Sam Bankman-Fried and other members of the inner circle of the collapsed crypto exchange FTX allegedly formed a discussion group on the Signal cipher platform under the name Wirefraud (literally wire fraud).
The Australian Financial Review reported that the Wirefraud newsgroup was used to send end-to-end figures regarding FTX and its hedge fund, Alameda Research, in the run-up to the implosion of the exchange. According to the daily, members of the secretive group included Bankman-Fried, his FTX partners Zixiao “Gary” Wang and Nishad Singh, and Alameda Research CEO Caroline Ellison.
Shortly before being arrested in the Bahamas at the request of the US government on Monday, Bankman-Fried denied the story. If that’s true, then I wasn’t a member of that inner circle (I’m sure that’s just not true, I’ve never heard of such a group), he said on Twitter .
Disgraced FTX boss Sam Bankman-Fried once had a private chat group with his inner circle under the name Wirefraud, according to a report. The crypto billionaire, who was tipped as the future Warren Buffet according to fortune magazine, would then have used this dubious name [Wirefraud] to name a group chat on Signal with FTX co-founder Zixiao “Gary” Wang and engineer Nishad Singh, according to the Australian Financial Review.
Another member of that chat group was allegedly Bankman-Fried ex Caroline Ellison, who was the managing director of Alameda Research, the private crypto fund the FTX chief is accused of moving billions into. dollars in client funds.
The report was released hours before Bankman-Fried was indicted on New York federal charges.
In his last tweet before his arrest on Monday, Bankman-Fried admitted he mightn’t rule out such a group chat, just saying he wasn’t involved: If this is true, then I was not a member of this inner circle,” he wrote in response to the article.
Attorney John J Ray III is due to testify at the Congressional hearing in place of Bankman-Fried. Ray took over as CEO of FTX to guide the company through the bankruptcy as well as the multiple criminal and other investigations it is currently facing from law enforcement and regulators in the United States and the stranger.
FTX filed for bankruptcy last month following a meteoric collapse in its fortunes left it with a multi-billion dollar gap in its accounts. In his draft statement to the House committee, Ray said it was already known that FTX assets were commingled with assets from Alameda’s trading platform and that Alameda used client funds to engage in margin trading, which exposed clients’ funds to massive losses.
He added that the job of untangling FTX’s finances was complicated as we are starting from near zero in terms of corporate infrastructure and record keeping that one would expect to find in a multi-billion dollar international business. dollars.
A very controversial business management
Never in my career have I seen such a complete failure of corporate controls and such a complete absence of reliable financial information as has happened here,” noted FTX’s new CEO. A statement that underscores the chaos and mismanagement at the heart of what was once a major player in the crypto industry with deep Washington, DC ties. The demise of Bankman-Fried’s FTX empire has thrown the crypto markets into crisis.
Ray said he found FTX International, FTX US and Bankman-Fried trading firm Alameda Research to have “compromised systems integrity”, “flawed regulatory oversight” and “a concentration of control in the hands of a very small group.” of inexperienced and unsophisticated people, potentially compromised.
The scathing case in federal bankruptcy court in Delaware painted a picture of Bankman-Fried’s serious mismanagement at FTX, a company that raised billions of dollars from top venture capitalists such as Sequoia. , SoftBank and Temasek.
FTX did not maintain proper books, records or security controls for the digital assets it held for clients; used software to conceal the misuse of client funds; and gave Alameda special treatment, Ray said, adding that debtors don’t have an accounting department and outsource that function.
He said the company did not have an accurate list of its own bank accounts, or even a complete record of who worked for FTX. He added that FTX used an insecure group email account to manage security keys for its digital assets.
The group’s funds had been used to buy homes and other personal items for staff and advisers, and payments were approved through the use of personalized emojis in an online chat, according to Ray.
Ray said one of the most widespread failures with the company behind the FTX exchange was the lack of decision-making documents. He said Bankman-Fried often used messaging platforms with an auto-delete feature and encouraged employees to do the same.
Among the assets listed in the document were $4.1 billion in related party loans made by Alameda, including $3.3 billion from Bankman-Fried both personally and an entity he controlled. Bankman-Fried previously told the Financial Times that FTX accidentally donated $8 billion in funds to FTX Alameda clients.
Ray said that among the main objectives of the bankruptcy proceedings was a thorough, transparent and deliberate investigation of the claims [juridiques potentielles] once morest Bankman-Fried.
What risks Sam Bankman-Fried
In total, Bankman-Fried was charged with eight criminal offenses including wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering. He was also accused of making illegal contributions to an election campaign, a notable charge as he was one of the biggest political donors this year. Most of these donations would have been directed to the Democratic party. According to Nicholas Biase, spokesman for US prosecutors, these charges might land him in prison for decades, with a maximum sentence of 115 years.
“I have a feeling he’s going to have to serve a pretty heavy sentence,” said Nick Akerman, former assistant US attorney. Under US federal law, a conviction for a single count of wire fraud carries a sentence of up to 20 years in prison. According to other sources, there wouldn’t be an indictment if prosecutors weren’t absolutely confident that they’re going to get a conviction. In addition, US prosecutors also accused Bankman-Fried of playing a central role in the collapse of FTX, which cost investors billions of dollars.
The criminal indictment is in addition to civil charges announced earlier Tuesday by the Securities and Exchange Commission. The SEC alleges that Bankman-Fried defrauded investors and illegally used their money to purchase real estate for himself and his family. US authorities have said they will try to recover any financial gain made by Bankman-Fried in the alleged fraud. They are expected to request his extradition to the United States, although the date of this request is unclear. The Bahamas and the United States have an extradition treaty in place.
We allege Bankman-Fried built a house of cards on a foundation of deception while telling investors it was one of the safest buildings in the cryptocurrency industry, said SEC Chairman Gary Gensler. . The SEC complaint also notes that Bankman-Fried had raised more than $1.8 billion from investors since May 2019 by promoting FTX as a safe and responsible platform for trading digital assets. Instead, the complaint says that Bankman-Fried diverted client funds to Alameda Research without informing them.
Bankman-Fried then used Alameda Research as his personal piggy bank to buy luxury condominiums, support political campaigns, and make private investments, among other uses. None of this has been disclosed to FTX stock investors or clients of the exchange. Alameda Research did not separate funds from FTX investors and Alameda Research investments, using that money to indiscriminately fund its trading operations, as well as other Bankman-Fried businesses, the complaint reads. filed with the United States SEC.
Source : Australian Financial Review
