Act Daily News
John J. Ray III, who made his identify overseeing the liquidation of Enron within the early 2000s, is the person accountable for sifting by the rubble of FTX, the once-mighty cryptocurrency alternate — based in 2019 and run into the bottom by 2022 by Sam Bankman-Fried.
On Tuesday, Ray testified earlier than the House Financial Services Committee, relaying what he may in regards to the firm he took over simply 4 weeks in the past. When a congressman requested Ray how his expertise with FTX compares with Enron, Ray was fast to make the excellence clear:
“The crimes that were committed [at Enron] were highly orchestrated financial machinations by highly sophisticated people to keep transactions off balance sheets,” Ray advised lawmakers. FTX, then again, was “not sophisticated at all.”
“This is really old-fashioned embezzlement,” Ray continued. “This is just taking money from customers, and using it for your own purpose.”
In different phrases: Look, there’s loads occurring right here, however don’t let all of the discuss of digital belongings confuse you — this can be a con as outdated as time.
Mark Cohen, a lawyer for Bankman-Fried, stated his consumer “is reviewing the charges with his legal team and considering all of his legal options.”
Federal prosecutors from the Southern District of New York (aka, a extremely aggressive, elite bunch of attorneys who not often lose in relation to white-collar circumstances) charged Sam Bankman-Fried with eight prices of fraud and conspiracy. They say he misappropriated FTX clients’ deposits by utilizing these funds to pay bills and money owed of Alameda, his crypto hedge fund.
US Attorney Damian Williams referred to as the FTX case “one of the biggest financial frauds in American history.”
Meanwhile, US markets regulators filed civil lawsuits accusing Bankman-Fried of defrauding traders and clients, saying he “built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto.”
And as if all that weren’t sufficient, Bankman-Fried’s successor, Ray, spent the day calling out the colossal mismanagement that befell earlier than FTX and Alameda collapsed. In addition to calling the earlier leaders “a very small group of grossly inexperienced and unsophisticated individuals” — underneath oath, thoughts you — Ray additionally illustrated that mismanagement by revealing that FTX used QuickBooks to run its business, which was valued at greater than $30 billion at its peak. (Ray clarified: “Nothing against QuickBooks. It’s a very nice tool. Just not for a multibillion-dollar company.”)
So a lot… however I’ll persist with the highlights.
Bankman-Fried may resist 115 years in jail if convicted on all eight counts in opposition to him in a federal indictment unsealed Tuesday morning, in accordance with congressional statutory most sentencing pointers.
(That stated, he doubtless wouldn’t get the utmost sentence, and it’s not unusual for a decide to have these sentences run concurrently.)
Bankman-Fried stays within the Bahamas, the place FTX was primarily based, and was arrested Monday evening. He was arraigned Tuesday, and a Bahamian decide denied his request for bail, saying that he posed a flight danger. (His extradition to the United States is within the works, however that course of can take weeks.)
There’s nonetheless a ton we don’t know in regards to the case. But the truth that prosecutors put collectively an eight-count, 14-page indictment simply 4 weeks after FTX filed for chapter suggests prosecutors could have an ace within the gap, and/or a preponderance of proof in opposition to the corporate. (The SDNY are an aggressive folks, however they don’t seem to be sloppy, they usually don’t indict with out a stable case.)
Several attorneys not concerned within the case have advised me that the velocity of Bankman-Fried’s arrest alerts that former FTX workers could also be aiding prosecutors.
“The smart move by former employees would be to rush to become a cooperator in exchange for more lenient treatment, and it would not be surprising to learn that one or more of them had done so,” stated Howard A. Fischer, a former SEC lawyer. He added: “The fact that only one person has been charged so far would seem to indicate this as well.”
Correction: An earlier model of this story incorrectly recognized John Ray. He is Sam Bankman-Fried’s successor.