Crypto Opinions & News Game Over for FTX " Updated "

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upnorth

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Sam Bankman-Fried, founder of the failed cryptocurrency exchange FTX, has been denied bail by a judge in the Bahamas.

US authorities charged Mr Bankman-Fried with "one of the biggest financial frauds in US history" on Tuesday. The ex-FTX boss built a "house of cards on a foundation of deception," Securities and Exchange Commission (SEC) Chair Gary Gensler said. Mr Bankman-Fried has indicated that he will fight extradition to the US. Bahamas Chief Magistrate JoyAnn Ferguson-Pratt denied the petition for his release on bail, citing a "great" risk of flight, and ordered that he be kept on remand at a correctional facility until 8 February. He was arrested in the Bahamas on Monday.

Last month, FTX filed for bankruptcy in the US, leaving many users unable to withdraw their funds. According to a court filing, FTX owed its 50 largest creditors almost $3.1bn (£2.5bn). Among the most serious allegations against Mr Bankman-Fried is that he used billions of dollars of customer funds to prop up his investment trading company, Alameda. It is unclear how much people who have funds in the exchange will get back at the end of bankruptcy proceedings - though many experts have warned it may be a small fraction of what they deposited. Mr Bankman-Fried faces eight criminal charges in the US, including wire fraud, money laundering and conspiracy to defraud. He also faces civil charges including misleading investors who put more than $1bn into the company.
 

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upnorth

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Two members of Samuel Bankman-Fried's inner circle have pleaded guilty to defrauding equity investors in the moribund FTX cryptocurrency trading platform.

Yesterday the US Securities and Exchange Commission announced that it was charging Gary Wang, former CTO and co-founder of FTX, and Caroline Ellison, former CEO of sister company Alameda Research, with fraud. This was followed by a statement from US Attorney for the Southern District of New York Damian Williams that said Ellison and Wang had admitted to their roles in the frauds that contributed to the collapse of FTX. He added that they are "both cooperating" with the investigation.

Williams also said: "Samuel Bankman-Fried is now in FBI custody and is on his way back to the United States. He will be transported directly to the Southern District of New York and he will appear in court before a judge in this district as soon as possible."
 
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vtqhtr413

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In the joint statement, the US Federal Reserve, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency said they were closely monitoring the crypto activities of banking organizations "The events of the past year have been marked by significant volatility and the exposure of vulnerabilities in the crypto-asset sector," the statement said. The regulators also said that issuing or holding crypto tokens, which are stored on public, decentralized networks was "highly likely to be inconsistent with safe and sound banking practices". Banks were also encouraged to take steps to avoid problems in the digital asset market spreading to the wider financial system. "It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system," it added.
 

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The collapse of crypto exchange FTX sparked a run on Silvergate Capital, forcing the bank to sell assets at a steep loss to cover some $8.1 billion in withdrawals. From a report: Crypto-related deposits plunged 68% in the fourth quarter, the bank said in an early release of some quarterly results. To satisfy the withdrawals, Silvergate liquidated debt it was holding on its balance sheet. The $718 million it lost selling the debt far exceeds the bank's total profits since at least 2013. The bank has laid off 40% of its staff, or about 200 employees, and said it would pare back its businesses. It shelved a plan to launch its own digital currency, writing off $196 million it spent buying the technology that Facebook had built in its failed attempt to start a crypto-based payments network. Silvergate caters to companies in the crypto business, taking their deposits and operating a network that links investors to crypto exchanges. FTX and other companies controlled by its founder, Sam Bankman-Fried, accounted for about $1 billion of the bank's deposits. Silvergate was able to survive such a steep decline in deposits because it isn't structured like most banks. It sold off much of its traditional banking operations and branches to focus on providing bank accounts to crypto exchanges and investors. Crypto-related deposits account for some 90% of the bank's total, and it keeps almost all of its deposits in cash or easy-to-sell securities. The bank said it remains committed to crypto and has the funding to handle a "sustained period of transformation."
 

upnorth

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Collapsed cryptocurrency exchange FTX has located more than $5bn (£4.1bn) of assets, an attorney for the firm says.

However, a US bankruptcy court was told on Wednesday that the extent of losses to customers is still not known. Prosecutors have accused FTX's former chief executive Sam Bankman-Fried of orchestrating an "epic" fraud that may have cost investors, customers and lenders billions of dollars. Mr Bankman-Fried has pleaded not guilty to charges that he cheated investors. "We have located over 5 billion dollars of cash, liquid cryptocurrency and liquid investment securities," Andy Dietderich, an attorney for FTX, told US Bankruptcy Judge John Dorsey in Delaware. Mr Dietderich said that the recovered funds do not include assets seized by the Securities Commission of the Bahamas, where FTX was based and where Mr Bankman-Fried was living at the time of his arrest. Most of FTX's customers and investors who are facing losses have not been named in the hearings.
 

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Sam Bankman-Fried instructed his FTX cofounder Gary Wang to create a "secret" backdoor to enable his trading firm Alameda to borrow $65 billion of clients' money from the exchange without their permission, the Delaware bankruptcy court was told Wednesday.

Wang was told to create a "backdoor, a secret way for Alameda to borrow from customers on the exchange without permission," said FTX lawyer Andrew Dietderich.
 

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New FTX Chief Says Crypto Exchange Could Restart
FTX's new chief executive, John J. Ray III, said he is looking into the possibility of reviving the bankrupt crypto exchange as he works to return money to the failed company's customers and creditors. From a report: In his first interview since taking over FTX in November, Mr. Ray said that he has set up a task force to explore restarting FTX.com, the company's main international exchange. Although top FTX executives have been accused of criminal misconduct, some customers have praised its technology and suggested that there would be value in rebooting the platform, he said. "Everything is on the table," Mr. Ray said. "If there is a path forward on that, then we will not only explore that, we'll do it."
FTX's bankruptcy filing marked the largest of several failures of cryptocurrency platforms last year that froze millions of users' access to their accounts. FTX, Celsius Network, Voyager Digital and BlockFi have used the chapter 11 process to explore restarting their businesses and selling their platforms to stronger rivals. Another option is to simply close up shop and return crypto holdings to customers as quickly as possible. Mr. Ray said he would look into whether reviving FTX's international exchange would recover more value for the company's customers than his team could get from simply liquidating assets or selling the platform. "There are stakeholders we're working with who've identified what they see is a viable business," he said.
 
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upnorth

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Another top executive at collapsed cryptocurrency firm FTX has pleaded guilty to criminal charges in the US.

Former engineering director Nishad Singh admitted six charges, which included three counts of conspiracy to commit fraud on Tuesday. The plea comes after FTX founder Sam Bankman-Fried has been accused of 12 criminal charges, which he denies. FTX filed for bankruptcy last year, leaving many users unable to withdraw their funds.
Mr Singh, a childhood friend of Mr Bankman-Fried's brother, worked at Alameda Research and was later part of the team that established FTX. Like Mr Bankman-Fried, he had also become a multi-million dollar donor to political campaigns in recent years. According to court filings, he wrote the software code that ultimately gave Alameda special treatment on the FTX platform and helped Mr Bankman-Fried backdate financial transactions to make FTX's financial performance look better than it was.

The filings said the 27-year-old was also aware of Mr Bankman-Fried transferring FTX customer funds, as the company entered shaky territory following the collapse of crypto prices in 2022. Mr Singh withdrew $6m for his own personal use and expenditure in 2022, as the firm approached its November bankruptcy, according to the documents. "I am unbelievably sorry for my role in all of this," said Mr Singh, who is facing civil fraud charges from financial regulators on top of the criminal charges.
 

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Sam Bankman-Fried received about $2.2 billion in payments and loans from FTX entities, mainly from Alameda Research, FTX and its affiliated debtors said yesterday. Bankman-Fried's fellow executives received another $951 million combined, including $839 million to three executives who already pleaded guilty to fraud, FTX and its debtors said in a press release describing a series of filings made in US Bankruptcy Court in Delaware.

As summarized by the Financial Times, "Bankman-Fried and five members of his inner circle transferred $3.2 billion in total to their personal accounts in the form of 'payments and loans,' the funds primarily coming from Alameda Research, a crypto trading hedge fund affiliated with FTX." John Ray, the new CEO leading FTX through bankruptcy proceedings, "has been seeking to identify the location of cryptocurrency and other assets that can be eventually returned to the millions of FTX customers whose accounts have been frozen since its collapse," the Financial Times noted.

Bankman-Fried, who faces criminal fraud and conspiracy charges, is accused of improperly diverting billions of dollars of FTX customer funds to Alameda. The other payment and loan totals described by FTX yesterday were $587 million to Nishad Singh, $246 million to Zixiao "Gary" Wang, $87 million to Ryan Salame, $25 million to John Samuel Trabucco, and $6 million to Caroline Ellison. Singh, Wang, and Ellison have pleaded guilty to criminal fraud charges and are cooperating with government prosecutors.
FTX's press release yesterday said the $3.2 billion transferred to Bankman-Fried and fellow executives "exclude over $240 million spent to purchase luxury property in the Bahamas, political and charitable donations made directly by the FTX Debtors, and substantial transfers to non-Debtor subsidiaries in the Bahamas and other jurisdictions." FTX said it hasn't yet determined how much money it will be able to return to customers.
 

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The Margaritaville bill always comes due — and in FTX's case, it was way higher than we thought. Back in November, it emerged that the now-defunct crypto exchange's closely-tied hedge fund, the also-bankrupt Alameda Research, owed the Jimmy Buffet-owned Bahamian resort roughly $50,000. Which, of course, is already a lot of debt for cheeseburgers, be they in paradise or elsewhere. But apparently, $50k isn't even half of what FTX and Alameda owe Nassau's Margaritaville. In fact, it's hardly a tenth. According to Insider, bankruptcy court documents filed in Delaware last week revealed that the flip-flop sanctuary is claiming a staggering $599,409 from the Sam Bankman-Fried-founded crypto hedge fund. You want fries with that!?
 

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Bankrupt crypto exchange FTX has recovered over $7.3 billion in cash and liquid crypto assets, an increase of more than $800 million since January, the company's attorney said on Wednesday at a U.S. bankruptcy court hearing in Delaware. Reuters reports: FTX attorney Andy Dietderich said the company is starting to think about its future after months of effort devoted to collecting resources and figuring out what went wrong under the leadership of indicted ex-founder Sam Bankman-Fried. Bankman-Fried has pleaded not guilty. "The situation has stabilized, and the dumpster fire is out
 

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Though disgraced former FTX CEO Sam Bankman-Fried generally didn't exactly handle his customers' money well — or, according to some former coworkers, legally — there may actually be one very bright spot on the defunct crypto exchange's balance sheet: a massive investment into a buzzy AI startup which, according to new reporting from Semafor, may ultimately spell good news for former FTX customers.

Per Semafor, FTX appears to have made a $500 million dollar investment into Anthropic, an OpenAI rival that made waves back in January when its model was reported to have passed a blindly-graded George Mason University law and economics exam with flying colors (a claim, it's worth noting, that was made weeks before the OpenAI-built GPT-4's test-taking prowess was publicly known.)

And FTX isn't the only high-profile Anthropic investor. Seemingly in a move to level the playing field in its battle with the financially tethered Microsoft and OpenAI, a little company known as Google, among other investors, invested $300 million into the AI firm back in February.
 

plat

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This is so sordid, right? A little nick in the facade and all this gooey stuff comes oozing out. Well, it seems (but isn't solid yet) that several celebrities may be on the hook as part of a class action lawsuit that claims these celebrities gave "credibility" to the crypto, making it more inviting. The news article is also chock-full of descriptions of some really sneaky and conniving behaviors of Bankman-Fried, leading one to think "no surprises there" that bail was revoked. .
 

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Ryan Salame, who was co-CEO of FTX's Bahamas entity FTX Digital Markets, pleaded guilty to conspiracy to make unlawful contributions and defraud the Federal Election Commission and conspiracy to operate an unlicensed money transferring business. “I made political contributions in my name that were funded by transfers from an Alameda subsidiary,” Salame told Judge Lewis Kaplan, who is also overseeing Bankman-Fried's trial, as he entered his guilty plea.

The transfers were “categorized as loans,” Salame said, but “it was understood that the would not be repaid.” The donations, according to Salame, “were for the benefit of initiatives introduced by others but supported by Sam Bankman-Fried.” In its original indictment against Sam Bankman-Fried, which listed Salame as an unnamed co-conspirator, the U.S. Department of Justice charged Bankman-Fried with using a straw donor scheme to secretly make political donations in violation of campaign finance laws.

As Bankman-Fried publicly branded himself as an ardent supporter of the Democratic party – he made the second-largest single donation to Joe Biden’s 2020 presidential campaign, and he and his family were active in a variety of left-leaning political causes – he allegedly used Salame to covertly court Republicans.
Salame doled out more than $24 million to Republican political candidates during his time at FTX, and he was the 11th largest individual U.S. political donor in 2022 according to OpenSecrets.org.
 

upnorth

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Sam Bankman-Fried, the founder and former CEO of crypto exchange FTX and trading firm Alameda Research, has been found guilty of seven criminal charges.
The combined maximum sentences for all of those charges could see Bankman-Fried go away for 110 years.

A key witness in the case appears to have been Bankman-Fried's sometime romantic partner, Caroline Ellison. She testified that Bankman-Fried directed her to shift around $10 billion from FTX to bail out Alameda. FTX co-founder Gary Wang also testified that Bankman-Fried knew of Alameda's troubles and of funds shifted to address them, but did not challenge the decisions. As CEO of a giant financial services outfit, Bankman-Fried should have known the money-shuffle was not appropriate.

Bankman-Fried, an infamously awkward character, testified in his defence and portrayed himself as the victim of the never-ending ructions of the crypto market. Which clearly did not work – the jury needed just four hours to reach seven guilty verdicts. Sentencing in United States vs Bankman-Fried has been set for March 28, 2024.
 
F

ForgottenSeer 97327

The only purpose of cryptocurrencies is to allow ransom payments to criminals. Also, power consumption is irresponsibly high for these types of currencies.
First the positives of crypto currency
  1. Due to the interlaced blocks (referring to each other) and the decentralized cloud administration it could be an error proof banking system
  2. Bitcoins are stored in secured (encrypted) wallets and brokers and exchanges platforms connect those wallets to accounts
  3. Crypto currencies are anomalously and you only need private crypto keys to unlock/prove they are yours

Negatives
  1. Crypto currencies are not backed (like bank deposits) and exchange platforms are not backed either (like commercial banks are backed by your central banks)
  2. There is no central governance and it is all digital, meaning that while the system itself is unbreakable, the weak points are the access points to this system, like brokers and exchange platforms (FTX created a software backdoor to sluice away money of the account holders).
  3. Depending on the exchange platform the identity of the account holder is yes/no verified

Bottom line
  1. Because of the lack of central governance and the anomalously, it is the payment method for illegal and covert activities (as Oldie1950 mentioned)
  2. Because illegal activities are estimated to sum up to 5 to 20 percent of a country's economy (hence its National Income), the positive long term outlook for (some) crypto currency makes them attractive target for investors (criminals continuously need a place to store the money they make, so over the long range crypto currencies will increase in value due to criminal demand)
  3. Because of the lack of central control, investors forming (digital) groups can influence the value of crypto currencies by selling or buying them in masses, making it a risky investment for the average person (because the value can be manipulated) which explain the stories of people earning hyper profits and people losing all they had invested.
 
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Ink

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While it will doubtless be a huge relief to customers to recover their funds, whether the money is being repaid “in full” is a matter of perspective.

At the time of the collapse, Bitcoin was trading at around $16k, and they will be recovering that value. But the value of Bitcoin has since risen to almost $48k, so if their funds had remained in Bitcoin, they’d have three times as much money by now.
 

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