Tag Archives: Fraud

CME Group CEO called Bankman-Fried ‘an absolute fraud’

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“When you have the greatest quarterback of all time and a supermodel wife doing a commercial picking up the phone saying ‘Are you in, are you in, are you in.’ To me, it looks like a pump-and-dump scheme. People get very influenced by people like Tom [Brady].” ~ Terry Duffy, CME Group Chairman and CEO

FTX’s sudden and catastrophic collapse sent reverberations throughout the entire cryptocurrency industry. What was once the third-largest cryptocurrency exchange has filed for bankruptcy and has billions of dollars left in limbo.

FTX is a cryptocurrency exchange headquartered in the Bahamas. The exchange allowed users buy, sell, hold, and trade cryptocurrency (although those functions are currently unavailable due to the firm’s collapse as a result of FTX founder and CEO Sam Bankman-Fried’s fraud and misappropriation of its customers’ accounts), writes The Verge.

CME Group Chairman and CEO Terry Duffy suspected the fraud at the cryptocurrency exchange the day of his first one-on-one meeting with Bankman-Fried, stated during an interview with Melissa Lee on CNBC Fast Money.

Duffy recounted his March 2022 meeting with Bankman-Fried on the “On the Tape” podcast, which is hosted by “Fast Money” traders Guy Adami and Dan Nathan.

“You’re a fraud. You’re an absolute fraud,” Duffy said he told Bankman-Fried. Moreover, he tried to warn Congress and the financial sector that the disgraced FTX billionaire Bankman-Fried was a “fraud.”

Additionally, Duffy wanted to know why the Commodities Futures Trading Commission was even considering Bankman-Fried’s request to ease regulatory rules to push his trading model. He was told it was required under innovation guidelines.

“Right away my suspicions were up,” Duffy said. “Why is there so much pressure coming for this application? And then when I met with him, I knew right away this a joke.”

The FTX collapse is the biggest cryptocurrency exchange bankruptcy on record.

Duffy alleges that a former senior executive of the Commodity Futures Trading Commission (CTFC) was closely aligned with Bankman-Fried. “I hope someone has the courage to ask, ‘Was anybody putting pressure on the CFTC to move forward with an application that could have put everything at risk?’” Duffy said.

The former CEO Bankman-Fried is facing a barrage of civil and reportedly criminal investigations after allegedly transferring billions in customer funds from FTX, the crypto trading platform he founded in 2019, to Alameda Research, a crypto trading firm he founded in 2017.

References:

  1. https://www.cnbc.com/2022/11/23/absolute-fraud-cmes-terry-duffy-says-he-saw-trouble-before-ftx-collapse-.html
  2. https://www.foxnews.com/media/sam-bankman-fried-easy-pick-out-fraud-cme-group-chief-terry-duffy

“Any time there is a boom cycle like this, otherwise smart investors do dumb things because they see their pals and peers piling in and worry they will be left out. Envy is a pernicious quality — and one that is all too human.” ~ Andrew Ross Sorkin

FTX Debacle and Lessons Learned

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The lessons investors can learn from the FTX debacle are not all that new or even groundbreaking. But, the lessons are important ones for investors to learn who desire to build long-term wealth and achieve financial freedom.

The significant lessons are the importance of investors understanding an asset and doing thorough research on companies in which they intend to invest.

In FTX’s case, here is a company, led by it’s under thirty CEO Sam Bankman-Fried (SBF), that in three years grew from relative nothing to $32B literally overnight. It’s meteoric rise attracted thousands of investors who were more than happy to invest their capital in a young company and its brash CEO.

Yet, by performing just basic research on how the company made its money, on the experience and acumen of the CEO, and on the executive management team, and on the company’s financial profitability would have raised red flag to cause serious investor to pause before investing their capital in the company.

Additionally, SBF, FTX’s thirty-something CEO was consider a “wunder-kid” of sorts and featured by Forbes as its #2 “The Forbes 400” in 2022.

In a relatively short time, SBF took FTX from near zero is capitalization to $32B. His feats caused both seasoned and retail investors to flock to FTX.

Now, at the beginning of the week, FTX possessed a capitalization of $32. By Friday, FTX was at near zero capitalization, SBF had resigned, and the luster and shine of the once high flying company had been completely tarnished.

Thus, this is a classic and stark example why investors must understand and do thorough research, and remain disciplined before investing their capital.

References:

  1. https://www.forbes.com/sites/jemimamcevoy/2022/09/27/10-under-40-the-youngest-billionaires-on-the-2022-forbes-400/?sh=2455189c397e

FTX Fraud, Political Donations and False Altruism

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FTX founder Sam Bankman-Fried (SBF) admits masquerading as ‘woke Westerner’.

Sam Bankman-Fried (SBF), the founder and CEO of collapsed cryptocurrency exchange FTX, revealed that ‘the woke appearance’ that he personified and his company displayed was all a “dumb game.”

In an interview, Bankman-Fried confessed that the fake window dressing of altruism was mostly a front and that the performance was done “so everyone likes us.”

Until last week, FTX was the world’s second-largest cryptocurrency exchange and was valued at $32 billion. However, the digital coin exchange collapsed and filed for bankruptcy.

In addition, between $1 billion and $2 billion in customer funds reportedly vanished from the FTX cryptocurrency exchange via corporate fraud, via an apparent hack and/or via an “unauthorized access” by Bankman-Fried.

In an emergency court filing, evidence suggests Bahamian regulators directed former CEO Sam Bankman-Fried to gain “unauthorized access” to FTX systems to obtain digital assets belonging to the company and to transfer those assets to the custody of the Bahamian government.

Bankman-Fried was a Democrat megadonor.

  • He reportedly contributed more than $5 million to Joe Biden in the 2020 presidential campaign.
  • He was the second-biggest individual donor behind George Soros to Democrats in the 2021-2022 election cycle – donating $37 million.
  • He planned to donate “north of $100 million” to Democrats in the 2024 presidential election, but pledged to have a “soft ceiling” of $1 billion in donations to Democrats if former President Donald Trump ran again.

The concern now is whether Democrats will be obliged morally to ‘give back’ the apparent illicit political donations from Bankman-Fried.

A liberal darling

Bankman-Fried, a self-proclaimed “effective altruist,” was promoted by Democrats and hyped up by the media. However, in a new interview, Bankman-Fried confessed that he used his virtuous stances as a front to win the game.

SBF was one of the featured speakers at World Economic Forum 2022 in Davos, Switzerland.

In September, SBF was a featured speaker at the annual meeting for the Clinton Global Initiative.

SBF was slated to be a featured speaker at a summit hosted by the New York Times on Nov. 30, along with BlackRock CEO Larry Fink, New York City Mayor Eric Adams (D), and Ukrainian President Volodymyr Zelenskyy.

Bankman-Fried said it was “never the intention” to squander away investors’ money, but “sometimes life creeps up on you.”

References:

  1. https://www.theblaze.com/news/ftx-sam-bankman-fried-woke-esg
  2. https://www.cnbc.com/2022/11/17/ftx-suggests-sam-bankman-fried-transferred-assets-to-bahamas-government-custody-after-bankruptcy-filing.html

The Impact of FTX’s Collapse

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“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.” ~ John Ray, new FTX CEO

Crypto exchange FTX filed for bankruptcy after a stunning five-day collapse of the once-$32 billion dollar crypto company as concerns over its financial health led to a surge in withdrawals and a plunge in the value of its native FTT token. FTX’s founder, Sam Bankman-Fried (SBF), resigned as CEO.

As a result of the collapse, the company and its leadership are facing investigations and potential criminal charges in both the Bahamas and the U.S. for its misappropriation of users’ assets and allegations of fraud. 

Before its collapse, FTX offered retail and professional traders spot crypto investing as well as more complex derivatives trades. At its peak, the platform was valued by investors at $32 billion and had more than 1 million users.

FTX’s books revealed the exchange had more than $9 billion in liabilities, but less than $1 billion in liquid assets the day before its bankruptcy filing. And, after an apparent hack (or “unauthorized access” via a backdoor by SBF) drained $477 million of the company’s remaining assets, customers are facing long odds of ever recovering much of their deposits.

After FTX collapse, at least $1 billion in customer funds are unaccounted for, and FTX may owe as many as one million creditors. Additionally, FTX’s collapse has resulted in:

  • Crypto’s total market cap has dropped below the $1 trillion mark since FTX’s trouble started early last week, and sits near $826 billion as of Wednesday morning, November 9. 2022.
  • After the firm’s bankruptcy filing, BTC price sank nearly 25%, dropping below $16,000, before slightly recovering; ETH fell by more than 30% in the same span.
  • Market contagion and liquidity issues have spread to a growing number of crypto businesses that have suspended redemptions, citing “extreme market dislocation … caused by the FTX implosion.”
  • Several major players have halted customer withdrawals and cited “significant exposure to FTX.” Others are planning to file for bankruptcy.

CNBC reported that Alameda Research, FTX’s sister company, had borrowed billions in customer funds from the exchange to make risky leveraged trades, leaving FTX caught short when users wanted to withdraw their money.

In general, mixing customer funds with counterparties and trading them without explicit consent is illegal, according to U.S. securities law. It also violates FTX’s terms of service. “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” said newly appointed FTX CEO John Jay Ray III – a bankruptcy expert with more than 40 years of restructuring experience who liquidated Enron.

Former CEO Bankman-Fried declined to comment on allegations but said the company’s recent bankruptcy filing was the result of fraud, misappropriation and issues with a leveraged trading position placed by Alameda Research.

“In the Bahamas, I understand that corporate funds of the FTX group were used to purchase homes and other personal items for employees and advisors,” Ray wrote. “I understand that there does not appear to be documentation for certain of these transactions as loans, and that certain real estate was recorded in the personal name of these employees and advisors on the records of the Bahamas.”

Moreover, larger investors and traditional firms been impacted

  • Since its founding in 2019, FTX raised nearly $2 billion in capital from sources like venture capital firms and pension funds, and its bankruptcy means that many of its investors will likely need to write their investments off as losses. 
  • SoftBank, Tiger Global, and Sequoia Capital are among the many well-known firms who made now-worthless bets on FTX. Sequoia was marking its $213 million stake down to $0. 
  • The impact isn’t limited to venture capital firms either — the Ontario Teachers Pension Fund lost $95 million investing in FTX’s funding rounds and professional athletes celebrities like TV producer Larry David and NFL quarterback Tom Brady are among the individuals who had equity stakes in and promoted the company. 
  • In an emergency court filing, evidence suggests Bahamian regulators directed former CEO Sam Bankman-Fried to gain “unauthorized access” to FTX systems to obtain digital assets belonging to the company and to transfer those assets to the custody of the Bahamian government.

In the wake of the FTX exchange’s collapse, there has been calls from financial business leaders and lawmakers regarding the need for greater oversight and regulation of the crypto industry.

U.S. Congressman Patrick McHenry, the top Republican on the House Financial Services Committee, said: “It’s imperative that Congress establish a framework that ensures Americans have adequate protections while also allowing innovation to thrive here in the U.S.”

Source: Coinbase Bytes

References:

  1. https://www.cnbc.com/2022/11/15/ftx-says-could-have-over-1-million-creditors-in-new-bankruptcy-filing.html
  2. https://www.businessinsider.com/ftx-managers-used-online-chat-emojis-approve-official-expenses-ceo-2022-11
  3. https://www.cnbc.com/2022/11/17/ftx-suggests-sam-bankman-fried-transferred-assets-to-bahamas-government-custody-after-bankruptcy-filing.html