CRIMINAL CRYPTO CAPITALI$M 3.0

Binance boss CZ reportedly warns the coming months will be 'bumpy' for the crypto exchange, as it unfreezes USDC withdrawals

Zahra Tayeb
Wed, December 14, 2022 

Changpeng Zhao, CEO of Binance.

REUTERS/Darrin Zammit Lupi

Binance's CEO warned staff of "bumpy" times ahead, after it resumed withdrawals on Tuesday.


FTX's collapse has drawn scrutiny on Binance, he said, after it faced billions of dollars of outflows in a matter of days.


Changpeng Zhao welcomed the "stress test" of withdrawals however, saying it builds credibility.

Binance CEO Changpeng Zhao warned staff of difficult times ahead as the crypto exchange weathers scrutiny over its reserves.

In a company memo sent to employees seen by Bloomberg, Zhao, commonly known as "CZ" said the crypto industry is experiencing a "historic moment" in the wake of FTX's shocking collapse, but reassured staff that Binance "will survive any crypto winter."

"While we expect the next several months to be bumpy, we will get past this challenging period — and we'll be stronger for having been through it," he wrote. He added that FTX's problems have invited "a lot of extra scrutiny and tough questions" on Binance, referring to over $2 billion in customer withdrawals it faced on Tuesday. The bank-like run forced Binance to halt USDC withdrawals.

The large outflow of customer funds came amid concerns over the exchange's proof of reserves report published last week, and allegations that Binance has been involved in money laundering practices.

On Wednesday however, Binance announced it unfroze customer withdrawals, while Zhao noted deposits are returning to the exchange in a sign of stability.

"Things seem to have stabilized. Yesterday was not the highest withdrawals we processed, not even top 5. We processed more during LUNA or FTX crashes. Now deposits are coming back in," Zhao tweeted.

The crypto billionaire even welcomed the "stress test" of withdrawals, saying: "I actually think it is a good idea to 'stress test withdrawals' on each CEX on a rotating basis." He added it helps build the credibility for exchanges that pass the test.

Crypto exchange Binance freezes withdrawals of stablecoin USDC as rattled investors pull $2 billion in funds

George Glover
Tue, December 13, 2022 

Crypto exchange Binance has paused withdrawals of the key stablecoin USDC, chief executive Changpeng Zhao said Tuesday.

Patricia De Melo Moreira/AFP/Getty Images

Leading crypto exchage Binance temporarily halted withdrawals of the USDC stablecoin on Tuesday.


Customers have pulled over $2 billion in funds in 24 hours as concerns about its stability grow.


Questions about Binance's reserves and a potential investigation are in focus after FTX's collapse.

Binance has temporarily paused withdrawals of a major stablecoin after customers pulled over $2 billion in funds, as worries about the crypto exchange's stability grow after the collapse of FTX.

The world's largest crypto exchange will freeze all withdrawals of USD Coin while it conducts a "token swap" to boost its holdings of the dollar-pegged token, CEO Changpeng Zhao said Tuesday.

"On USDC, we have seen an increase in withdrawals," the Binance boss, commonly known as "CZ", tweeted.

Binance has faced questions over transparency about its reserves and reports of an imminent investigation by US prosecutors in recent days, which have rattled some crypto investors in the wake of the collapse of now-bankrupt rival FTX.

Binance requires traditional fiat currency held by a New York bank to swap some of its Paxos Standard and Binance USD stablecoins for USDC, so that it has sufficient holdings of the token for withdrawals to continue, Zhao added.

"The banks are not open for another few hours," he said. "We expect the situation will be restored when the banks open."

USDC has its value fixed at $1, and it is used by some crypto traders as a place to park their cash at times of high uncertainty or volatility.

The stablecoin maintained its dollar peg Tuesday, while Binance Coin — a native token that is seen as reflecting customers' trust in the exchange — had slipped 5.12% to trade at just under $269 at last check Tuesday.

Binance halted USDC withdrawals after customers pulled over $2 billion worth of cryptocurrency from the exchange Monday, according to data from blockchain intelligence platform Nansen.

Those withdrawals came after top accountants and legal experts slammed a proof of reserves report published last week, where Binance claimed its bitcoin holdings were overcollateralized – which would mean it held more than enough of the token to cover its losses in case of a default.

US prosecutors are revving up to charge CZ's crypto group for violating anti-money-laundering regulations from 2018 onwards, Reuters reported Monday. The report said Binance processed over $10 billion worth of illegal payments in 2022.

In follow-up tweets Tuesday, CZ called on Binance customers to avoid acting based on "FUD" – an acronym for the feelings "fear, uncertainty, and doubt" that crypto bulls believe drive some traders away from the digital asset space.

Crypto investors are on alert for any sign that the problems that helped pull down FTX could spread to other platforms. The now-bankrupt crypto exchange collapsed after facing a liquidity squeeze, and over 1 million customers may have lost money, according to NPR.

At the request of the US, authorities in the Bahamas arrested FTX's founder and former CEO Sam Bankman-Fried on Monday. He faces allegations he illegally misused billions of dollars in FTX customer funds to prop up sister trading firm Alameda Research.

Binance representatives declined to comment further on this story.

Read more: Nouriel Roubini slams Binance boss CZ as a 'walking time bomb' and says crypto is totally corrupt

Binance’s proof-of-reserves is just another black box

Nate DiCamillo
Mon, December 12, 2022 

When the crypto market melted down, Binance appeared as both the main antagonist and market savior. The exchange started the run that felled its rival, FTX, and has since promised to help bail out struggling crypto firms.

Binance also led the way in offering to prove to its customers and the broader market that it has the assets it says it does, which is known as proof-of-reserves. Specifically, Binance claims that it performed a “Merkle tree” proof-of-reserves audit, which is a cryptographic way of collecting blockchain data and making it more easily accessible

At first glance, the breakdown of Binance’s assets and liabilities shows a $245 million hole. However, Binance’s auditor Mazar claims that this is because Binance holds collateral for lent out bitcoin that was out of the audit’s “scope.”

Former SEC regulator John Stark told Decrypt that there were several red flags with the audit, including using Mazar, instead of a big-four auditing firm, and being able to dictate the terms of the audit. Mazar also did not issue an official opinion on the effectiveness of the audit it performed.

The future of Binance’s finances are also in question as the US Department of Justice (DOJ) weighs charging the exchange with anti-money laundering and sanctions violations, according to a new report in Reuters.

The exchange’s lawyers are allegedly talking with the DOJ about the possibility of entering into plea deals for exchange executives, including CEO Changpeng Zhao, instead of fining the exchange. Binance didn’t immediately respond to a request for comment from Quartz.

How did we get here?

November 2: CoinDesk published a story revealing that a chunk of Alameda’s balance sheet was made up of FTX’s native exchange token FTT.

November 6: Binance sells its FTT tokens, pushing down the price of FTT and starting a run on FTX.

November 8: Binance offers to buy rival FTX.

November 9: Binance rescinds the buyout offer.

November 11: FTX files for Chapter 11 bankruptcy.

November 25: Binance says it will set up a $1 billion recovery fund for the industry.

CRIMINAL CRYPTO CAPITALI$M TOO

Sam Bankman-Fried was charged with defrauding investors. His defense was a terrible attempt at saving himself and lacked accountability.


Alexandra York
Tue, December 13, 2022 

Sam Bankman-Fried, the founder and CEO of FTX.Alex Wong / Getty Images

The SEC charged Samuel Bankman-Fried with defrauding investors in FTX.

Bankman-Fried was interviewed at the DealBook Summit about his company's collapse on November 30.

The FTX founder said he "didn't know exactly what was going on."

Sam Bankman-Fried, the once-billionaire founder of the cryptocurrency exchange FTX, has been charged with defrauding investors by the SEC and was arrested on December 12.

Weeks earlier, he told Andrew Ross Sorkin of The New York Times that he wasn't aware of the details that led to his company's implosion in November.

"I didn't know exactly what was going on," Bankman-Fried, 30, told the Times on November 30. "Obviously, that's a pretty big mistake and oversight, that I wasn't more aware."

But convicted scammer Anna Sorokin told Insider that Bankman-Fried's apology press tour is insincere garbage.

"He's just trying to save himself," she said.

Sorokin isn't the only one to balk at Bankman-Fried's explanation. Bankman-Fried's defense isn't acceptable for business leaders who should know the inner workings of their companies. However, it is an excuse that other villainized founders have tried and failed to use in the past, like Elizabeth Holmes, the founder and CEO of the now-defunct Theranos.

"Generally speaking, when you go into these types of cases, there's two types of defenses: 'I didn't know' and 'It wasn't me,'" Neama Rahmani, the president of the law firm West Coast Trial Lawyers and a former federal prosecutor, previously told The New York Times of Holmes' case.

Once valued at $32 billion, FTX filed for bankruptcy and Bankman-Fried stepped down as CEO in November. Meanwhile, multiple billions are owed to creditors, and the Department of Justice and Securities and Exchange Commission are investigating FTX.

Michael M. Santiago/Getty Images
'I didn't know' was his only defense

Sorkin started his interview by noting there are two views of what occurred at FTX. The first is that Bankman-Fried is a young founder who made a series of terrible decisions. The second is that he committed a Ponzi scheme that took advantage of the relationship between FTX and Alameda Research, a trading firm that Bankman-Fried cofounded in 2017. Bankman-Fried denied the latter allegations, saying, "I did not ever try to commit fraud on anyone."

"I haven't been running Alameda. I haven't been thinking about its finances," he said. "I haven't been making those decisions. But as CEO of FTX, it was still my duty to make sure someone was doing diligence."

Holmes took a similar approach, but to no avail

Elizabeth Holmes was sentenced to more than 11 years in federal prison.

Justin Sullivan / Getty Images

Holmes, who was found guilty on four counts of defrauding investors in January 2022, told the SEC "I don't know" more than 600 times during its questioning of her in 2019. In November, she was sentenced to more than 11 years in prison.

Holmes' efforts to blame others for Theranos' mistakes while highlighting her ignorance is a common tactic among fraud defendants, Rahmani told the Times. Holmes and her team "are going to do everything they can to distance themselves from that knowledge," he said.

While denial can be a plausible defense, jurors are often too savvy to accept the strategy. Jeffrey Cohen, an associate professor at Boston College Law School, previously told The Times that a better strategy is to appeal to jurors' humanity.

"What I would expect a defendant in a high-profile case to do is try to humanize themselves and make the jury see that they're not just a corporate CEO, but a person with the flaws that any person might have who's running a large corporation," Cohen said.

Sam Bankman-Fried's arrest denies Americans who lost life savings the chance to get answers about FTX's implosion, House committee chair says

George Glover
Tue, December 13, 2022

Sam Bankman-Fried's arrest in the Bahamas could stop Americans who lost their life savings the chance to hear from the disgraced FTX founder, California Rep. Maxine Waters said Monday.

Patsy Lynch/MediaPunch /IPX/AP

Sam Bankman-Fried, disgraced former CEO of FTX, was arrested in the Bahamas on Monday.

That means he won't be able to testify to a House Financial Services Committee, its chair Maxine Waters said.

"The American public deserves to hear directly from Mr. Bankman-Fried about the actions that've harmed over one million people," she said.

Sam Bankman-Fried's arrest in the Bahamas could deny millions of Americans a chance to hear from the disgraced FTX founder about what happened in the crypto exchange's collapse, the chairwoman of the House Financial Services Committee has said.

Bahamian authorities detained the former CEO of FTX on Monday, at the request of the US government. Allegations have built that Bankman-Fried and his associates illegally misused billions of dollars in FTX customer funds to prop up sister trading firm Alameda Research.

California Rep. Maxine Waters said that Bankman-Fried would be unable to testify Tuesday, when he was due to answer the House committee's questions about the collapse of FTX.

"We received confirmation this afternoon from Mr. Bankman-Fried and his lawyers that he was still planning to appear before the Committee tomorrow, but then he was arrested," she wrote in a statement released Monday evening.

"Although Mr. Bankman-Fried must be held accountable, the American public deserves to hear directly from Mr. Bankman-Fried about the actions that've harmed over one million people, and wiped out the hard-earned life savings of so many," Waters added.

"The public has been waiting eagerly to get these answers under oath before Congress, and the timing of this arrest denies the public this opportunity."

FTX filed for bankruptcy in November, after CoinDesk reported that Alameda held a significant amount of its portfolio in its native FTT token, triggering a solvency crisis.

Over 1 million FTX customers may have lost any money they had in the exchange after the group's collapse, according to NPR.

Department of Justice investigators are reportedly pursuing multiple lines of inquiry into FTX, with charges in an indictment filed by the US Attorney's Office for the Southern District of New York set to be unsealed Tuesday.

Prosecutors will have the legal tools to extradite Bankman-Fried to the US if they succeed in bringing criminal charges against him, experts told Insider.

New York Rep. Alexandria Ocasio-Cortez also expressed disappointment at the timing of Bankman-Fried's arrest.

"Bankman-Fried was set to testify before the House tomorrow," she said on Twitter Monday. "Tonight he was arrested."

"While I am disappointed we will not have the opportunity to present our line of questioning, we look forward to more information coming to light and justice being served in this case," Ocasio-Cortez added.

Read more: FTX's bankruptcy filings show the situation is much worse than anyone thought. From a million creditors to a stunning lack of oversight, here are the craziest details.

Sam Bankman-Fried denied he was part of a secret chat group called 'Wirefraud' alongside other top FTX executives

Sawdah Bhaimiya
Wed, December 14, 2022

Sam Bankman-Fried \

Jabin Botsford/Getty Images

Sam Bankman-Fried denied he was in a secret chat group called "Wirefraud" in a tweet on Monday.


Bankman-Fried and his inner circle shared secret information in the chat, the Australian Financial Review reported.


The former FTX CEO was arrested and charged with eight counts of fraud and conspiracy this week.

Sam Bankman-Fried, founder and former CEO of now-defunct crypto-lending firm FTX, denied that he was in a secret chat group called "Wirefraud," hours before his arrest in the Bahamas on Monday.

Bankman-Fried responded to a tweet accusing him of being in the chat group saying: "If this is true then I wasn't a member of that inner circle. (I'm quite sure it's just false; I have never heard of such a group.)"

The apparent chat group, based on encrypted messaging platform Signal, included members of FTX's inner circle, the Australian Financial Review reported first.

Alongside Bankman-Fried, FTX's co-founder Gary Wang, engineer Nishad Singh, and former CEO of Alameda Research Caroline Ellison were in the group to share information that they hoped would remain hidden, according to AFR.

Although the chat group was set up to keep communications hidden, the contents of it will become public throughout legal proceedings, AFR reported.

FTX did not immediately respond to Insider's request for comment about the chat group, made outside of normal working hours.

Hours after Bankman-Fried denied involvement in the chat group, he was arrested by Bahamian authorities.

On Tuesday, it was announced that he had been charged with eight counts of fraud and conspiracy.

The Securities and Exchange Commission accused Bankman-Fried on Tuesday of "orchestrating a massive, years-long fraud."

FTX and 130 other affiliated companies including trading firm Alameda Research, all called FTX Group, filed for Chapter 11 bankruptcy in November with Bankman-Fried stepping down as CEO on the same day. The collapse of FTX exposed that Bankman-Fried was transferring billions of dollars of customer funds to prop up Alameda Research.

Shortly after the collapse, Bankman-Fried embarked on a media apology tour and interviewed with the New York Times at its DealBook Summit where he told reporter Andrew Sorkin that he "didn't knowingly commingle funds," and "didn't ever try to commit fraud."

He has now been denied bail by a judge because he poses a flight risk and is headed to a harsh Bahamian prison, while he awaits extradition to the US.

Sam Bankman-Fried Has Been Charged And Accused Of “A Massive, Years-Long Fraud"

Tom WarrenTue, December 13, 2022 

Miami Herald / TNS

Sam Bankman-Fried, the founder and former CEO of collapsed crypto exchange FTX, has been charged with fraud by US authorities. The 30-year-old, who is also known as SBF, was arrested in the Bahamas on Monday.

Today, an unsealed grand jury indictment from the US Department of Justice detailed criminal charges against Bankman-Fried. He is charged with eight counts of defrauding his customers, money laundering, and violating campaign finance laws.The indictment says that Bankman-Fried and his associates “knowingly” devised a scheme to defraud customers by misappropriating funds to “pay expenses and debts of Alameda Research,” Bankman-Fried’s private crypto fund.

Bankman-Fried was a major political donor who promised to contribute $1 billion in the 2022 US midterm elections — a commitment that he reneged on. However, the DOJ said that he violated campaign finance laws and intentionally misled the Federal Election Commission by funneling donations through other people.

In addition, the Securities and Exchange Commission this morning filed a civil complaint against Bankman-Fried, which accused him of orchestrating “a massive, years-long fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire.”

The SEC complaint asks that Bankman-Fried pay reparations to FTX’s clients and additional fines for defrauding customers. The SEC also is seeking to bar the entrepreneur from acting as a director or officer of any company in the future.

The SEC said that Bankman-Fried diverted funds to Alameda, his privately held investment fund, while assuring clients that their money was safe and that “Alameda is a wholly separate entity from FTX.” The SEC said that he “knew or recklessly disregarded that these statements were false and misleading.”

The SEC said that once client funds were in Alameda, Bankman-Fried would lend them to himself and his executive team. These loans were “poorly documented, and sometimes not documented at all,” but, according to the SEC, between March 2020 and September 2022, he lent himself more than $1.3 billion, which he spent on large political donations and luxury property in the Bahamas.

And even when his scheme started to spiral out of control, the SEC said, Bankman-Fried “continued to mislead investors and the public.” In early November, following public allegations that FTX would run out of money, the FTX founder said, in later deleted tweets, “FTX is fine. Assets are fine” and “FTX has enough to cover all client holdings.” The SEC said that Bankman-Fried knew at the time that FTX risked bankruptcy.

The company ultimately went into bankruptcy on Nov. 11, and Bankman-Fried stepped down as CEO of FTX. His wealth fell from an estimated $16 billion to virtually nothing.

After his departure, Bankman-Fried continued to tweet about FTX and do interviews in which he apologized for the collapse of the firm while denying it was a fraud. He was supposed to appear before Congress today to testify before the House Financial Services Committee.

“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,” SEC Chair Gary Gensler said in a statement. He warned that “the alleged fraud committed by Mr. Bankman-Fried is a clarion call to crypto platforms that they need to come into compliance with our laws.”

Dec. 13, 2022, 

One Of The World’s Largest Cryptocurrency Exchanges Imploded And Here's What You Need To Know

Tom Warren · Nov. 14, 2022



Sam Bankman-Fried Has Been Arrested In The Bahamas

Paige Skinner · Dec. 13, 2022

5 things FTX did with its money — including customer assets — according to its new CEO

David Hollerith

·Senior Reporter

Mon, December 12, 2022 

Ahead of Tuesday's U.S. House Financial Services Committee hearing on FTX, John Jay Ray III, FTX's new CEO since bankruptcy, filed written testimony which outlines several "unacceptable management practices," the new CEO uncovered at the bankrupt crypto exchange.

Ray said in prepared remarks FTX's demise was due to "the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals."

Additionally, Ray, who led the liquidation of Enron, has uncovered at least five different things the company did with some of the billions it raised from investors and the billions more in client assets held on its exchanges.

Which, given the $8 billion asset hole found at the center of FTX in bankruptcy, is no doubt of interest to customers and counterparties looking to be made whole.

1. Customer assets from FTX.com were commingled with assets from the Alameda trading platform.

"I didn't knowingly commingle funds," disgraced former CEO Sam Bankman-Fried told Andrew Ross Sorkin in an interview two weeks ago, suggesting the platform's margin trading system was the source of the problem.

"You have the margin trading. You have, you know, customers borrowing from each other. Alameda is one of those. I was frankly surprised by how big Alameda's position was, which points to another failure of oversight on my part," he went on to say in the interview.

NEW YORK, NEW YORK - NOVEMBER 30: Andrew Ross Sorkin and Sam Bankman-Fried on stage at the 2022 New York Times DealBook on November 30, 2022 in New York City. (Photo by Thos Robinson/Getty Images for The New York Times)

2. Alameda used client funds to engage in margin trading which exposed customer funds to massive losses.

In a since deleted tweet from November 8, Bankman-Fried said customer assets were backed 1:1.

When asked during a Twitter Spaces on Monday whether this statement was true, Bankman-Fried replied, "Yes, but... the problem is that that includes negative balances for some customers... net customer assets were equal to net assets on the platform... gross customer assets were not."

3. The FTX Group went on a spending binge in late 2021 through 2022, during which approximately $5 billion was spent buying a myriad of businesses and investments, many of which may be worth only a fraction of what was paid for them.

The list of investments by sibling trading firm Alameda Research alone is $5.2 billion spread across approximately 474 companies. Originally supported by both FTX's name and influence, these startups will not likely fetch the price FTX paid despite what independent success they might have, according to Ray's assessment.

4. Loans and other payments were made to insiders in excess of $1 billion.

In Ray's original declaration (Doc 24) for FTX Group's bankruptcy proceedings, he previously highlighted how Alameda lent $2.3 billion to affiliated companies such as Paper Bird Inc., one billion to Bankman-Fried, another $543 million to Former FTX Director of Engineering Nishad Singh, and $55 million to former FTX Digital Markets CEO Ryan Salame.

5. Alameda’s business model as a market maker required deploying funds to various third party exchanges which were inherently unsafe, and further exacerbated by the limited protections offered in certain foreign jurisdictions.

The market for total crypto assets has fallen by 62% from $1.4 trillion to $843 billion since the beginning of January. As cryptocurrency prices have plunged through the year, Alameda can be expected to have taken heavy losses.

In June, it lent $200 million loan to crypto lender Voyager before its U.S. subsidiary lent another $275 million to BlockFi. Both companies have filed for bankruptcy protection.

"My ability to comment on certain matters ... will be materially limited by the state of the FTX Group’s books and records, ongoing bankruptcy proceedings, and the numerous, ongoing investigations by U.S. law enforcement and regulators," Ray added.

David Hollerith is a senior reporter at Yahoo Finance covering the cryptocurrency and stock markets. Follow him on Twitter at @DsHollers

Sam Bankman-Fried attended a top Silicon Valley prep school where his senior class prank reportedly included making $100 bills with his face on them called 'Bankmans'

Morgan Chittum
Wed, December 14, 2022 

Sam Bankman-Fried is escorted out of the Magistrate Court building after his arrest, in Nassau, the Bahamas, on December 13.Dante Carrer/Reuters

SBF attended a top prep school where his senior class's prank included making $100 bills with his face on them.

The former Jane Street trader was known for being one of the school's top math students.

A new report details the disgraced founder's childhood, family ties, and more.

Long before FTX founder Sam Bankman-Fried was accused of facilitating a massive crypto fraud and in the crosshairs of regulators, he was a nerdy kid from a well-to-do family in Northern California, raised in the upper echelons of academia.

Bankman-Fried attended a top Silicon Valley prep school where his senior class's prank included making $100 bills with his face on them called "Bankmans," Puck reported.

Raised by two former Stanford Law professors, Joseph Bankman and Barbara Fried, the dethroned crypto exec attended Crystal Spring Uplands, the Hillsborough prep school.

The middle school and high school have a $56,620 annual tuition, according to its website, with alumni including Patty Hearst, the American publishing heiress, along with chess grandmaster Daniel Naroditsky, per the school's student-run newspaper The Gryphon Gazette.

Bankman-Fried and his younger brother Gabe "grew up immersed in a rotating circus of Stanford faculty members," according to Puck's report. Gabe was known as the more "socially adept" of the two.

The former crypto billionaire's mother wrote in her recent book: "When Sam was about fourteen, he emerged from his bedroom one evening and said to me, seemingly out of the blue, "What kind of person dismisses an argument they disagree with by labeling it 'the Repugnant Conclusion'?" Clearly, things were not as I, in my impoverished imagination, had assumed them to be in our household."

Elsewhere, one of Joseph Bankman's more notable law students was Paypal cofounder and billionaire Peter Thiel, who described Bankman's tax law course as "his most valuable because he was able to put a lot of his Facebook stock in an IRA," Bankman later recalled. Thiel later turned his Roth IRA, a retirement account typically for the middle class, into a gargantuan $5 billion tax-exempt piggy bank, ProPublica reported.

Bankman-Fried was known for being one of the top math students at Crystal Spring Uplands, and the leader of the "Puzzle Hunt Club," which the outlet described as "a particularly nerdy group at an already nerdy high school."

More than a decade after his high school graduation, Bankman-Fried, a MIT grad and former Jane Street trader, has been arrested following the collapse of FTX, which he has chalked up to accounting errors rather than any sort of fraud or misuse of funds.

US prosecutors are accusing Bankman-Fried of orchestrating a years-long scheme to defraud investors. FTX secured $1.1 billion from around 90 US-based investors, according to a US Securities and Exchange Commission complaint, which alleges he raised $1.8 billion total.

"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," SEC Chair Gary Gensler said in a statement on Tuesday.

Meet Sam Bankman-Fried's family: His parents are Stanford Law professors, his aunt is a dean at Columbia, and his brother is the founder of a nonprofit


Huileng Tan
Wed, December 14, 2022 

The FTX cofounder Sam Bankman-Fried was arrested in the Bahamas Monday.

Alex Wong / Getty Images

Sam Bankman-Fried was arrested in the Bahamas Monday. The US SEC has charged him with fraud.

Bankman-Fried's law-professor parents were spotted Tuesday at their son's hearing in the Bahamas.

As his troubles unravel, his high-profile family is under the spotlight.

Sam Bankman-Fried was raised in an academic family in Silicon Valley. He grew up playing games like chess and bridge.

Bankman-Fried cofounded FTX in 2019 and was its CEO.FTX

The FTX founder Sam Bankman-Fried was arrested in the Bahamas Monday, in a spectacular fall from grace after his crypto exchange collapsed last month.

Bankman-Fried — whose wealth peaked at an estimated $26 billion in March, according to the Bloomberg Billionaires Index — has been charged with fraud by the US Securities and Exchange Commission. A judge in the Bahamas denied him bail Tuesday.

As his troubles unravel, Bankman-Fried's high-profile family has been in the spotlight. His parents were spotted Tuesday at their son's hearing in the Bahamas and have been living with him on the island nation for over a month.

In November, Reuters reported a $16.4 million house in the Bahamas listed Bankman-Fried's parents, Joseph Bankman and Barbara Fried, as signatories. The house is in a gated community with beach access and was described in property records as a vacation home.

Last month, Bankman-Fried told Andrew Ross Sorkin at the New York Times DealBook Summit that he called his parents when FTX was collapsing. He added that his parents "bore no responsibility" for FTX's downfall.

"Anyone close to me, including my parents and employees and coworkers, who fought with the company to push forward, they were hurt by this," Bankman-Fried said. "They bore no responsibility for that. I feel really bad about that. I feel really grateful for the support my parents are still giving me throughout all of this."

We rounded up some of the prominent members of Bankman-Fried's family. Bankman and Fried did not immediately respond to a request for comment sent to a spokesperson outside regular business hours. His brother, Gabriel Bankman-Fried, and aunt Linda Fried also did not immediately respond to requests for comment sent outside regular business hours.

His father, Joseph Bankman, is a Stanford Law professor who's also a clinical psychologist.

Joseph Bankman has postponed his class that was set to start in January amid the FTX fallout.

Stanford University

Bankman, a law professor at Stanford University, is Bankman-Fried's father.

Described in his official biography as a "leading scholar in the field of tax law," Bankman teaches mental-health law and is a scholar who writes about law and psychology.

Bankman was also a paid FTX employee for nearly a year before the exchange collapsed, a spokesperson for Bankman and Fried told The Wall Street Journal Monday. He was mostly working on charity projects at FTX, the spokesperson told the media outlet.

Bankman had a law class that was scheduled to start in January, but that has been pushed back until the spring as he remains in the Bahamas with his son, according to The Journal.

The lawyer earned a Juris Doctor from Yale Law School in 1980, according to his biography on Stanford's website.

His mother, Barbara Fried, is a professor emerita of law at Stanford.

Barbara Fried cofounded Mind the Gap, a super PAC.

Stanford University

Bankman-Fried's mother is also a law professor at Stanford University.

Her scholarly interests are "at the intersection of law, economics, and philosophy," according to her biography on the university's website.

Fried cofounded Mind the Gap, a super political action committee that uses statistical analysis to determine the dollar-value influence of donations on Democrats running for the House of Representatives. She resigned from Mind the Gap in November, The New York Times reported. The Times did not specify why she resigned.

Fried retired from teaching in September and didn't have plans to teach this year, a spokesperson told The Journal.

She graduated from Harvard with a Juris Doctor in 1983, according to her biography on the Stanford site.

His younger brother, Gabriel Bankman-Fried, founded and ran a nonprofit called Guarding Against Pandemics — which was in part funded by his sibling.

Gabriel Bankman-Fried stepped down as the director of Guarding Against Pandemics in mid-November.

FP Global Health Forum

Gabriel Bankman-Fried is Sam Bankman-Fried's younger brother.

In 2020, Gabriel Bankman-Fried founded and ran the nonprofit Guarding Against Pandemics, which aims to prevent another pandemic. The nonprofit was partly funded by Sam Bankman-Fried, Puck reported.

The two brothers have spent at least $70 million since October 2021 on research projects, campaign donations, and initiatives that hope to boost biosecurity and pandemic prevention, The Washington Post reported.

Gabriel Bankman-Fried stepped down as the director of the nonprofit in mid-November, The Post said.

His aunt Linda Fried is the dean of the public-health school at Columbia University.

Linda Fried is a public-health expert.

Columbia University

Fried, the dean of Columbia University's public-health school, is Sam Bankman-Fried's aunt, according to The Washington Post.

Described on the school's website as a "leader in the fields of epidemiology and geriatric medicine," Fried was trained in cardiovascular and chronic disease, epidemiology, and geriatrics.

Fried graduated from Rush Medical College in 1979 with a doctor of medicine and got a master's in public health from the Johns Hopkins Bloomberg School of Public Health in 1984, her biography on the Columbia website says.

CRIMINAL CRYPTO CAPITALI$M
Bipartisan bill targets crypto money laundering in wake of FTX collapse



Igor Bonifacic
·Weekend Editor
Wed, December 14, 2022

US Senators Elizabeth Warren and Roger Marshall have introduced a bipartisan bill designed to crack down on illegal uses of cryptocurrency. If passed, The Digital Asset Anti-Money Laundering Act would extend aspects of the Bank Secrecy Act (BSA), a Nixon-era law Congress passed to combat money laundering, to cover crypto entities such as wallet providers and miners. Specifically, the new legislation would apply so-called “Know-Your-Customer” rules to those entities by directing the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to treat them as money service businesses. Another BSA expansion would require US citizens to file a report with the Internal Revenue Service whenever they engage in transactions that involve more than $10,000 in digital assets.

Additionally, the legislation would direct FinCEN to implement a rule the agency proposed at the end of 2020 that would require financial institutions to report transactions involving “unhosted” digital wallets. Per CoinDesk, those are wallets where the user has complete control over the contents — rather than an exchange or other third party. The legislation would also prohibit financial institutions from using or transacting with digital asset mixers, which are frequently used to obscure the origin of funds.

“Rogue nations, oligarchs, drug lords, and human traffickers are using digital assets to launder billions in stolen funds, evade sanctions, and finance terrorism,” said Senator Warren. “The crypto industry should follow common-sense rules like banks, brokers, and Western Union, and this legislation would ensure the same standards apply across similar financial transactions. The bipartisan bill will help close crypto money laundering loopholes and strengthen enforcement to better safeguard US national security.”

The push from Senators Warren and Marshall to crack down on crypto money laundering comes a day after the Department of Justice, Securities and Exchange Commission and Commodity Futures Trading Commission announced civil and criminal charges against FTX founder and former CEO Sam Bankman-Fried. Due to time constraints, the likelihood of the bill passing in the current lame-duck session is low. Warren and Marshall will almost certainly need to reintroduce it next year.

Warren pushes bipartisan bill to regulate crypto firms after FTX collapse

Ed Pilkington
Wed, December 14, 2022 

Photograph: Elizabeth Frantz/Reuters

Elizabeth Warren is pressing Congress to adopt new bipartisan legislation which would force crypto firms to abide by the same regulations as banks and corporations in an attempt to crack down on money laundering through digital assets.

The Democratic US senator from Massachusetts is pushing for the new controls on the crypto industry in the wake of the spectacular collapse of the cryptocurrency exchange FTX. On Tuesday its founder and former CEO Sam Bankman-Fried was charged with eight criminal counts including conspiracy to commit money laundering.

Related: Five things we know about the collapse of FTX and Sam Bankman-Fried

Warren’s bill is being co-sponsored by the Republican senator from Kansas Roger Marshall. The Digital Asset Anti-Money Laundering Act would essentially subject the world of crypto to the same global financial regulations to which more conventional money markets must conform.

Under current systems, crypto exchanges are able to skirt around restrictions designed to stop money laundering and impose sanctions. Should the bill be enacted into law it would authorize the Financial Crimes Enforcement Network (FinCen) to reclassify crypto entities as “money service businesses” which would bring them under basic regulations laid out in the Bank Secrecy Act.

In a statement to CNN, Warren said that the “commonsense crypto legislation” would protect US national security. “I’ve been ringing the alarm bell in the Senate on the dangers of these digital asset loopholes,” she said, adding that crypto was “under serious scrutiny across the political spectrum”.

Bankman-Fried, 30, was indicted by prosecutors at the southern district of New York and is being held in custody in the Bahamas. The US Securities and Exchange commission (SEC) has also brought civil charges against him, accusing him of creating a firm that was a “house of cards”.

An ongoing area of interest to investigators was the vast political contributions made by Bankman-Fried to the Democratic party, as well as to Republicans in the form, he has said, of secretive dark money donations. The Wall Street Journal has calculated that he gave more than $95,000 in direct campaign donations to the same members of the US House financial services committee who are now investigating him.

Even before the implosion of FTX, the treasury department was focusing on the feared risks to national security posed by relatively unregulated digital currency exchanges. In August it moved against Tornado Cash, a virtual currency mixer which it accused of laundering more than $7bn in virtual currency since 2019.

The Treasury said that Tornado Cash was attractive to launderers of the proceeds of cybercrime, including the Lazarus Group, a hacking group sponsored by North Korea. The entity’s appeal to cybercriminals was that it could move digital assets around anonymously, obscuring the origin and destination of transactions and hiding the parties involved.

Warren is a former Harvard law professor and expert on consumer protection and economic inequality. She entered the Senate in 2013, where she established herself as a leading progressive critic of corporate largesse and a spirited opponent of Donald Trump.

She made an unsuccessful bid for the White House in 2020.

Senate crypto hearing yields big claims, possible regulation

Investor and star of "Shark Tank" Kevin O'Leary, testifies before the Senate Banking Committee about cryptocurrency and the collapse of FTX, at the Capitol in Washington, Wednesday, Dec. 14, 2022. (AP Photo/J. Scott Applewhite)


GLENN GAMBOA
Wed, December 14, 2022

Whether increased regulation would have prevented the spectacular collapse of cryptocurrency exchange FTX was fiercely debated at a hearing of the Senate’s banking committee Wednesday. However, new legislation is potentially on the way.

Sen. Elizabeth Warren announced at the hearing bipartisan legislation aimed at cracking down on cryptocurrencies being used in money laundering. The legislation, co-sponsored by Republican Sen. Roger Marshall of Kansas, would require cryptocurrency exchanges to verify customer identities like banks and other financial institutions do.

“Crypto has become the preferred tool for terrorists, for ransomware gangs, for drug dealers and for rogue states that want to launder money,” said Warren, the Massachusetts Democrat, adding that “crypto doesn’t get a pass to help the world’s worst criminals – no matter how many television ads they run or how many political contributions they make.”

Republican Sen. Cynthia Lummis, of Wyoming, said she and Democratic Sen. Kirsten Gillibrand, of New York, would reintroduce their bipartisan legislation, the Responsible Financial Innovation Act, next year. That act would require disclosures and consumer protection obligations from cryptocurrency issuers.

Lummis, like several other Republicans on the banking committee, said the alleged financial crimes of former FTX CEO Sam Bankman-Fried should not be used to target cryptocurrency more generally.

“Let’s separate digital assets from corrupt organizations,” she said. “FTX is good old-fashioned fraud.”

However, Democratic Sen. Sherrod Brown, chairman of the Senate Committee on Banking, Housing and Urban Affairs, asked the hearing’s four witnesses – two crypto proponents and two critics – whether fraud was systemic at other firms in the industry. They all indicated that it was – one of the few points of agreement in the entire hearing.

Hilary J. Allen, professor of law at the American University Washington College of Law, testified that the current environment cryptocurrency operates in is highly conducive to fraud.

“Sam Bankman-Fried may have engaged in good old-fashioned embezzlement,” she said, “but the embezzlement was able to reach such a scale and go undetected for so long because it was crypto – shrouded in opacity, complexity, and mystique.”

Entrepreneur Kevin O’Leary, best known as Mr. Wonderful on the TV show “Shark Tank,” disagreed with the characterization, even though the $15 million he earned as a paid spokesman for FTX is now essentially worthless.

“I am of the opinion that crypto, blockchain technology and digital payment systems will be the 12th sector of the S&P within a decade,” he said, referring to the S&P 500, a well-known benchmark for stocks.

O’Leary also testified that Bankman-Fried told him that the collapse of FTX was due to its battle with crypto competitor Binance, which also held a stake in FTX.

“These two behemoths that owned the unregulated market together… were at war with each other,” O’Leary said. “And one put the other out of business.”

Federal prosecutors say Bankman-Fried defrauded FTX customers and investors starting in 2019 and illegally diverted their money to cover expenses, debts and risky trades at the crypto hedge fund he started in 2017, Alameda Research. Bankman-Fried, 30, was arrested Monday in the Bahamas at the request of the U.S. government, and remains in custody after being denied bail.

Pennsylvania Republican Sen. Pat Toomey, the ranking member of the banking committee, said FTX’s actions do not reflect the business of cryptocurrency as a whole.

“There’s nothing intrinsically good or evil about software – it’s about what people do with it,” he said. “Code committed no crime.”

However, actor and author Ben McKenzie Schenkkan, best known for his role as Jim Gordon on “Gotham,” said his research shows cryptocurrency is built on “misinformation, hype and fraud” and that the estimated 40 million Americans who have invested in it were lied to.

“In my opinion, the cryptocurrency industry represents the largest Ponzi scheme in history,” he said. “The fact that it has roped in tens of millions of Americans from all walks of life, as well as hundreds of millions of people worldwide, should be of concern to us all.”

 

Democratic Sen. Sherrod Brown, Republican Sen. Pat Toomey

 

   

Kevin O’Leary Says Binance ‘Intentionally’ Killed FTX 😳 #crypto

 

FTX Spokesman, Shark Tank Co-Host Kevin O’Leary Blames Competitor for Firm’s Collapse in Senate Hearing

Brittany Bernstein
Wed, December 14, 2022 


Kevin O’Leary, an investor and judge on Shark Tank who was paid $15 million to act as a spokesman for FTX, testified before the Senate Banking Committee on Wednesday about the crypto exchange’s collapse.

O’Leary has said as an investor he lost all of the money he was paid to act as a spokesman for the exchange, which fell apart in November, costing investors millions in losses.

FTX founder Sam Bankman-Fried was recently arrested on charges that he misled investors and mishandled billions in funds. He has been accused of misusing customer funds deposited with FTX to boost his crypto hedge fund, Alameda Research.

O’Leary was among a group of celebrities, including Tom Brady and Larry David, who were sued by FTX investors for their promotion of the firm. He said he put roughly $9.7 million into crypto from the $15 million deal. The rest went to taxes and agent fees, he said.

Senator Pat Toomey (R., Pa.) asked O’Leary on Wednesday why he believes FTX failed.

O’Leary recounted reaching out to Bankman-Fried after the investor discovered his accounts were stripped of all of their assets and accounting and trade information.

“I couldn’t get answers from any of the executives in the firm so I simply called Sam Bankman-Fried and said, ‘Where is the money, Sam?'” O’Leary testified.

He said he then discovered that Bankman-Fried had spent between $2 billion and $3 billion to repurchase shares from Binance CEO Changpeng Zhao, who held 20 percent ownership in Bankman-Fried’s firm.

O’Leary said he asked Bankman-Fried what would compel him to do that. The founder replied that Zhao would not comply with regulators’ requests for data that would allow the firm to get licensed. The founder allegedly told O’Leary “the only option” FTX had was to buy Zhao out at an “extraordinary valuation” of close to $32 billion.

“That stripped the balance sheet of assets,” O’Leary said. “You ask me why it went bankrupt. Go to the last week. All of a sudden in social media, CZ is asking for another $500 million. He wants to do a block trade of FTT, or the proprietary token of FTX. He wants to convert it back to fiat. Why would you put that out there? You know it’s going to push down the value of that coin dramatically. That’s exactly what happened.”

O’Leary said the two “behemoths that own the unregulated market together” were at “war with each other and one put the other out of business intentionally.”

“Now, maybe there’s nothing wrong with that,” he said. “Maybe there’s nothing wrong with love and war. But Binance is a massive unregulated global monopoly now. They put FTX out of business.”

Binance was founded in China but quickly moved out of the country when the government announced it would impose regulations on cryptocurrency trading.

Despite the company’s founding in Shanghai, Zhao has said it “couldn’t be further from the truth” that Binance is run by the Chinese Communist Party or is a “Chinese spy.” Zhao was born in China but is a naturalized Canadian citizen.

Zhao argued in a blog post that it would be impossible for Binance to be a Chinese company today as Binance and other crypto exchanges “have been designated a criminal entity in China.”

VIDEO

Where is the money?: US senators grill FTX spokesperson Kevin O'Leary on collapse

 

Kevin O'Leary, paid to promote FTX, testifies about crypto collapse

   

CNBC O'Shares' Kevin O'Leary weighs in on FTX

  

Watch Elizabeth Warren Debate Crypto Investor Kevin O'Leary (FTX Congressional Hearing)