Sam Bankman Fried found guilty of all charges

[Valcazar]

The scam was largely as follows: user opens an account with FTX, user sends money to FTX bank account, screen will pop up for user with money amount which can be used for buying crypto, FTX takes a commission on every trade. So far so good. But at some point FTX has bags of user's money and cryptos in custody, which should be sitting there at all times so users can withdraw. What SBF did was founding another company (Alameda), put his ex-girlfriend "in charge" of it and then give FTX user custody money and crypto to Alameda to make risky crypto gambles. The ex-girlfriend was so bad at it that she lost fortunes. During this trial it was confirmed that FTX and Alameda were the same: all controlled and instructed by SBF. So basically SBF was grabbing FTX's treasury (user's funds) to gamble on Alameda, buy real estate in the Bahamas, give money and real estate to his parents, give donations to politicians etc. The "missing funds" that you hear about (mix of old fashioned currencies and crypto currencies) is what SBF "stole" from the FTX treasury. Alameda could not pay back FTX, FTX went bankrupt, SBF was thrown out and replaced by a caretaker CEO. This CEO has been working to get as many funds back to FTX treasury. Old fashioned money can be retrieved by seizing and selling the real estate, seize SBF parents illegal acquired property, retrieve politician's donations (Biden got the largest bag ) etc. The cryptos have been moving around and can be traced to crypto wallets. The problem is, who owns which wallet and has the keys to access them. Given SBF's overlord level of control, it is almost certain he holds most of these wallets and/or the keys.

The "hacker" you mentioned was most likely literally SBF himself shifting crypto from company managed wallets to personal ones. He was one of few that knew bankruptcy was coming and that he was to be thrown out (and lose access to the company's wallets). The same time the "hacker" was active (a day before the bankruptcy), about $30 million was returned to Bahama's politicians who closed their accounts "just in time".

Lets hope that SBF still has these crypto wallets and will return funds in exchange for reduced sentencing. Who cares whether he gets 30 or 115 years in jail? For many users it might mean a life changing difference if they can get a chunk of their money back.

That doesn't seem quite right.
The "his girlfriend was in charge and she made bad trades" thing doesn't seem to track with the evidence from trial (SBF was always in charge and the Alameda CEOs were just figure heads). But also, outside of the crypto that was "stolen" (and I agree there is a high chance SBF or someone he knows was behind that) people weren't "storing their crypto" in FTX like a bank, were they? They had their own wallets, didn't they. Were coins disappearing from their wallets? Any wallets FTX had on the books have presumably been handed over to the new CEO. (I suppose maybe wallets there had coins sent over from them?)
SBF could have stolen money and bought coins, sure, but what I'm asking is this...

Are there people who were like "I have 15 bitcoins in FTX, and now I can't get them back"?
I don't think that's the case, is it?

 

[icynaps]

That doesn't seem quite right.
The "his girlfriend was in charge and she made bad trades" thing doesn't seem to track with the evidence from trial (SBF was always in charge and the Alameda CEOs were just figure heads). But also, outside of the crypto that was "stolen" (and I agree there is a high chance SBF or someone he knows was behind that) people weren't "storing their crypto" in FTX like a bank, were they? They had their own wallets, didn't they. Were coins disappearing from their wallets? Any wallets FTX had on the books have presumably been handed over to the new CEO. (I suppose maybe wallets there had coins sent over from them?)
SBF could have stolen money and bought coins, sure, but what I'm asking is this...

Are there people who were like "I have 15 bitcoins in FTX, and now I can't get them back"?
I don't think that's the case, is it?

Correct, during the trial it has become more an more clear that Caroline Ellison (his ex-girlfriend and Alameda CEO) seems to have been more of a puppet . SBF seemed to be calling most of the shots (thats why I put the "in charge" between quotes). Irrespective, Alameda was terrible at trading, despite having multiple insider advantages. A good article about that here: https://www.afr.com/technology/play...s-alameda-still-lost-billions-20221120-p5bztf. Alameda tried to fill up the losses with loans and used FTT (FTX's own crypto currency) as a collateral. They also used fake balance sheets to support the loan applications. When CZ (CEO of Binance) got hold of the fake balance sheet, he announced to dump his entire pile of FTT, evaporating the value of the loan collaterals. Alameda could not pay back FTX and FTX could not pay back their customers, which triggered the bankruptcy.

As for the crypto storage, you will be surprised how many people keep their crypto on an exchange (yes, like cash in a bank). Not many people are familiar enough with self custody. This became painfully clear when Dave Portnoy (Barstool), self proclaimed "Baron of Bitcoin", found out publicly the hard way, that his FTX bitcoins were gone. Not used FTX myself but it seems they called user accounts "wallets" which gave people a false sense that this "wallet" was their own. Turned out is was nothing more than an IOU from FTX. Given the disastrous admin at FTX, I wonder how many users still have copies of their IOU's at the time of collapse and whether these would hold up legally.

The new CEO, John Ray III, has spoken multiple times about lack of admin concerning crypto wallets, crypto keys custody and paper trails . I watched his testimonies, fascinating stuff. Crypto should theoretically leave a full trail but it might take a very long time to reverse engineer all the crypto flows and the legally claim ownership. I am not up to date how far they have reached to claw back crypto assets.

 

[poker]

Bernie Madoff

Madoff in a 2009 mugshot

Born
Bernard Lawrence Madoff
April 29, 1938
New York City, New York, U.S.

Died
April 14, 2021 (aged 82)
Butner, North Carolina, U.S.

Education
Hofstra University (BA)
Brooklyn Law School (withdrew)

Occupations
Stock brokerinvestment adviserfinancier

Employer
Bernard L. Madoff Investment Securities[1] (founder)

Known for
Being the chairman of Nasdaq and the Madoff investment scandal

Criminal status
Deceased

Spouse
Ruth Madoff (m. 1959)

Children
MarkAndrew

Conviction(s)
March 12, 2009 (pleaded guilty)

Criminal charge
Securities fraud, investment advisor fraud, mail fraud, wire fraud, money laundering, false statements, perjury, making false filings with the SEC, theft from an employee benefit plan

Penalty
150 years in prison, forfeiture of US$17.179 billion, lifetime ban from securities industry

Date apprehended
December 11, 2008

 

[Robert Mugabe]

Fitting. Singh was the first to sing.

on Bankman. Oh the irony.

 

[Valcazar]

Correct, during the trial it has become more an more clear that Caroline Ellison (his ex-girlfriend and Alameda CEO) seems to have been more of a puppet . SBF seemed to be calling most of the shots (thats why I put the "in charge" between quotes). Irrespective, Alameda was terrible at trading, despite having multiple insider advantages.

I somewhat suspect that Alameda was so bad at trading because it actually wasn't really created to do trades in the first place. (But that's neither here nor there.)

Alameda tried to fill up the losses with loans and used FTT (FTX's own crypto currency) as a collateral. They also used fake balance sheets to support the loan applications. When CZ (CEO of Binance) got hold of the fake balance sheet, he announced to dump his entire pile of FTT, evaporating the value of the loan collaterals. Alameda could not pay back FTX and FTX could not pay back their customers, which triggered the bankruptcy.

Yes, this I know.

As for the crypto storage, you will be surprised how many people keep their crypto on an exchange (yes, like cash in a bank). Not many people are familiar enough with self custody. This became painfully clear when Dave Portnoy (Barstool), self proclaimed "Baron of Bitcoin", found out publicly the hard way, that his FTX bitcoins were gone. Not used FTX myself but it seems they called user accounts "wallets" which gave people a false sense that this "wallet" was their own. Turned out is was nothing more than an IOU from FTX. Given the disastrous admin at FTX, I wonder how many users still have copies of their IOU's at the time of collapse and whether these would hold up legally.

OK, so this sounds like you are saying people actually did transfer those coins to FTX and FTX just flat out stole them?

The new CEO, John Ray III, has spoken multiple times about lack of admin concerning crypto wallets, crypto keys custody and paper trails . I watched his testimonies, fascinating stuff. Crypto should theoretically leave a full trail but it might take a very long time to reverse engineer all the crypto flows and the legally claim ownership. I am not up to date how far they have reached to claw back crypto assets.

I know he has mentioned repeatedly how bad their security was and how private keys were out in the open and so on.
The question I had was whether or not people literally had stored coins with FTX which then just completely vanished because they were transferred out.
That had NOT been the impression I had of what had gone on.
Thanks for clarifying.

 

[HungSowel]

FTT was not a cryptocurrency it was a token that just traded on FTX so FTX could manipulate the pricing and show fake volume numbers. I assume that the vast majority of the crypto held by FTX was from customers purchasing FTT tokens and not customers parking their crypto at FTX.

 

[mandrill]

Was there actually "missing coins" where the money supposedly is?
I know there was a hacker who stole a bunch of the crypto right as they declared bankruptcy, but are there coins that went missing otherwise?
I thought the fraud was primarily paper shuffling and loans from one thing to another and any actual wallets are accounted for. There weren't coins that "went missing".

I wasn't following the original collapse very much, so I don't know.
But my impression was not that there were missing or inaccessible coins that SBF might secretly hold the keys to.

They must have stuffed some money away in the confusion. For personal use later.

 

[icynaps]

I somewhat suspect that Alameda was so bad at trading because it actually wasn't really created to do trades in the first place. (But that's neither here nor there.)



Yes, this I know.



OK, so this sounds like you are saying people actually did transfer those coins to FTX and FTX just flat out stole them?



I know he has mentioned repeatedly how bad their security was and how private keys were out in the open and so on.
The question I had was whether or not people literally had stored coins with FTX which then just completely vanished because they were transferred out.
That had NOT been the impression I had of what had gone on.
Thanks for clarifying.

The problem is whether what you see on your screen is really yours or not. What I personally like about crypto is the self-custody aspect of it. When you control your own wallet, whatever is in it is really yours and can not be transferred out by anyone. Most crypto exchanges dont work like that though. What you see on your screen is basically an IOU of what FTX owes you. It seems that even the "wallet" they gave you was not a self-custody wallet, but another IOU wrapped in a wallet look-and-feel. The actual coins might not even be with FTX anymore. This is not much different than an old-fashioned bank. The cash you deposited is hardly ever there. What you see on your bank statement / screen is an IOU of what the bank owes you. You will get shit-scared if you actually see how little cash banks have on their balance sheets. However, conventional banks are regulated under law and accounts are guaranteed (up to a maximum amount) by local governments. In case the bank goes bankrupt and the capital has "vanished", the government will step in and pay to you what the bank "owed" you.

When a company (like FTX) is declared bankrupt by a court, the judge appoints a caretaker CEO (like John Ray III), and seals a snapshot of the company at that specific bankruptcy date. Whatever it has in hand, whatever is owed to it and whatever it owes to others at that date is established. The caretaker CEO is tasked by the judge to secure what is in hand, collect what is owed and then liquidate these two and use the proceeds to pay what it owes to other. During this process nothing is moving in or out (users have to sit on the sideline to see how things play out). Most cases the proceeds will not cover what is owed and they will pay out a percentage of what is owed only. So if SBF moved customer's cash or crypto out, he personally or the company he transferred it to (like Alameda), owes to FTX. So the cash / crypto did not "vanish" and to prove in court that is was "stolen" is very hard. As long as SBF says that intended to pay everything back, it is legally not stealing. That is why they slap guys like him and Madoff with charges like wire fraud, mail fraud, defrauding customers, defrauding investors, money laundering etc. Easy to prove in court, plenty of precedents and heavy sentences.

The massive problem that John Ray is facing is to figure out who owes what to whom and how to claw it all back. That is why the F%cked up administration is such a massive problem. And is a set of crypto keys owned by SBF or FTX? Is there enough legal framework / laws already in place to enforce pay backs? How much did FTX owe to each of the millions of users at the bankruptcy date? Do users have proof of that (hardcopies, screenshots)? Especially the crypto portion is wildly interesting. Cryptos have made a strong recovery since the bankruptcy and seem to be trending much higher towards the BTC halving. Even if John Ray could claw back only 50-60%, but cryptos have recovered a lot, customers could settle for a US Dollar value close to what they put in.

You made an interesting comment on Alameda's trading record. It is indeed very suspicious that they performed so badly. With the tools they had at their disposal, it would be close to impossible to lose on any trade, let alone multiple ones and at such disastrous amounts. I dont think the court case will delve into that unfortunately. It looks like the objective is to threaten huge sentences and like that force the suspects into deals. Not much of justice served I guess but maybe fastest way to get this debacle out of the way and complete the bankruptcy. In the end, you want users to get as much money back as possible.

 

[icynaps]

FTT was not a cryptocurrency it was a token that just traded on FTX so FTX could manipulate the pricing and show fake volume numbers. I assume that the vast majority of the crypto held by FTX was from customers purchasing FTT tokens and not customers parking their crypto at FTX.

OK, interesting. I have never used FTX, nor ever held FTT tokens. The way you describe it, it sounds like FTT was just another IOU from FTX to its customers. But an IOU with a fluctuating value. That is pretty wild. Makes Madoff's Ponzi scheme look like child's play.

 

[Ceiling Cat]

They must have stuffed some money away in the confusion. For personal use later.

If he did, the money will be old and moldy by the time he will get to spend it.

 

[icynaps]

Coffeezilla has posted a good video on YouTube, covering essentials from the trial. It about 45 mins but worth it.

 

[Valcazar]

The problem is whether what you see on your screen is really yours or not.

Yes. It seems clear now that they were taking advantage of people not understanding what was going on to just take control of the assets.
So the account can still say "5 bitcoin" but because people don't understand what's going on, they just spent the coins and hoped they could buy them back later.
(Lots of people don't understand that this happens in banks, too, but that's because money is involved and these things have regulations.)

You made an interesting comment on Alameda's trading record. It is indeed very suspicious that they performed so badly. With the tools they had at their disposal, it would be close to impossible to lose on any trade, let alone multiple ones and at such disastrous amounts. I dont think the court case will delve into that unfortunately. It looks like the objective is to threaten huge sentences and like that force the suspects into deals. Not much of justice served I guess but maybe fastest way to get this debacle out of the way and complete the bankruptcy. In the end, you want users to get as much money back as possible.

The bankruptcy is just about the bankruptcy.
That it was fundamentally a crypto based organization, and therefore almost certainly a scam first and foremost is a separate issue.

 

[rafterman]

And it's twenty five years in the slammer

Sam Bankman-Fried sentenced to 25 years in prison for multi-billion dollar FTX fraud

The judge handed down the sentence after rejecting Bankman-Fried’s claim that FTX customers did not actually lose money and accusing him of lying during his trial testimony

www.theglobeandmail.com

 

[Indiana]

25 yrs is way extreme. I don’t think he forced any loser to invest. 10 yrs would be more appropriate IMHO.
But I guess they threw the book at him to appease all the celebs.

 

[Robert Mugabe]

Most ironic name ever.

 

[Robert Mugabe]

Just tossing something out, as I'm not an expert in mega fraud: - 15 years.

If I was BF, I'd be scooping together as much money as I could to present compensation to the victims. Jail is going to be nasty for a soft, fat loser like him.

You'd think. But not always the case.
This cunt seems to be just fine.

 

[rajput]

25 yrs is way extreme. I don’t think he forced any loser to invest. 10 yrs would be more appropriate IMHO.
But I guess they threw the book at him to appease all the celebs.

How Sam Bankman-Fried's 25-year sentence compares to Bernie Madoff and Elizabeth Holmes's jail time

www.morningstar.com

.

 

[Valcazar]

25 yrs is way extreme. I don’t think he forced any loser to invest. 10 yrs would be more appropriate IMHO.
But I guess they threw the book at him to appease all the celebs.

Ahh... "those people were suckers, so it was ok to steal from them".
Always bound to show up at some point.

 

[mandrill]

25 yrs is way extreme. I don’t think he forced any loser to invest. 10 yrs would be more appropriate IMHO.
But I guess they threw the book at him to appease all the celebs.

Sounds about right to me for a massive fraud with multiple victims.

 

[LiveInTorontoPartyInMontreal]

The TERRA collapse ( May 2022) & FTX collapse ( Nov 2022 ) exacerbated & prolonged the Bitcoin downturn but we found a bottom at around $ 16,500 ( late Nov 2022). Many experts were calling for Bitcoin to go to zero at that time. Whenever I hear SBF's name or see his FUGLY headshot, it reminds me of this Tom Brady commercial :