Cryptocurrencies: Sam Bankman-Fried and the FTX scandal in the dock

Indicted for fraud and criminal conspiracy, Sam Bankman-Fried, the founder of the cryptocurrency exchange platform FTX created in 2019, is summoned to New York federal court on Tuesday, October 3.

The story of Sam Bankman-Fried, aka SBF, has become sadly commonplace in the American business world. An ultra-rapid rise on the fast-growing cryptocurrency market, a young and brilliant representative of this new emerging world of finance, of which he becomes the perfect icon… and the explosion in flight, after shattering revelations on the use of a portion of FTX client funds through a subsidiary, Alameda, to make risky investments. This was followed by the fall of FTX, which was placed in bankruptcy. There would be a shortage of $8.7 billion, according to the receiver appointed to manage the liquidation.

Manhattan federal prosecutor Damian Williams accuses SBF of diverting funds from FTX clients to inject them into Alameda, but also to buy several hundred million dollars worth of real estate in the Bahamas or make donations to candidates in elections in the United States. Extradited from the Bahamas, released and then placed in detention last August after an attempt at witness tampering, Sam Bankman-Fried planned to defend himself and highlight his good faith by banking on the fact that he did not believe that the use of his clients’ funds was inappropriate… He also intends to question the credibility of those who claim the opposite. “We’ve been overconfident and careless“, SBF wrote on X (formerly Twitter) five days before FTX filed for bankruptcy in November 2022. “I’m broke, I wear an ankle monitor, and I’m one of the most hated people in the world […] And the truth is I did what I thought was right“, he posted on X, a month later.

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A family matter ?

The trial is expected to last six weeks. We will notably hear Caroline Ellison, the ex-girlfriend of SBF and former manager of Alameda. Also charged, she agreed to collaborate with the authorities, like other FTX employees who abandoned SBF and could overwhelm her. Gary Wang, co-founder and chief technology officer of FTX, said he was tasked with changing information system codes between 2019 and 2022, a move that would have given Alameda Research special privileges. Nishad Singh, the technical director, and Ryan Salame, a former client director, both admitted to illegal transfers of client funds from FTX to Alameda.

More recently, a complaint targeting SBF’s parents was filed. These two lawyers, very involved in the creation of Alameda, are accused of having “siphoned millions of dollars from the FTX group for their personal benefit“. This trial promises a great unpacking of the grandeur and decadence of a company symbol of the era of cryptocurrencies.

Sources: AFP, Reuters, Le Figaro

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