New York
CNN
—
John J. Ray III, who made his identify overseeing the liquidation of Enron within the early 2000s, is the person in control of sifting in the course of the rubble of FTX, the once-mighty cryptocurrency change — based in 2019 and run into the bottom through 2022 through Sam Bankman-Fried.
On Tuesday, Ray testified earlier than the House Financial Services Committee, relaying what he may concerning the corporate he took over simply 4 weeks in the past. When a congressman requested Ray how his revel in with FTX compares with Enron, Ray was once fast to make the honour transparent:
“The crimes that were committed [at Enron] were highly orchestrated financial machinations by highly sophisticated people to keep transactions off balance sheets,” Ray advised lawmakers. FTX, however, was once “not sophisticated at all.”
“This is really old-fashioned embezzlement,” Ray persevered. “This is just taking money from customers, and using it for your own purpose.”
In different phrases: Look, there’s so much happening right here, however don’t let the entire communicate of virtual belongings confuse you — it is a con as outdated as time.
Mark Cohen, a attorney for Bankman-Fried, stated his shopper “is reviewing the charges with his legal team and considering all of his legal options.”
Federal prosecutors from the Southern District of New York (aka, a truly competitive, elite bunch of attorneys who infrequently lose in relation to white-collar circumstances) charged Sam Bankman-Fried with 8 fees of fraud and conspiracy. They say he misappropriated FTX shoppers’ deposits through the use of the ones budget to pay bills and money owed of Alameda, his crypto hedge fund.
US Attorney Damian Williams known as the FTX case “one of the biggest financial frauds in American history.”
Meanwhile, US markets regulators filed civil court cases accusing Bankman-Fried of defrauding buyers and shoppers, pronouncing he “built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto.”
And as though all that weren’t sufficient, Bankman-Fried’s successor, Ray, spent the day calling out the colossal mismanagement that happened earlier than FTX and Alameda collapsed. In addition to calling the former leaders “a very small group of grossly inexperienced and unsophisticated individuals” — below oath, thoughts you — Ray additionally illustrated that mismanagement through revealing that FTX used QuickBooks to run its trade, which was once valued at greater than $30 billion at its top. (Ray clarified: “Nothing against QuickBooks. It’s a very nice tool. Just not for a multibillion-dollar company.”)
So a lot… however I’ll keep on with the highlights.
Bankman-Fried may resist 115 years in jail if convicted on all 8 counts in opposition to him in a federal indictment unsealed Tuesday morning, in line with congressional statutory most sentencing pointers.
(That stated, he most likely wouldn’t get the utmost sentence, and it’s now not unusual for a pass judgement on to have the ones sentences run at the same time as.)
Bankman-Fried stays within the Bahamas, the place FTX was once based totally, and was once arrested Monday evening. He was once arraigned Tuesday, and a Bahamian pass judgement on denied his request for bail, pronouncing that he posed a flight possibility. (His extradition to the United States is within the works, however that procedure can take weeks.)
There’s nonetheless a ton we don’t know concerning the case. But the truth that prosecutors put in combination an eight-count, 14-page indictment simply 4 weeks after FTX filed for chapter suggests prosecutors will have an ace within the hollow, and/or a preponderance of proof in opposition to the corporate. (The SDNY are an competitive other folks, however they aren’t sloppy, and so they don’t indict with no cast case.)
Several attorneys now not concerned within the case have advised me that the velocity of Bankman-Fried’s arrest alerts that former FTX staff could also be assisting prosecutors.
“The smart move by former employees would be to rush to become a cooperator in exchange for more lenient treatment, and it would not be surprising to learn that one or more of them had done so,” stated Howard A. Fischer, a former SEC attorney. He added: “The fact that only one person has been charged so far would seem to indicate this as well.”
Correction: An previous model of this tale incorrectly recognized John Ray. He is Sam Bankman-Fried’s successor.
