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News in a Glimpse:
- Sam Bankman-Fried went on a $5 billion “spending binge,” according to John J. Ray, who plans to testify before the House Financial Services Committee about how he combined assets with those of his hedge fund, Alameda Research.
- The discredited cryptocurrency exchange FTX, where Sam Bankman-Fried was detained last Monday, has been charged by the US Securities and Exchange Commission with “orchestrating a scheme to defraud investors.”
- Despite having previously expressed his belief that he wouldn’t be detained, Bankman-Fried admitted in his most recent interview that he had mismanaged the FTX empire while making an effort to distance himself from any criminal wrongdoing.
The new CEO of FTX, John J. Ray, has indicated that he intends to testify before the House Financial Services Committee about how Sam Bankman-Fried, the previous CEO of the aforementioned cryptocurrency exchange platform, went on a $5 billion “spending binge” and combined assets with those of his hedge fund, Alameda Research.
According to reports, the new CEO and his team made a list of the things they had learned since taking over for Bankman-Fried. In which, under Bankman-direction, Fried’s the cryptocurrency platform rapidly declined after an asset run that was akin to a bank run.
In his remarks, Ray acknowledged that there are still many things they do not know at this point, but he also focused on what they have already learned. They have found a number of things, including the mixing of FTX customer assets with Alameda assets.
Additionally, FTX went on a “spending binge” from late 2021 through 2022 in which about $5 billion was spent buying a variety of businesses and investments. Alameda Research, FTX’s sister company, used the funds from FTX’s clients to do margin trading, exposing them to “massive losses.”
Additionally, the platform is said to have given insiders loans and other payments totaling more than $1 billion. These comments from the new FTX CEO have somehow validated some details about the collapse that have been previously reported by media outlets, with Ray revealing that Alameda’s role as a market maker for crypto inspired it to place money into other exchanges that were “inherently unsafe.”
SEC Charged SBF
The US Securities and Exchange Commission has accused Sam Bankman-Fried of “orchestrating a scheme to defraud investors” in the discredited cryptocurrency exchange FTX. In which the man who was once considered a crypto genius was detained last Monday.
The former FTX CEO, according to SEC Chair Gary Gensler, “built a house of cards on a foundation of deception,” and the allegations of fraud serve as a reminder and a warning to other crypto exchange platforms to abide by US laws.
Remember how the former CEO of FTX tried to distance himself from claims of illegal activity earlier this month? In which he stated that he neither believes he committed fraud nor did he do so knowingly.
The former CEO refuted claims that he had to have known Alameda Research was using money from FTX customers. FTX raised more than $1.8 billion from equity investors in 2019, according to the SEC.
In light of that allegation, the SEC further alleges that the former CEO concealed FTX’s exposure to Alameda’s significant holdings of overvalued FTX-affiliated tokens by promoting the platform as a “safe, responsible crypto asset trading platform” while in reality he allegedly “orchestrated a years-long fraud” to conceal from FTX’s investors the diversion of FTX customers’ funds to Alameda Research LLC.
In addition, Bankman-Fried was accused of “co-mingling” FTX customers’ money at Alameda to fund “undisclosed venture investments, lavish real estate purchases, and large political donations,” according to the allegations.
Bankman-Fried had previously expressed confidence that he wouldn’t be detained, but in his most recent interview, he acknowledged that he had mismanaged the FTX empire while attempting to disassociate himself from any criminal wrongdoing. The collapse of FTX, according to Bankman-Fried, highlights the dangers that unregistered crypto asset trading platforms present to investors and consumers.
Bankman-Fried is currently accused of breaking the securities law’s anti-fraud provisions as well as the 1934 Securities Exchange Act. To support this, the U.S. In parallel actions, charges against Mr. Bankman-Fried were also announced by the Commodity Futures Trading Commission (CFTC) and the Attorney’s Office for the Southern District of New York.