they can lock me up if I don't. That funding pays for the stuff the government spends today.

          So long as there are still people in the country in twenty years time, I hope that I'll get to draw a pension. The system's been working for the last 110 years. I'm forced to hope it'll continue to work for another forty.

          But it's not a Ponzi scheme because it's not a fake investment. Ponzi IIRC claimed that he had a scheme to make money from foreign postal orders. And needed investors' money to make it work. There was no such scheme and he just paid a few people out of the next lot of people's money to "prove" it worked, while keeping the rest.

          Government pensions work because the state is a continuously existing entity, expected to outlive its individual citizens. Government pensions are also not a scam, because nobody is lying to you about this. Governments openly admit this is how it works all the time.

          Private pensions are a genuine investment where I entrust my money to a heavily regulated company, and they take a profit for holding it in various bonds and shares. It has risks, but hopefully in twenty years I'll have a big chunk of cash to spend on my retirement. Plus a governmetn pension to keep me in cat food and Werther's Originals.

          1. elsergiovolador Silver badge

            Re: Perspective

            I am guessing the victims of Ponzi schemes were trying to rationalise their spending in the similar way as you do.

            Ponzi scheme is how variations of investment scams are called, in which returns are paid to existing investors from funds contributed by new investors, rather than from profit earned. (as in "I've paid national insurance for over thirty years in order to pay the pensions of the people already receiving them. My pension will be covered by younger people, some of them not yet born")

            Whether there was a scheme generating some profit or not is irrelevant.

            Whether a particular Ponzi scheme calls itself a Ponzi scheme openly (as in "Government openly admit this") is also irrelevant.

            1. I ain't Spartacus Gold badge

              Re: Perspective

              elsergiovolador,

              Whether there was a scheme generating some profit or not is irrelevant.

              Incorrect. A ponzi scheme is a pure fraud, where there's no underlying investment and a few early investors are paid in order to make it look real. If you have a scheme that actually generates profits as well, then it becomes a pyramid scheme or just a normal fraud. A pyramid scheme being where you get the victims to recruit your next victims for you.

              The reason that government pensions aren't a ponzi scheme is that the country has an inexhaustible supply of taxpayers. In fact, each group of "investors" in this government "scam" have children who are then the next victims of the scheme. So it can go on for ever. What destroys ponzi and pyramid schemes is that they run out of victims. What makes governments work is that they've got most of the guns and control of an area of land where lots of people live and where lots of economic activity happens, that they can tax.

              Now obviously there's a risk, this being a democracy, that the next generation can vote not to pay my pension. The bastards! With their long hair and their terrible music where you can't even hear the words... But there are two things working against that. Firstly, old people tend to vote more than young people, so they're likely to lose if they try. And also, if they vote to get rid of my pension, they're also voting away any hope of getting theirs. And they have to pay mine in order for theirs to happen. Unless we get a really cunning generation of young people who decide to vote to abolish our pensions, then when they get old vote to re-establish the pension scheme so they can get it...

              This is also why fiat currencies generally work and crypto coins generally don't. Governments have longevity and the power to force people to pay them tax. Which means they have the ability to make promises of payment far into the future - with a high likelihood that they'll actually make them. Promises that will therefore be believed. The modern British state has a 350 year history of having a national debt which it has never once defaulted on. That gives it quite a good credit history.

              1. Alan Brown Silver badge

                Re: Perspective

                The problem across the world is that the ratio of taxpayers per pensioner has been falling as people live longer and have fewer children

                Sensible countries saw this coming and made investments for the future. Most english-speaking ones simply pretended this wasn't going to happen and told taxpayers to party on

                The result is that GenXers are likely to face a pension eligibility age of 75, simply because there's no way pensions can cover them retiring at 65 - and it's likely to be means-tested too

      2. Anonymous Coward
        Anonymous Coward

        Re: Perspective

        mmm, weird, as gov have forced my company to enrol me in a personal pension.

        look personal pensions are lying.

        their sales wankers will make it look like you can retire nicely for X% per month of your income (normally around 10 to 30%) then tell you all these future promises (which are bollocks!).

        if you die before retirement, it's all gone you got fucked.

        if you live to retirement your then made to "convert the pension pot to an annuity" (another way to take another slice of that pot from you, you got mini-fucked).

        Then unless you live for 25+ years, guess what they fucked you good!

        In reality due to all the schemes to rip you off, you would need to put 50%+ of income on your pension.

        So the moral is unless you are already rich/rather well off, a private pension will do shit all for you.

      3. Peter2 Silver badge

        Re: Perspective

        We then have private pension schemes. Which we aren't forced to pay into.

        Under the pensions act 2008 in the UK your employer is required to deduct money from your salary and put it into a private pension scheme. If you don't have a pension scheme they are required to enroll you in one.

        You can say that your "not forced" to pay into it, but that's dancing on the head of a needle; your employer is required to deduct the cost from your wages so you don't have any way of opting out, at least in the UK.

        1. I ain't Spartacus Gold badge

          Re: Perspective

          Under the pensions act 2008 in the UK your employer is required to deduct money from your salary and put it into a private pension scheme. If you don't have a pension scheme they are required to enroll you in one.

          Yes. And if you don't want them to, they are also required by the same law to stop doing it. It is a scheme you are automatically opted in to, but can opt out of, in order to harness people's natural laziness to get them to save.

          So no dancing on the head of any pins required. If you don't want it, don't sign up to it.

          Also not a ponzi scheme by the way, because private pensions hold actual assets.

  6. Doctor Evil

    Telling the truth?

    "We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto," said SEC chairman Gary Gensler in a statement.

    You know, those two elements aren't necessarily contradictory and SBF was well-positioned to know that. Not that FTX wasn't a house of cards, but the crypto sector could, in fact, be so unsafe that it would make putting money into a Ponzi scheme look like a hedge.

    /s

  7. Doctor Evil

    Casino rules?

    Maybe they should just apply the same rules to the crypto sector that already apply to casinos. There's a lot of commonality there:

    - it exists outside of the conventional financial system

    - it's an out-and-ouit gamble (ok: speculation)

    - the house always wins

    - organized crime takes a real interest in it

    Hmmm.

    1. elsergiovolador Silver badge

      Re: Casino rules?

      Would they also include stock exchanges? Not much different.

  8. Anonymous Coward
    Anonymous Coward

    How all crypto works

    You insert your hard earned here —-> Magic black box

    Null divide by zero

    That’s it.

    Nothing more to see here

    1. Anonymous Coward
      Anonymous Coward

      Re: How all crypto works

      No magic beans?

      1. Anonymous South African Coward Bronze badge

        Re: How all crypto works

        No magic beans?

        Plant 'em and go rob the giant of his riches.

        Then use propaganda to make the giant attack your enemies, then kill the giant once all your enemies are dead.

  9. Long John Silver
    Pirate

    True fame to be denied him?

    In months and years to come we are unlikely to see the following daubed on motorway bridges.

    "Bankman-Fried is Innocent OK!"

    1. spireite Silver badge

      Re: True fame to be denied him?

      Is the 'Give Peas a Chance' still over the M25?

      1. Neil Barnes Silver badge

        Re: True fame to be denied him?

        Sadly no.

        https://www.bbc.co.uk/news/uk-england-beds-bucks-herts-45564552

  10. Anonymous Coward
    Anonymous Coward

    Stating the bleeding obvious here..

    "FTX isn't an anomaly. Its collapse isn't just a case of one corrupt guy stealing money. It's about an entire industry that refuses to comply with existing regulation, that thinks it's above the law."

    Well, duh. The whole point of crypto currencies (would crypto money not be more accurate?) is to avoid the regulatory system. That's also why criminals love it, well, until their proceeds went up in smoke if they hadn't moved to Binance already.

    Incidentally, the hearing had a moment of disbelief when it was reveleaved by the current caretaker that they had been doing their accounting (for as much as it existed) on Quickbooks..

  11. Anonymous South African Coward Bronze badge

    "I fucked up" is not a get out of jail card.

    It can be used against him.

    Wonder if Hairy Potter will also testify against him?

  12. CR

    Eh

    Why running to Bahamas? Isn't really safe, it seems. But maybe... Siberia?

    Pros: nobody finds you

    Cons: nobody finds you

    1. iron Silver badge

      Re: Eh

      FTX had its offices in the Bahamas, so he was already there rather than runnihng. FTX bought a lot of property in the Bahamas, mostly beach front villas for SBF, his law professor parents and others.

  13. Anonymous Coward
    Anonymous Coward

    It's a good thing ..

    .. the US doesn't have a death penalty for fraud (probably to protect their politicians), otherwise SBF's last surname would have been rather unfortunate..

    :)

    1. SundogUK Silver badge

      Re: It's a good thing ..

      That's an unusual spelling of 'funny as fuck.'

  14. wsm

    Fraud but not fraudulent enough?

    Everyone is jumping on the bandwagon to prosecute SBF, but where is the queue to return his political donations to the victims of his fraud?

    1. gnasher729 Silver badge

      Re: Fraud but not fraudulent enough?

      Political parties are allowed to accept donations. 99% of the financial damage was done by _illegally_ siphoning investors’ money into other companies owned by the same gang. The interesting bit is where _those_ companies sent the money to. And of course take all their property unless it comes from legal income.

POST COMMENT House rules

Not a member of The Register? Create a new account here.

  • Enter your comment

  • Add an icon

Anonymous cowards cannot choose their icon

Other stories you might like