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FTX execs plead guilty while throwing SBF under bus

FTX execs plead guilty while throwing SBF under bus

#FTX #execs #plead #guilty #throwing #SBF #bus Welcome to InNewCL, here is the new story we have for you today:

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Alameda Research CEO Caroline Ellison (left) and FTX co-founder Gary Wang (right), both of whom have pleaded guilty to federal fraud charges.

Alameda Research CEO Caroline Ellison, (left) and FTX co-founder Gary Wang (right), both of whom have pleaded guilty to federal fraud charges.Screenshot: Twitter/Publish0x

Two executives linked to FTX, the once-bankrupt cryptocurrency exchange worth $32 billion, have pleaded guilty, according to US Attorney Damian Williams, who made the announcement in a video statement posted online late wednesday. And that’s really bad news for FTX co-founder Sam Bankman-Fried, as executives say they broke the law on Bankman-Fried’s orders.

It looks like Bankman-Fried, aka SBF, embarked on a whirlwind media tour to win hearts and minds with his “hell, how did I ever make such a mistake” act, apparently its partners in crypto crime struck a deal with the FBI.

FTX co-founder Gary Wang pleaded guilty to four charges, including wire fraud, conspiracy to commit wire fraud, conspiracy to commit merchandise fraud and conspiracy to commit securities fraud. The 29-year-old previously worked at Google and met SBF during a high school math camp together, according to CoinDesk. According to ABC News, Wang faces a maximum of 50 years in prison.

Caroline Ellison, CEO of Alameda Research, who was reportedly at one point romantically involved with SBF, has pleaded guilty to seven counts, including wire fraud, conspiracy to commit wire fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering. Ellison and SBF met while working together at the trading company Jane Street. The 28-year-old faces a maximum of 110 years in prison.

SBF was arrested in the Bahamas last week and charged in the US on eight counts, including wire fraud, money laundering and illegal political donations. SBF, who was a very public supporter of the Democrats and a private supporter of the Republicans, was in prison in the Bahamas where he originally planned to fight extradition to the US, but that plan changed after a few days of tinkling.

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SBF has tried during its media tour after the collapse to claim that it didn’t know what was going on at Alameda Research, the hedge fund he co-founded with FTX. SBF even claimed he did not knowingly mix funds between Alameda and FTX, but the explanation was just blatant bullshit given that SBF would admit in the same interviews that FTX users would send funds to Alameda to have their accounts debited see the crypto platform. Why? Because nobody would give FTX a bank account. Alameda Research, as SBF 2021 declaredwas a name deliberately chosen to sound boring and respectable, which ultimately allowed him to get a bank account.

“Even the Alameda Research name, I get it, there’s a backstory to why the Research name is there…” podcast host Ash Bennington asked in June 2021.

“Yeah, I mean, it’s kind of a quick backstory, which is just like, I don’t know, it doesn’t sound bad,” SBF replied, laughing.

“I don’t want to give reasons to the banks for not giving us accounts and stuff like that, especially in 2017 when you gave your company a name like ‘We do cryptocurrency, bitcoin, arbitrage, multinational stuff’ that no one is going to give you a.” Bank account if that is your company name […] but everyone wants to serve a research institute,” SBF continued.

In addition to the criminal charges outlined by the Justice Department, the SEC announced civil charges against Wang and Ellison late Wednesday. The SEC complaint alleges the scam started from the beginning and cheated investors out of billions of dollars.

From the SEC’s civil lawsuit:

FTX raised more than $1.8 billion from investors, including US investors, who bought an equity interest in FTX because they believed FTX had adequate controls and risk management measures in place. Unbeknownst to these investors (and FTX’s trading clients), Bankman-Fried orchestrated a massive, years-long scam by diverting billions of dollars of the trading platform’s client funds for his own personal gain and helping to grow his crypto empire. The defendants were active participants in the program and engaged in behaviors critical to its success.

The SEC also alleges that Wang built a backdoor for SBF that allowed it to funnel FTX client funds to Alameda. SBF has previously denied that such a backdoor exists, pointing out that he doesn’t even know how to code. But the SEC says the backdoor was definitely real.

Wang created and helped create the software code that enabled Alameda to redirect FTX client funds. Ellison, in turn, used the embezzled FTX client funds for Alameda’s trading activities. And Bankman-Fried used those client funds to make secret venture investments, lavish real estate purchases, and large political donations.

Many news outlets have labeled what happened to FTX in the days leading up to its demise as a “run on the bank.” And while that’s partially true, it obscures the real reason for FTX’s collapse. In reality, rival crypto exchange Binance, led by Changpeng “CZ” Zhao, bought a large stake in FTX back in 2019. When CZ and SBF had a dispute, FTX bought CZ’s stake in the company for around $2 billion from FTX’s native token known as FTT. CZ then decided to cash in his fun money, but FTX failed to deliver the cash value of the worthless token that knocked over the first dominoes.

Many people are angry with CZ for the move, including former FTX spokesman Kevin O’Leary, who received $15 million to promote FTX. But CZ didn’t do anything illegal by asking to cash out his chips. CZ simply called SBF’s bluff, even though CZ is sitting on his own house of cards that could collapse at any moment. Binance’s token is currently the third-largest floating-priced crypto token in existence, behind Bitcoin and Ethereum.

But the SEC complaint provides even more insight into what SBF has allegedly been doing to FTT tokens over the three years of its existence.

Beyond his “line of credit” with FTX, Ellison, under direction from Bankman-Fried, arranged for Alameda to borrow billions of dollars from third-party lenders. These loans were secured in significant part by Alameda’s holdings in FTT — an illiquid crypto-asset security issued by FTX and made available to Alameda at no cost. Ellison, acting on Bankman-Fried’s direction, engaged in automated purchases of FTT tokens on various platforms to inflate the price of those tokens and inflate the value of Alameda’s collateral, allowing Alameda to raise even more money from outside lenders to borrow increased risk for the lenders and the investors and customers of FTX, all to promote the program.

Did you catch the part that says “Ordered by Bankman-Fried”? This is the kind of language that emerges when one party is talking to the prosecutors and the other party is just trying to win over public opinion in court.

Amazingly, the SEC claims that SBF was so bad at trading Alameda that when the market turned sour, his bad bets caught up with him immediately.

When crypto asset prices plummeted in May 2022, Alameda’s lenders demanded billions of dollars in loan repayments. Despite the fact that Alameda had already acquired billions of dollars in FTX customer assets at the time, it was unable to meet its loan obligations. Bankman-Fried, with the knowledge of the defendants, directed FTX to divert billions more in customer assets to Alameda to ensure that Alameda maintained its lending relationships and that money could continue to flow in from lenders and other investors. Ellison then used FTX’s client assets to pay off Alameda’s debt.

And then it all collapses, according to the SEC:

Even in November 2022, when Bankman-Fried and Ellison faced billions in customer pullout demands that FTX could not meet, they used Wang’s knowledge to mislead investors they needed money from to plug a billion-dollar hole. That brazen, multi-year scheme finally came to an end when FTX, Alameda, and their hodgepodge of affiliates filed for bankruptcy on November 11, 2022.

Ellison’s bail was set at an extremely low $250,000, according to CoinDesk, although it’s not clear if Wang’s bail was set at the same price. Curiously, the unsealed plea agreement states that if Ellison is not a US citizen, she may face deportation after serving a sentence. Ellison is believed to have been born in the US, but CoinDesk speculates that she may have given up her American citizenship to avoid taxes, which cryptocurrency traders who move abroad sometimes do.

Cryptocurrency is inherently a Ponzi scheme that powerful and connected people use to extract wealth from people who throw their few hundred dollars into a lottery ticket in hopes of getting rich. But the game is rigged against them, and the house always wins. Unless you’re a fucking idiot, a casino manager. Former President Donald Trump is known to have lost money trying to operate casinos. And it looks like SBF will likely go down in history along with Trump and all the other scams of that era. It may just take a while to uncover them all.

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