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Editing and Additional Reporting by Nathaniel Cajuday
On December 12, the founder and former CEO of international cryptocurrency exchange FTX, Sam Bankman-Fried, was arrested by Bahamian authorities in relation to the collapse of the exchange. The arrest is the first move by regulators to hold those accountable for the multi-billion-dollar implosion.
Timeline of the FTX collapse covered by BitPinas:
- Binance CEO Changpeng Zhao (CZ) announced that it is set to liquidate its own FTX Tokens ($FTT) after a Coindesk article revealed that Alameda, FTX’s sister company, rests largely on FTT and not on any independent asset. [Read: Just House Cleaning: Binance To Liquidate Own FTX Tokens]
- CZ revealed that his company has signed a “letter of intent” to acquire FTX Exchange. [Read: BREAKING: Binance Signs Deal to Acquire FTX Exchange]
- FTT went into freefall and lost most of its value (about 80%) [Read: FTX Token Price Drops 80% as News of Binance Buying FTX Surface]
- CZ denied that there is any kind of “conspiracy” against FTX, or that he’s in a “fight” with its CEO Sam Bankman-Fried. [Read: Binance CEO Denies FTX Conspiracy]
- Binance backed out of its deal to purchase FTX because “the issues are beyond our control or ability to help.”[Read: Binance Will No Longer Acquire FTX]
- BlockFi files for Chapter 11 bankruptcy, weeks after the collapse of FTX, which previously signed a term sheet to provide credit to the embattled crypto lender last June. [Read: What Happened? BlockFi Files for Bankruptcy Amid FTX Crypto Contagion]
- The Bangko Sentral ng Pilipinas (BSP) has confirmed that it has asked locally licensed cryptocurrency exchanges about their exposure to FTX’s downfall, exchanges then clarified that none was affected by the downfall. [Read: Report: BSP Asks Local VASPs of FTX Exposure, Exchanges Respond]
- SBF has been arrested by Bahamian authorities in relation to the collapse of his founded exchange, a CNBC report revealed. [Read: BREAKING: FTX Founder Sam Bankman-Fried Arrested]
Several days after SBF’s arrest, what happened to the storyline of FTX’s downfall?
US Attorney’s Office Files Criminal Charges vs SBF
After being arrested by the Bahamas government, SBF is now facing charges of wire fraud, conspiracy to commit money laundering, and campaign finance violations from the U.S. Attorney’s Office for the Southern District of New York
He is also facing the US Securities and Exchange Commission for orchestrating a “massive, years-long fraud” in which he diverted billions of dollars of FTX customer funds for “his own personal benefit.”
As per the indictment of the US Department of Justice (DOJ), the founder “agreed with others to defraud customers of FTX.com by misappropriating those customers’ deposits and using those deposits to pay expenses and debts of Alameda Research, Bankman-Fried’s proprietary crypto hedge fund, and to make investments.”
New FTX CEO Hesitates if SBF is Guilty or Not
In the testimony of John Ray III, FTX’s replacement CEO, during the U.S. House Financial Services Committee about the company’s collapse, he called the misdeeds inside the exchange “not sophisticated” when compared to the highly orchestrated crimes he encountered when taking apart Enron two decades ago.
“This is really old-fashioned embezzlement… This is just taking money from customers and using it for your own purposes—not sophisticated at all,” he told the solons.
The new CEO even called the embezzlement done “frankly right in front of their eyes.”
However, when asked whether SBF had committed crimes, Ray hesitated to state that his main job was finding money for those who were harmed, and “we’re trying not to lay judgment or put labels on actions.”
“Obviously, there’s been a failure here of massive proportion. Ultimately, I think others will judge him by his actions,” he added.
US SEC Affirmed SBF Liable
On the other hand, the civil complaint filed by the US SEC in the Southern District of New York stated that the FTX founder had raised more than $1.8 billion from investors who bought an equity stake in the exchange, with the hope that FTX had appropriate controls and risk management measures.
The filing highlighted that customers “believed his lies” regarding the platform being secure and sent billions of dollars to FTX.
US Solon Calls SBF Arrest Wrong Timing
Prior to his arrest, Bankman-Fried had expressed that he was “willing to testify,” which was followed by Maxine Waters, chair of the US House committee on financial services, announcing Bankman-Fried’s participation in the first hearing on the topic, which was supposedly set to happen last December 13.
Following this, Waters expressed her displeasure with the timing of the law enforcement authorities, claiming that it had taken her opportunity to question Bankman-Fried at the hearing.
“Unfortunately, the timing of his arrest denies the public the opportunity to get the answers they deserve,” Waters said.
This article is published on BitPinas: Days After SBF’s Arrest, What Happened Next?
Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.