There's only two ways this can turn out, both bad, but one massively worse than the other.
Prosecutors from New York have unsealed the indictment against him, charging Bankman-Fried with wire fraud, conspiracy, committing fraud against investors, lenders, and the United States, securities fraud, money laundering, and violation of campaign finance laws.
But things aren't as straightforward as it sounds - there's a real possibility some, maybe even most of these charges, get dropped.
It All Comes Down to This: Did Sam Misuse of Funds Include Those from FTX US - a Separate Company and Website from FTX International?
This could be the difference between life in prison, or 10 years with a chance to get out early with good behavior.
The US will only charge him with crimes he committed while in the US, or against US citizens.
For example, US law enforcement cannot pursue a case where investors from France were victims of fraud committed by a company in the Bahamas. Actually, no country on earth prosecutes cases under those circumstances.
As covered in previous articles, if someone from the United States visited FTX International (ftx.com) they would find themselves unable to get past the home page, they were blocked from joining, only able to view a message re-directing them to FTX's platform for US citizens (ftx.us).
The platforms did not share storage of funds with FTX International either, separate wallets for crypto, separate banks for fiat currency.
In other words, it would be extremely easy for Sam to exclude US funds from his alleged scheme, which would be the smartest thing someone in his position could do (besides leave everyone's funds alone).
So, are there any signs indicating FTX US funds were left untouched?
While Sam's word means very little and I'm not suggesting you put any trust into him, for some reason in every interview he's done following the FTX collapse, he made sure to tell the audience that the US site was not effected, everyone's funds are still there, and he believes 'it could open to let people withdraw today'.
If that is true, Sam committed no crime while in the US, and committed no crimes against US citizens, and suddenly this becomes a very different thing.
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| Sam Bankman-Fried Being Taken Into Custody by Police in the Bahamas. |
As predicted in previous articles, we see Sam being charged with additional crimes like wire fraud, this so they can still lock him up for something even if the charges directly related to him losing billions don't hold up in court.
Similar to how the FBI lacked evidence against Mafia leaders for murders they knew they had committed, so they started digging through their tax history and locked them up for tax violations.
Are There any Signs Sam Mismanaged Funds Belonging to Both FTX International and FTX US Users?
The acting CEO, John J. Ray, appointed to oversee the company's bankruptcy testified with Congress yesterday, Sam was scheduled to appear but that was canceled with his arrest.
Ray stated they had "NOT found evidence (that Sam made unauthorized withdraws from US customer funds) of that yet"
This is a HUGE - It means if what Ray said is True, Prosecutors do Not Have Evidence for Several of the Charges Against Him!
If Sam really did leave US funds alone, several charges get dropped before he ever sets foot in a courtroom.
However, a source on the 'inside' at FTX told me that the new CEO "thinks Sam was so reckless with funds from FTX International he's assuming Sam did the same at FTX US and just hid it better" adding that this was "just a personal opinion, but it's a fact that they're looking into where every dollar or token went, so if Sam did anything he shouldn't have they will find it'.
The new CEO and his team have been digging through the records for nearly a month, and their failure to find anything showing Sam's abuse of funds included the FTX US has me prepared for the possibility Sam told the here.
Remember, FTX US staff included former government regulators - would you hire former IRS tax auditors to work for your company if you were secretly committing tax fraud? Probably not.
It's starting to look like Sam followed the rules when it came to FTX US, all high-profile employees specifically worked for FTX US, and saw no red flags that would stop them from vouching for Sam as a legitimate business person.
Where they went wrong is assuming FTX International was operating similarly to FTX US - when in reality Sam saw FTX International as the place where the rules no longer applied.
Life in Prison?
Yes, really. Many think life-sentences aren't given for financial crimes, and that's true for the average case of someone stealing thousands or even low-millions from a company they work for.
But when someone defrauds investors at a total cost in the billions, everyone involved is willing to punish them as severely as legally allowed. Prosecutors seek the maximum sentence, and if guilty, the jury will agree.
Looking at the other high-profile multi-billion dollar scandals, one thing that immediately stands out is how we refer to them by the company name, 'Enron scandal' or 'Worldcom scandal' for example. With the focus on the companies involved, the names of the actual people behind those scandals are generally forgotten.
A multi-billion dollar loss with all the blame focused on 1 individual, the only other name that comes to mind is Bernie Madoff, the former head of the NASDAQ stock exchange, who lost billions of investors funds when his investment firm was exposed for not investing in anyone, it was actually the largest Ponzi scheme in history.
If Sam truly belongs in the same category as Madoff, he should expect a similar fate. Madoff received a sentence of 150 years in prison in 2009 - he died there last year.
An Unplanned, Early Exit?
Sam was politically connected, and many FTX members with empty accounts are wondering how their money is gone, but Sam had millions in 'profits' to donate to politicians.
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| Sam and Bill Clinton shared the stage at a conference in the Bahamas. |
Sam leveraged his political donations for meetings with lawmakers and other VIPS, he was becoming well-connected in Washington DC - many believe Sam may "know too much" and that worries powerful people.
Take this with a huge grain of salt since it is both a conspiracy theory and prediction - but the idea that Sam's former friends may now want him eliminated was on enough people's minds that both 'Sam Bankman-Fried' and 'Epstein' began trending on twitter with hundreds of tweets like:
While this is one of the more extreme possibilities, one thing is clear - there's no 'good outcome' for him from here.
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Author: Ross Davis
Silicon Valley Newsroom
GCP | Breaking Crypto News
