Bankman-Fried testified in his own defense across three days of hearings. Aug. 11 – Bankman-Fried had his bail revoked and was immediately remanded to custody of the U.S. Bankman-Fried had tampered with witnesses, prosecutors alleged, citing his decision to share Caroline Ellison’s personal writings with the New York Times.
Bankman-Fried deliberately and knowingly “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,” the indictment alleges. Bankman-Fried opened the window after Bahamian regulators pressed him about the crisis at FTX days before its Nov. 11 bankruptcy filing, which the company said on Twitter it was doing at the behest of Bahaman rules and its regulators. The since deleted tweet was published by Bankman-Fried on Nov. 7, just days before he stepped down as CEO of FTX and his company filing for Chapter 11 bankruptcy. Prior to his company’s implosion, Bankman-Fried donated almost $40 million to candidates, campaigns and political action committees in the 2022 congressional midterm elections, with most of his publicly disclosed contributions going toward Democrats. Ryan Salame, the co-CEO of FTX Digital Markets, donated another $23 million, with the majority of his contributions heading toward Republicans. The Securities and Exchange Commission also charged the former crypto “darling” Tuesday morning with allegedly “orchestrating a scheme to defraud equity investors in FTX Trading,” according to the agency.
Note that most of the questionable activities of FTX took place abroad. Within the U.S., investment banks have been relatively cautious in their crypto-related activities. This caution is even more evident in the case of national banks which are highly regulated financial institutions. The Office of the Comptroller of the Currency has deliberately required that banks have ex-ante controls in place before they can provide crypto-related support and engage in stablecoin and other activities. For instance, a non-objection letter is required before certain crypto activities may be conducted.
FTX also asked Judge John Dorsey to allow the company to submit redacted lists of its largest creditors, citing concerns about their privacy and safety. He argued its customer database is valuable — “important to any reorganization or sale to maximize value to all stakeholders” — and for that reason, that information shouldn’t be made public. But the FTX lawyers said that just ten months ago, the company was valued at a whopping $40 billion.
The collapse of one of the largest crypto exchanges in the world shook the digital currency world and sent prices plunging. The swift demise of cryptocurrency exchange FTX in 2022 had damaging domino effects on the cryptocurrency industry, stoking widespread mistrust among the public and toppling cryptocurrency services that did business with it. At the time, FTX was the third-largest crypto exchange, widely regarded as one of the prime players in the space. Its sudden collapse not only shocked the market but also shook the very foundation of the crypto industry, revealing major vulnerabilities in what investors perceived as a promising and robust ecosystem. Last month, FTX was one of the most popular cryptocurrency exchanges in the world. Today, it is figuring out how to sell off assets, pay customers and satisfy creditors as part of a large and complex bankruptcy filing.
Nov. 8 – FTX reached a deal to sell itself to Binance, the crypto exchange whose executive had helped trigger the selloff. March 28 – A federal judge sentenced Bankman-Fried to 25 years in prison. Those connections began to become clearer in the days following FTX’s move to stop withdrawals, as would its financial challenges. Media organizations including Bloomberg, the Financial Times, The Wall Street Journal and others cited anonymous sources saying that FTX needed $8 billion to cover the gap between what it owed and what it could pay out.
