Unexpectedly, it emerged that Sam Bankman-Fried, the creator of the cryptocurrency exchange FTX, had received critical information from an insider. This significant document in their bankruptcy case revealed new insight on his participation and activities within the business.
The Securities Commission of the Bahamas’ inquiry revealed that Ryan Salame, co-CEO of FTX, may have been involved in questionable activities. The announcement stunned the financial markets since it now appears that Mr. Salame and his company would face severe legal implications.
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The commission was forewarned by Salame about Bankman-“potential Fried’s misuse of clients’ assets,” according to the report.
A letter warning that FTX’s insolvency was imminent was sent out soon after a historic midterm election. This crucial warning was sent to individuals impacted on November 9th, two days before financial disaster struck them. But how would they react in such a short amount of time?
Salame warned authorities about a network of alleged fraud involving unauthorized transfers of funds between two connected businesses, FTX and Alameda Research.
As CNBC reported, “Salame told regulators that only three individuals at FTX — Bankman-Fried, Nishad Singh and Gary Wang — had the kind of access and authority to engineer the possibly fraudulent transfers to Alameda, a hedge fund and trading firm.
“Commissioners understood Salame to have said the fund movements and commingling allegedly authorized by Bankman-Fried were contrary to ‘normal corporate governance’ practices.”
Salame returned to the United States after his Securities Commission probe, settling in Massachusetts, Washington, D.C., and New Jersey—a trifecta of states he now refers to as “home.”
Salame and Bankman-Fried are two of the most well-known political donors in America. Salame gave the GOP a generous $20 million while Bankman-Fried generously contributed approximately $38 million to the Democratic Party during the most recent election cycle. Together, they provide just one illustration of how those who value democracy enough to make financial contributions pay for it.
The crypto king’s conflict with prosecutors reached a turning point on Wednesday when longtime insider Salame turned on Bankman-Fried and sided with the government. With this important ally on their side and claiming to be in possession of priceless information, additional insiders may soon follow suit, which may indicate major trouble for the defendants.
There are growing rumors that Caroline Ellison, Bankman-ex-girlfriend Fried’s and former CEO of Alameda Corporation, is actively collaborating with law enforcement. The New York Post first reported on her potential participation in the probe on Wednesday.
Former Securities and Exchange Commission lawyer Howard Fischer told the Post, “She would have among the greatest incentives to cooperate, as it was seeming likely that in his effort to exculpate himself, Bankman-Fried would try to finger her.”
“The speed of the indictment and the breadth of the charges” against Bankman-Fried could indicate that “someone relatively senior is cooperating with the federal authorities in exchange for leniency for their own potential misconduct,” he said.
Fischer added, “It is possible Bankman-Fried’s publicity tour, in which he repeatedly disclaimed either knowledge of — or responsibility for — mishandling or theft of customer assets, spurred senior officers to fear that he would specifically blame them.”
Bankman-time Fried’s was up on Monday night when U.S. law enforcement arrived in the Bahamas to arrest him in accordance with a sealed indictment created by the Southern District of New York Attorney’s Office.
A Bahamian court denied him bail the following day at the hearing because of the possibility that he might flee.
The eight accusations against Bankman-Fried include “two counts of wire fraud conspiracy, two counts of wire fraud, and one count of conspiracy to commit money laundering, each of which carries a maximum penalty of 20 years,” according to a news release from federal prosecutors. Each of these counts carries a five-year maximum sentence: “[one count of] conspiracy to commit commodities fraud; [one count of] conspiracy to commit securities fraud; and [one count of] conspiracy to defraud the United States and commit campaign finance violations.”
According to Bloomberg news sources, Bankman-Fried, the man sought by American officials for extradition, is steadfast in his decision and won’t be changing his mind any time soon.
The founder of said corporation found himself in handcuffs the day before he was scheduled to appear at a congressional hearing regarding the massive failure of his company.
Prior to his scheduled appearance before Congress, Bankman-Fried, a well-known Democratic fundraiser and ally, was unexpectedly detained. Many people were concerned that the timing wasn’t coincidental and that Bankman-Fried might have been silenced.
“I don’t understand why the Justice Department would not want him on record today and potentially tomorrow in a Senate hearing spilling his guts,” Republican Rep. Lance Gooden of Texas said, according to Fox Business.
“It’s very frustrating,” he said.
