FTX affair: look back at a week of hearings around Sam Bankman-Fried

Six days, seven nights – Just a month ago Sam Bankman-Fried participated in television programs and was still posting wacky messages on Twitterr. At the same time, in Miami, the three giant letters that adorned the roof of the city’s stadium were dismantled. The House of Representatives then raised the question of the relevance of a hearing about this FTX affair. Last week, the young deposed CEO was still exchanging friendly messages with the president of this same chamber to discuss his presence or not at a future hearing while the name of his lawyer leaked in the press.

Today, while he is in detention in the Bahamas and faces 115 years in prison, Congress has gone through multiple hearings while the Bahamian regulator and FTX lawyers are at loggerheads over each other’s responsibilities. It is because the news moves too fast and it is sometimes complicated to follow everything day by day that we offer you a summary of recent events around the FTX affair. It will forever mark a year 2022 that is already well endowed with twists and turns. A week in the FTX business is now.

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Bahamian feuds with FTX lawyers

The Caribbean regulator and John Ray are each complaining

To say that there is water in the gas between the regulator in the Bahamas and the lawyers of FTX in the United States is an understatement. Earlier this week, the Bahamas Securities Commission – Securities Commission of the Bahamas (SCB) – requested through his lawyers their American counterparts to provide them a set of data relating to FTX’s customer base. End of inadmissibility and categorical refusal, the SCB takes note and complains to the judge of the Bankruptcy Court.

Almost at the same time, John Ray, the new CEO of FTX, takes his finest pen to write to the Prime Minister of the archipelago as well as to the Attorney General. The purpose of this correspondence? Complain about the behavior of the CBS Executive Director. She, or her teams, would have helped the leaders of the former team of the exchange to transfer assets during the first hours of bankruptcy.

Finding FTX’s Lost Money

Obviously, on both sides of the Gulf of Mexico, suspicion dominates and each preserves its own interests. Besides, a priori little confident in the efficiency of Bahamian justice, FTX announces recruiting a team of experts to try to get their hands on the billion dollars that would have disappeared from the accounts.

They are also looking for $450 million transferred the same evening of the bankruptcy out of the accounts of the exchange. In all, the amount of losses is dizzying and answers are essential. Fraud or financial loss, the question deserves to be asked. On December 12, John Ray’s testimony before the deputies will also provide the beginning of an answer.

This flag of the Bahamas behind the F, logo of FTX represents the fact that the Bahamian regulation does not wish to leave the entire management of the bankruptcy to the US regulator.
US regulation and the Bahamian regulator at war in the FTX affair

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Edifying statements by John Ray before the House of Representatives

A testimony that completes the credibility of Sam Bankman-Fried…

Remember that the US Congress is separated into two chambers. On one side the House of Representatives, and on the other the Senate. These two entities each have a commission responsible for investigating this type of case. In this case, it is the Financial Services Committee of the premiere that opens the ball with the hearing of John Ray. The next day, it will be the turn of the Senate to moderate the debates.

And before the delegates of the institution and under the presidency of the Democrat Maxine Watersthe new CEO of the exchange will engage to a terrible description of the state of society which he found when he arrived. In almost three hours of testimony, he describes the edifying lack of elementary structures at FTX and paints a vitriolic portrait of his predecessor. On the verge of incompetence and dishonesty, his statements will raise distressed comments from the assembly.

…and which (still) annoys the Bahamian regulator

But between the lines, John Ray will also point the responsibility of the Bahamian authorities. By wondering aloud where the assets of the platform have gone and who could have had access to them. In short, he once again accuses the SCB. And, the answer will soon come in the form of a scathing press release that asks US attorneys not to hamper the investigation with questionable innuendos. The committee will also take the liberty of pointing out that it is the first international body to have taken a decision against FTX.

And then there is this story emails between SCB and the Bankman-Fried teams. They would have been moved by the new management of FTX to make believe in a collusion between the two parts. The Bahamas criticize John Ray for wanting to rewrite history at his convenience without taking into account either local laws or the course of events. In short, the rag is burning between the two camps against a background of quarrels between lawyers. But, meanwhile, on the island of New Providence, things are getting clearer for the soon-to-be outlaw: Mr. Bankman-Fried.

Between the Bahamas and John Ray III the rag burns for the regulator.
Sam Bankman-Fried in the crosshairs of regulation and John Ray III, the new CEO of FTX

Sam Bankman-Fried finally imprisoned in Fox Hill faces 115 years in prison

Will go, will not go? SBF finally absent from his audition on December 13

The question that had been animating the media for a few days was the following: would the former head of FTX be present at the hearing before Congress on December 13? Will come, won’t come? Doubt hovered around his participation and it was maintained by contradictory statements. After learning the name of his new lawyer, the countdown was launched and the hours passed without anyone knowing more.

But finally, things accelerated in the early morning of December 12. France learns at breakfast that Samuel Bankman-Fried has finally been arrested in the Bahamas. After a successful collaboration between Nassau and Washington, the little business genius of 2021 is locked up the day before his scheduled hearing before Congress.

It must be said that he was arrested and that he risks 115 years in prison

But, of hearing, there will not be. Or at least not right away. The American authorities finally accelerated in the procedure and obtained his arrest. According to corroborating sources, he could be charged with fraud and wire fraud, securities fraud and money laundering, all conspiracy, 8 counts in total.

If found guilty, he faces 115 years in prison in the United States. But today, it is indeed in the Bahamas that he is imprisoned and more precisely within the only prison of the archipelago : Fox Hill. His request for bail was denied. He will therefore remain there until at least February 8, the date of his extradition hearing to the United States. We know by sources close to the file that he does not benefit from any preferential treatment, but that he is staying in the infirmary for the moment. Between overcrowding and lack of hygiene, the gap with his life before is likely to be particularly violent.

FTX USA feu 1
Sam Bankman Fried’s trial for extradition will take place on February 8

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New revelations around the FTX double case – Alameda

Financing of political party(ies) and expensive investments in real estate

Sam Bankman-Fried will still make the testimony public what he was about to do before the Commission. Unsurprisingly, he is always looping on the same chorus that he has been repeating over and over for several weeks. He apologizes again and again, and continues to blame the whole world for what would rather be his own responsibility. But, while we thought we would see the pace of revelations slowing down, this is not the case.

We will learn, in fact, this week that politicians are seeking at all costs to get rid ofe the cumbersome image of FTX. They do the same for the donations received to finance their actions. In another style, investigators dispatched to the Bahamas discover that FTX’s real estate empire could ultimately represent $200 million. The sale of these properties would be a priority to bring some money into the coffers.

A Telegram group and accounts in South Korea as icing on the cake

But other even more surprising rumors will also arrive these days like the existence of a secret account platform in Korea. It would have been used to conceal the company’s colossal debts. We even talk about $8 billion of transfer…

And since nothing surprises us anymore about the practices of the band at Bankman-Fried, the existence of a mysterious chat group between FTX and Alameda executives on Signal ultimately also seems quite possible. In any case, this is what indicates an Australian media. Info or intox ? Sam Bankman-Fried having denied being part of it, so it is quite possible that it is true.

And meanwhile, in the Senate, testimony that goes well beyond the Sam Bankman-Fried case

Let’s go back to Senate, to close this week. The absence of the main interested party will not have prevented a moment of exchange about FTX but especially about the cryptocurrency industry as a whole. Thus, on December 14, just after the opening speech of the President of the Commission, we were able to witness several declarations of love for crypto but also some well-placed attacks from opponents of Bitcoin & Co. Here are two extracts symbolizing the diversity of the debates:

“The code did not commit a crime. FTX and crypto are not the same things. FTX was opaque, centralized and dishonest. Cryptocurrencies are open source, decentralized and transparent. »

Pat ToomeyRepublican Senator from Pennsylvania

“Crypto has become the preferred tool of terrorists, gangs of ransomware, drug dealers and rogue states who want to launder their money. »

Elisabeth Warren, Democratic Senator from Massachusetts

When closing this weekly review of the FTX affair, we learn that the exchange is preparing to auction some of its companies to try to increase its liquidity, but also that the Proof of Reserve, so dear to crypto platforms in recent weeks, is severely questioned by the official withdrawal of Mazars. This shows to what extent the industry is still weakened by the FTX slap and subjected since then to recurring pressure surges.

Let’s end by saying that Samuel Bankman-Fried is sleeping in prison. That the American and Bahamian authorities will resume their delicate investigations on Monday to shed light on the facts of November. And, that American democracy is still trying to understand what happened by hearing witnesses, specialists and representatives of the people. Many questions still remain unanswered. However, many revelations are yet to come in this FTX case. This event will also feed, to our great regret, the discussions end of year celebrations.

The bankruptcy of FTX is there to remind us that we must remain cautious in this still very young ecosystem. To keep your cryptos, nothing beats a Ledger wallet. The Nano S and Nano X provide security and ease of use (commercial link).

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