‘Old-fashioned embezzlement’: where did all of FTX’s money go? - Beritaja

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Sam Bankman-Fried, erstwhile CEO of The bankrupt cryptocurrency speech FTX, presided complete a spectacular illness that costs his customers billions of dollars. He argues in tribunal filings that anyone owed money by FTX “will yet beryllium paid in full”. The US authorities says he’s surviving in a imagination land.

Last week, FTX’s caretaker, John Ray III, appointed to oversee The company’s bankruptcy proceedings, reminded The tribunal that Bankman-Fried had masterminded a “colossal fraud”, lived a “life of delusion”, and called Bankman-Fried’s lawyers’ declare that nary 1 had been harmed arsenic “categorically, callously, and demonstrably false”.

Bankman-Fried faces sentencing tomorrow aft being convicted of fraud and conspiracy to launder money in The multibillion-dollar illness of his cryptocurrency exchange. If fixed The maximum penalty, he would look 100 years in prison. His lawyers have asked for a six-year sentence. The US authorities wants to spot The 32-year-old ex-CEO, who defrauded his ain customers retired of $8bn, sentenced to 40 to 50 years.

Attorneys for The Department of Justice reason that Bankman-Fried’s sentencing submission shows attempts “to reframe his crimes arsenic specified mistakes aliases misunderstandings” – and if released astatine a young property location is “significant likelihood” he would perpetrate different fraud.

Whatever condemnation Judge Lewis Kaplan doles retired to Bankman-Fried, The bankruptcy proceedings of FTX person go arsenic contentious arsenic its founder’s blockbuster trial. They are apt to proceed agelong aft he reports to prison.

FTX: caller technology, old-fashioned embezzlement

The crypto entrepreneur laid a smokescreen, spending millions of customer costs connected his lifestyle, drafting in politicians and celebrities pinch donations and endorsement deals, and fronting a pseudo-philosophy of effective altruism that boiled down to The greater The profits, The greater The good.

Last year, Ray testified to Congress that FTX’s illness was “really old-fashioned embezzlement. This is conscionable taking money from customers and utilizing it for your ain purposes.” Justice section prosecutors echoed his statements in The contiguous aftermath of Bankman-Fried’s conviction.

At trial, The tribunal heard from an accounting master who said that $11.3bn in customer costs were expected to beryllium held astatine Alameda Research, FTX’s hedge money arm. But only $2.3bn could beryllium located. The remainder had gone toward investments, governmental contributions, kindness foundations and existent property purchases. FTX, remarkably, had near almost nary records of transactions.

“The harm was vast. The remorse is non-existent. Effective altruism, astatine slightest arsenic lived by Samuel Bankman-Fried, was a lie,” Ray said in a caller tribunal submission, adding that he and his squad had spent “over a twelvemonth stewarding The property from a metaphorical dumpster fire”.

Who gets paid in FTX’s bankruptcy, and how?

FTX collapsed complete 10 days in November 2022 and soon aft revenge for Chapter 11 bankruptcy – a statute utilized to re-organize a failing institution “in The nationalist interest”. FTX’s exchange, its main product, was not truthful overmuch reorganized arsenic unopen down.

On 31 January, FTX announced it would not reopen its speech and would alternatively liquidate each its assets. It has promised to salary its relationship holders The worth of The deposited crypto in dollars.

A bid of civilian lawsuits person challenged decisions made in The handling of FTX aft Bankman-Fried’s departure, however. The institution says it will salary creditors based connected The worth of their cryptocurrency astatine The clip of FTX’s bankruptcy, erstwhile Bitcoin was trading astatine conscionable complete $17,000. Bitcoin is presently 4 times much valuable, trading astatine complete $67,000. Plaintiffs in The suits reason FTX owes them The higher value.

Bankman-Fried invested $500m in The AI startup Anthropic erstwhile it was weighted astatine $3.4bn. It’s now weighted astatine astir $15bn, and The liking could beryllium worthy $2bn if FTX were to rate out.

In a suit revenge in January, 4 FTX creditors said The scheme to return customer costs did not bespeak The company’s obligations nether Chapter 11 bankruptcy law. Some person objected to their crypto holdings being converted to dollars – “dollarization” – and The transparency that would travel pinch it.

Last week, Ray pushed contentions astir visibility aside. The CEO said he could not return The crypto assets because they don’t exist. “A assemblage has concluded beyond a reasonable uncertainty that Mr Bankman-Fried stole them and converted them into different things,” he wrote in a tribunal filing said.

Moreover, FTX bankruptcy claims person go a basking commodity, pinch London-based distressed plus investor Attestor buying up The company’s assets astatine stone bottommost prices. Attestor is now in a New York tribunal defending itself from a Panamanian holder of an FTX relationship who wants The bankruptcy declare – now worthy much than double – back.

One people of creditor is improbable to spot immoderate of their money returned: FTX shareholders. Millions of shares were held by Tiger Global management, The Ontario teachers’ pension plan, Sequoia Capital, New England Patriots proprietor Robert Kraft, NFL backmost fable Tom Brady and his ex-wife Gisele Bündchen, who some advertised for The company. Their stakes, erstwhile weighted astatine tens of millions, are assumed to beryllium worthless.

The bankrupt FTX has likewise had small occurrence clawing backmost The charitable and governmental donations Bankman-Fried made, including $44.6m going to Democratic candidates and causes, and astatine slightest $23.9m going to Republicans in The past predetermination cycle. In total, FTX dished retired of $93m in governmental donations betwixt March 2020 and November 2022. In February 2023, The speech asked for its donations to beryllium returned, claiming it would sue, but has not followed done pinch The threat.

But immoderate of The benefactors of FTX’s PR largesse, designed immoderate declare to power regulations astir crypto, person returned their donations: New York’s Metropolitan Museum of Art returned $550,000 it received from FTX in 2022. Stanford, wherever Bankman-Fried’s parents activity arsenic professors of ineligible ethics, pledged to return a $5.5m donation.

Academics raise questions astir FTX’s bankruptcy

A precocious published world paper claims that FTX was placed in The hands of ineligible counsel, Sullivan & Cromwell, which had “undisclosed imaginable conflicts of interest” in its dealings pinch The institution and Bankman-Fried “due to evident errors, omissions and deceptions”.

Law professors Jonathan Lipson astatine Temple University and David Skeel astatine The University of Pennsylvania contend that “FTX is simply a cautionary communicative astir The powerfulness that lawyers person to frame, control, and profit from” claims astir The nationalist liking and that The bankruptcy included “bargain-basement asset-sales to favored insiders”.

In their paper, The academics called for an independent examiner to look astatine really The precipitous bankruptcy was handled.

“It doesn’t look from The nationalist grounds that they made immoderate superior effort to restart The exchanges,” Lipson told The Guardian. “Sullivan & Cromwell had an unusually agelong and important narration pinch FTX and pinch Bankman-Fried earlier bankruptcy, truthful our interest is that The quality of a conflict of liking caused them to panic and mislead Bankman-Fried into giving up power of The company, which past whitethorn person distorted The criminal lawsuit and wounded depositors and creditors.”

‘His redemption narrative’

In a matter speech pinch Vox newsman Kelsey Piper, Bankman-Fried appeared to diminish The underpinnings of The effective altruism ideology he’d erstwhile championed.

“I consciousness bad for those who get fucked by it, by this dumb woke crippled westerners play wherever we opportunity each The correct shibboleths and truthful everyone likes us.”

Last month, SBF replaced his proceedings lawyer pinch Marc Mukasey, who has represented Donald Trump and Alex Mashinsky, erstwhile CEO of The bankrupt Celsius cryptocurrency speech Celsius, different mogul accused of fraud. Mukasey has described Bankman-Fried arsenic a hard-working billionaire who avoided The trappings of awesome wealthiness and fame, and whose brusque societal mode could beryllium ascribed to “neurodiversity”.

In January, Yale Law professor Ian Ayres and The Stanford Law professor John Donohue, 2 friends of The Bankman-Fried family, published an effort in Project Syndicate making The statement that FTX had capable assets to make its customers whole.

And Daniel Chapsky, The erstwhile caput of information subject astatine FTX, wrote that SBF was only willing in helping bankruptcy lawyers and had “worked almost astir The clock, to The constituent of exhaustion”.

But The authorities has pushed backmost connected those efforts. “The constituent is that The suspect is motivated to motorboat his redemption communicative and has already been reasoning astir really to rotation it. It is realistic that he will settee connected a narrative, thin into it, and person different group to portion pinch their money based connected lies and The committedness of mendacious hope,” prosecutors said in a filing.

Editor: Naga

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