FTX profited from Sam Bankman-Fried’s inflated coins: Report

January 18, 2023 Coin Telegraph

Bankruptcy

Former FTX CEO allegedly used his popularity to lure developers, and Alameda Research to inflate the price of certain coins.

Sam Bankman-Fried (SBF), former CEO of the FTX crypto exchange, used his influence in the crypto industry to inflate some coins prices through a coordinated strategy with FTX's sister company, Alameda Research, a New York Times report claimed on Jan. 18.

As a way to keep FTX and the companies under its umbrella profitable, Bankman-Fried allegedly approached developers behind projects, insisting that they make their trading debuts on the exchange's platform. Following that, the report claimed that Alameda Research would buy some of these freshly listed coins to raise their value.

After attracting projects and using its hedge fund to prop up prices, Bankman-Fried allegedly relied on its popularity to advertise the projects, and persuade the crypto community to invest in those coins, known as 'Samcoins'. As a result of the strategy, Alameda appeared to be in a stronger position than it actually was.

The newspaper compared Bankman-Fried strategy with a large scale pump-and-dump scheme. A stock market operation refers to an increase in stock value by insiders in order to entice retail investors. The insiders then sell their shares, and other investors are left with worthless stock.

Pump-and-dump schemes are illegal, and are especially problematic when scammers use false or misleading statements to attract investors to micro and small-cap stocks.

For developers launching a new coin, Bankman-Fried's offer was an appealing option, as they could benefit from FTX recognition to advertise their tokens and get more attention from potential investors. Among the supposed "Samcoins" were Serum, Maps, Oxygen, Bonfida and Solana (SOL).

Sources interviewed by the NYT also noted that Bankman-Fried would offer a select group of investors the chance to buy in coins at low prices, warning that a second opportunity would only be available at higher amounts. Those interested in the offer are alleged to have signed up through an interna spreadsheet.

FTX's collapse kicked off on Nov. 2, after reports of a leaked balance sheet from Alameda suggested the company held a significant amount of FTT (FTT), the native token of FTX, among other coins facing liquidity issues. As a large trading firm holding such a large amount of one asset, Alameda's relationship with FTX raised questions in the crypto community, and ultimately led to a bank run on the exchange.

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Sam Bankman-Fried to reportedly plead not guilty to criminal charges

December 31, 2022 Coin Telegraph

Coin Telegraph

Following a court hearing on Dec. 22, SBF was released on bail and is slated to appear on court on Jan.3 before U.S. District Judge Lewis Kaplan in Manhattan.

Former FTX CEO Sam Bankman-Fried (SBF), currently free on a $250 million bail bond, will reportedly plead not guilty to the alleged FTX and Alameda-related financial frauds in court on Jan. 3.

SBF was arrested in the Bahamas at the request of the U.S. government under suspicion of defrauding investors and misappropriation of funds held on the FTX crypto exchange. Following a court hearing on Dec. 22, SBF was released on bail and is slated to appear on court on Jan.3 before U.S. District Judge Lewis Kaplan in Manhattan.

During the hearing, SBF is expected to enter a plea of not guilty to the criminal charges, according to a Reuters report. On Dec. 13, the SEC charged the former FTX CEO with violating the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.

Defendants have the right to plead not guilty during initial court hearings and are allowed to change their plea in due time.

On Dec. 28, a movement of funds from Alameda wallets raised suspicions about SBF’s involvement in the anomaly. However, the entrepreneur was quick to distance himself from the alleged rumors.

None of these are me. I'm not and couldn't be moving any of those funds; I don't have access to them anymore.https://t.co/5Gkin30Ny5
— SBF (@SBF_FTX) December 30, 2022

SBF’s tweet was in response to a Cointelegraph report that a wallet address had received over 600 Ether (ETH) from wallets that belonged to Alameda.

FTX customers file class-action lawsuit to get priority reparations

December 28, 2022 Coin Telegraph

Coin Telegraph

Customer class members don’t want to stand in line along the creditors of a failed crypto platform.

While the government agencies are queuing to sue the FTX and its founder Sam Bankman-Fried, the group of former customers made an effort to get their money back first. A class lawsuit initiated by four individuals demands priority access to frozen funds of the company for its customers, not investors.

The lawsuit was filed on Dec. 27 in the United States Bankruptcy Court for the District of Delaware. Four plaintiffs claim to be representing the whole class of former FTX customers, which might amass up to 1 million individuals. What the lawsuit seeks to obtain are the priority rights to return digital assets held by FTX US or FTX.com to its customers.

The plaintiffs emphasize that the FTX User Agreement did not permit the platform to use customer funds for its own purposes, including borrowing or using it for operating expenses. Any removal of customer funds from accounts was an “impermissible co-mingling, misappropriation, misuse, or conversion of customer property,” according to the complaint.

Hence, any funds frozen by FTX and traceable as customer property cannot be used to pay non-customer expenses, claims or creditors until customers are repaid, the lawsuits states:

“Customer class members should not have to stand in line along with secured or general unsecured creditors in these bankruptcy proceedings just to share in the diminished estate assets of the FTX Group and Alameda.”

Recently the Department of Justice has launched an investigation into the whereabouts of approximately $372 million in missing digital assets from FTX. On Nov. 12, amid its bankruptcy and internal collapse, FTX warned customers of abnormal wallet activity regarding at least 228,523 Ether transferred out of the exchange from an unknown perpetrator.

Another foul play was suspected when the crypto wallets associated with now-bankrupt trading firm Alameda Research, the sister company of FTX, began transferring out funds just days after SBF was released on a $250 million bond.

Sam Bankman-Fried found ‘chilling’ in JFK airport lounge on $250M bail bond

December 25, 2022 Coin Telegraph

<div>Sam Bankman-Fried found 'chilling' in JFK airport lounge on 0M bail bond</div>

Coin Telegraph

Based on the pictures, crypto community members confirmed that SBF’s location was the Greenwich (Business Class) lounge in American Airlines’ Terminal 8.

The momentary arrest of former FTX CEO Sam Bankman-Fried (SBF) can be attributed to the efforts taken by the crypto community to aid investigations and track down the whereabouts of the infamous entrepreneur. While SBF eventually escaped prison time via a $250 million bail bond, the community continues to monitor his every move publicly.

Just three days after being released on a personal recognizance bond, a crypto community member allegedly spotted SBF “chilling” in a John F. Kennedy International Airport lounge. The supporting images were shared on Twitter by @litcapital, which shows SBF sitting on a lounge chair with access to a laptop and mobile phone.

*Sam Bankman-Fried found at the JFK airport lounge. Source: Twitter*

Based on the pictures, other community members confirmed that SBF’s location was the Greenwich (Business Class) lounge in American Airlines’ Terminal 8. According to the primary source, SBF was accompanied by his parents, FBI agents and lawyers.

One of my followers spotted SBF chilling at JFK airport last night and snapped some icon photos pic.twitter.com/0Lg6OdqZz8
— litquidity (@litcapital) December 23, 2022

Subsequent images showed SBF on an American Airlines flight disguised with a beanie and seated next to a suited executive.

bro turned into gary vee pic.twitter.com/YdX49YaXMm
— frederik.eth (@bganpunk) December 23, 2022

The images reignited discussions around how SBF told Maxine Waters, chair of the United States House Financial Services Committee, that he had no access to his personal or professional data despite having access to his laptop and mobile device.

Moreover, some also wondered how SBF was able to afford the business-class tickets amid FTX’s bankruptcy proceedings. “Great to see customer funds are still being put to good use!” said a community member.

A recent court filing revealed that defunct crypto exchange FTX paid a retainer of $12 million to Sullivan & Cromwell LLP (S&C) right before filing for Chapter 11 bankruptcy.

Since Aug. 26, 2022, FTX made payments worth nearly $3.5 million to S&C to avail their legal services.

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Democrats to reportedly return over $1M of SBF’s funding to FTX victims

December 17, 2022 Coin Telegraph

<div>Democrats to reportedly return over M of SBF's funding to FTX victims</div>

Coin Telegraph

Three democratic committees, the DNC, the DSCC and the DCCC, pledged to return SBF’s political donations after the entrepreneur was charged with eight counts of financial crimes.

Following the arrest of former FTX CEO Sam Bankman-Fried (SBF), three prominent Democratic groups have reportedly decided to return over $1 million to investors that lost their funds due to misappropriation.

On Dec. 16, the Democratic National Committee (DNC), the Democratic Senatorial Campaign Committee (DSCC) and the Democratic Congressional Campaign Committee (DCCC) pledged to return SBF’s political donations after the entrepreneur was charged with eight counts of financial crimes.

A DNC spokesperson reportedly confirmed this decision when speaking to a media outlet, the Verge:

“Given the allegations around potential campaign finance violations by Bankman-Fried, we are setting aside funds in order to return the $815,000 in contributions since 2020. We will return as soon as we receive proper direction in the legal proceedings.”

The other two Committees, DSCC and DCCC, have also reportedly pledged to set aside $103,000 and $250,000, respectively, according to the Washington Post. SBF previously admitted to being a “significant donor” to both sides of the political spectrum.

1) I was a significant donor in both D and R primaries.

Supporting constructive candidates across the aisle to prevent pandemics and bring a bipartisan climate to DC.

And working with them to support permissionless finance.
— SBF (@SBF_FTX) November 5, 2022

Earlier this year, SBF had revealed in a podcast his plans to spend up to one billion dollars to help influence the 2024 presidential election campaigns.

White House press secretary Karine Jean-Pierre refused to answer questions related to the return of SBF’s past donations to the party.

When asked, she responded by saying that “I'm covered here by the Hatch Act,” which prohibits civil service employees, especially from federal agencies, from engaging in some forms of political activity.

Bankman was the second-largest “CEO contributor” to Biden’s 2020 presidential campaign, with his $5.2 million in donations.

Binance ‘put FTX out of business’ — Kevin O’Leary

December 14, 2022 Coin Telegraph

Binance

A US Senate committee heard details of the investor's conversations with Sam Bankman Fried before the collapse.

The collapse of FTX was triggered by Binance, claimed investor Kevin O'Leary on Dec. 14 speaking at the United States Senate committee hearing about the crypto exchange meltdown. O'Leary, who was a paid spokesperson for FTX, provided details about conversations with Sam Bankman-Fried in the days before FTX filed for bankruptcy.

During his testimony, O'Leary said he had questioned SBF regarding how customer funds were used in the past 24 months and was told that almost $3 billion were used to repurchase shares of FTX owned by Binance.

When asked by Senator Pattrick Toomey why FTX failed, O'Leary replied, "I have an opinion. I don't have the records," before revealing his view that the heads of Binance and FTX were at war.

O'Leary said that regulation was at the core of the silent war between the heads of the two crypto exchanges. Binance and Changpeng "CZ" Zhao had to comply with regulators' requests and compliance standards in different jurisdictions as shareholders with nearly 20% of the FTX.

"Apparently, according to Sam Bankman-Fried, CZ would not comply with regulators' requests in different jurisdictions to provide the data that would clear them [FTX] for a license […] The only option the management and Sam Bankman-Fried had was to buy him out at an extraordinary valuation close to $32 billion."

The share purchases hurt FTX's balance sheet, said O'Leary, and Zhao's decision to liquidate Binance's position on FTX token (FTT) at the beginning of November citing “recent revelations that have came to light,” and “post-exit risk management" reasons, was intended to push down the token's price. O'Leary stated:

"In my view, my personal opinion, these two [...] in an unregulated market [...] with this incredible business in terms of growth were at war with each other, and one put the other out of business, intentionally. Now, maybe there is nothing wrong with that, maybe there is nothing wrong with love and war, but Binance is a massive unregulated global monopoly now, and they put FTX out of business."

O'Leary also spoke out in favor of a cryptocurrency regulatory framework during his speech:

“This nascent industry is culling its herd. Going or gone are the inexperienced or incompetent managers, weak business models and rogue unregulated operators. Hopefully, these highly publicized events will put renewed focus on implementing domestic regulation that has been stalled for years. Other jurisdictions have already implemented such policies and are now attracting both investment capital and highly skilled talent. In the U.S., we are falling behind and losing our leadership position.”

As a paid spokesperson for FTX, O'Leary was paid nearly $15 million for his services. He reportedly lost over $10 million in tokens held at FTX wallets due to collapse.

Crypto blame game back on US Senators’ menu following SBF arrest

December 14, 2022 Coin Telegraph

Coin Telegraph

While Congressman Brad Sherman saw SBF as the poster child of the crypto ecosystem, congressman Tom Emmer highlighted the crypto community's contribution to uncovering the supposed FTX fraud.

The arrest of the former FTX CEO Sam Bankman-Fried (SBF) by the Bahamian authorities served as a cue for anti-crypto proponents to reignite discussions around the dangers of cryptocurrencies. While some political leaders blame the crypto ecosystem for SBF’s frauds, others find no point in blaming an entire industry for one man’s action.

During an FTX hearing in front of the House Financial Services Committee, Congressman Brad Sherman did not see a difference between SBF and an industry that once boasted a $2 trillion market cap, as he stated:

“My fear is that we'll view Sam Bankman-Fried as just one big snake in a crypto Garden of Eden. The fact is crypto is a garden of snakes.”

He supported this statement by explaining how cryptocurrencies, just like nonfungible tokens (NFTs), are being purchased in hopes of selling them for a higher price.

*Rep. Brad Sherman during the FTX hearing in front of the U.S. House Committee on Financial Services. Source: YouTube*

He also highlighted how entrepreneurs such as "Sam Bankman-Fried would tell you there's a hell of a market for bankruptcy court evasion" and pointed out how crypto aids tax evasion efforts of bad actors.

On the other hand, Congressman Tom Emmer distanced the FTX fallout from the institution of cryptocurrencies while speaking at the U.S. House Committee on Financial Services. Instead, Emmer disclosed how the immutable nature of blockchain technology helped the crypto community uncover the FXT Token (FTT) discrepancies, which ultimately led to SBF’s arrest.

Information stored over the public blockchain will further assist law enforcement in digging into the nuances of the possible crimes. He added:

“I encourage my colleagues to understand Sam Bankman-Fried’s con for what it is — a failure of centralization, a failure of business ethics and a crime. It is not a failure of technology.”

While naysayers try to link SBF’s actions with the idea of crypto and blockchain, the case for decentralization grows stronger. Public blockchain-based crypto ecosystems not only allow for traceability but can also help authorities with anti-money laundering initiatives.

Despite the decade-long federal resistance toward crypto, the support for crypto US Senators has grown evidently stronger. Pro-crypto Senator Cynthia Lummis believes in Bitcoin’s (BTC) position as a viable inclusion to 401(k) retirement plans, revealing her disregard for the prolonged, but temporary, bear market:

“I'm very comfortable with making sure that people can include Bitcoin in their retirement funds because it's just different than other cryptocurrencies.”

Lummis places her bet on Bitcoin’s scarcity, which according to “a personal belief,” will help increase the asset’s value over time.

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