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Sam Bankman-Fried, Founder of Bankrupt Crypto Exchange FTX, is Going to Trial for Fraud and Conspiracy- the Story Behind the Downfall of a Rising Crypto Star

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9 months ago

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In the last quarter of last year a report from CoinDesk raised concerns regarding the financial stability of Alameda Research, a company closely associated with FTX. When customers hurriedly attempted to withdraw their funds from FTX, the exchange faced difficulties in fulfilling these withdrawal requests. Despite attempting a bailout agreement with their rival exchange, Binance, which ultimately failed, FTX was forced to declare bankruptcy on November 11.

Approximately one month later, Sam Bankman-Fried, the founder of FTX, was arrested in the Bahamas, where the company was headquartered, and subsequently extradited to the United States. His trial for fraud and conspiracy has now started in the Southern district of New York.

The rise of a crypto star

Sam Bankman-Fried, the visionary founder of the crypto exchange FTX, stood at the intersection of digital dreams and traditional wealth. His journey from obscurity to notoriety was a tale of ambition, eccentricity, and ultimately, a stunning fall from grace.

Born to Stanford law professors who championed utilitarianism, Sam had a unique perspective on business. He believed in pursuing actions that brought the greatest good to the greatest number of people. This philosophy extended to his embrace of effective altruism, a movement that sought to make a positive impact on the world through strategic philanthropy. Earning to give was the mantra, accumulating wealth to create a better future for all.

In the bustling heart of the crypto world, he had become the rising star whose name echoed through the corridors of innovation and finance, but Sam’s influence reached far beyond the realm of cryptocurrencies. He became a political force, injecting over $40 million into the 2022 campaign, predominantly supporting Democratic candidates but also secretly funding Republican campaigns. His presence at a crypto conference in the Bahamas, attended by luminaries like Tony Blair and Bill Clinton, solidified his status as a global player. Even NFL legend Tom Brady and supermodel Gisele Bündchen lent their star power to FTX’s promotional efforts.

But behind the scenes, the unconventional reigned. Sam and his inner circle, including his on-again, off-again lover Caroline Ellison, lived a life that defied convention. They shared a luxurious penthouse in the Bahamas. Performance-enhancing drugs as well as an intricate web of emotional, romantic, and sexual connections at their disposal.

Then came the abrupt halt. A damning report revealed that Sam had used billions of FTX’s cryptocurrency as collateral for risky loans, triggering a panic among customers and leading to FTX’s bankruptcy. In December 2022, he faced financial crime charges for allegedly misappropriating investor funds and making lavish expenditures at Alameda Research, all while buying luxury real estate and making massive political donations.

The Manhattan US attorney, Damian Williams, minced no words, accusing Sam of intentional fraud. As the trial loomed, the world watched with bated breath. Would Sam Bankman-Fried, once crypto’s prodigy, be exposed as a callous profiteer who lined his pockets at the expense of unsuspecting investors?

The trial promised to unveil the shocking saga of FTX and Alameda’s downfall. Key figures in the case, including Caroline Ellison and others who had pleaded guilty, were set to testify. They would reveal how Sam had directed illegal conduct within FTX, allowing Alameda to mishandle billions in customer assets. Prosecutors would unveil the charade Sam allegedly maintained, tweeting false assurances to customers while seeking billions in investment capital.

Caroline Ellison’s role in the unfolding drama was pivotal. Her 9 November address to Alameda employees, recorded for posterity, exposed a sinister plot. She admitted that Alameda had borrowed heavily to invest in illiquid assets, leading to a crisis when loans were recalled. In an attempt to cover it up, she claimed Binance would buy FTX and safeguard customer funds.

Sam’s defense team sought to paint a different picture – that of a misunderstood figure driven by a desire to help the less fortunate, not motivated by greed. His lawyers highlighted his ADHD and the principles of effective altruism in their quest to redefine his actions.

As the world awaited the trial’s commencement, the story of Sam Bankman-Fried had evolved from that of a crypto guru to a cautionary tale of ambition, excessive self-confidence, and the blurred lines between noble intentions and financial misconduct in the digital age.



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Alameda Research

Alameda-Backed Mining Firm Genesis Digital Assets Considering IPO in US: Report

Published

5 days ago

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July 3, 2024

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A Bitcoin (BTC) mining firm backed by disgraced FTX founder Sam Bankman-Fried is reportedly considering an initial public offering (IPO) in the US.

According to a new report by Bloomberg, anonymous sources familiar with the matter say that Genesis Digital Assets, which is backed by Alameda Research, is currently working with advisors on the potential listing.

Alameda Research was once the investing branch of the former crypto exchange FTX.

One of the sources divulged that the firm is planning on launching a pre-IPO funding round in the coming weeks.

Genesis Digital Assets, which has its roots in 2014, eventually started large-scale operations in China before the nation banned the entire industry in 2021. Then, the company raised $550 million and moved to the US, according to the report.

Between 2021 and 2022, Alameda Research invested over $1 billion into Genesis Digital Assets, before the FTX empire collapsed and Bankman-Fried was accused and subsequently found guilty of defrauding investors and mishandling billions of dollars worth of customer funds.

In April 2022, Genesis Digital Assets was valued at $5.5 billion, according to an internal company memo seen by Bloomberg News. However, when FTX collapsed in November 2022, the digital assets industry saw sharp price decreases across the board.

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any losses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

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Alameda Research

Sam Bankman-Fried Found Guilty of Committing Billion-Dollar Fraud at FTX and Alameda Research

Published

8 months ago

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November 3, 2023

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Sam Bankman-Fried has been found guilty of spearheading a billion-dollar fraud against customers and investors at the crypto exchange FTX and trading firm Alameda Research.

A jury has found Bankman-Fried guilty on all seven charges against him, including wire fraud and conspiracy to commit wire fraud against FTX’s customers, wire fraud and conspiracy to commit wire fraud against Alameda’s lenders, conspiracy to commit securities fraud against FTX’s investors, conspiracy to commit commodities fraud against FTX’s customers and conspiracy to commit money laundering.

The jury took just four hours to reach a verdict.

Bankman-Fried was arrested in December after the epic collapse of his former crypto empire.

Prosecutors accused him of stealing billions of dollars in FTX customer deposits to purchase investments, loan repayments, political donations and real estate.

Former FTX chief technology officer Gary Wang, former head of engineering Nishad Singh and former Alameda CEO Caroline Ellison testified against Bankman-Fried at the trial, saying they had carried out his orders.

Bankman-Fried testified that he did not knowingly defraud anyone, although he admitted there were “significant oversights” at his companies.

“A lot of people got hurt – customers, employees. And the company ended up in bankruptcy. I made a number of small mistakes and a number of larger mistakes.”

Sentencing is expected to take place early next year.

Bankman-Fried faces a total possible sentence of 115 years in prison.

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

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Insights Into Alameda’s Financial Stability In FTX Trial

Published

9 months ago

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October 14, 2023

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The trial against FTX co-founder Sam Bankman-Fried took an intriguing turn as Zac Prince, the CEO of defunct crypto lender BlockFi, provided testimony in a Manhattan federal courtroom. 

Prince’s appearance provided valuable insights into the intricate relationship between BlockFi, FTX, and Alameda Research.

BlockFi’s Bankruptcy Rooted In Alameda And FTX

According to a Bloomberg report, Prince revealed that BlockFi had substantial exposure to Alameda and FTX, estimated at around $1 billion, at the time of BlockFi’s failure in November 2022. 

Prince asserted that if the loans to Alameda were still in good standing and the funds on FTX were available, BlockFi would not have filed for bankruptcy. This statement suggests that BlockFi’s financial troubles were closely tied to the collapse of Alameda and FTX.

Prince’s testimony diverged significantly from Caroline Ellison, the government’s star witness, who portrayed Bankman-Fried as the mastermind behind a fraudulent scheme using FTX customer funds for speculative trading at Alameda. 

Prince’s account positioned BlockFi as a victim of Bankman-Fried’s alleged schemes, claiming that BlockFi made loans to Alameda based on misleading balance sheets. 

Defense lawyers sought to emphasize that BlockFi willingly provided the loans to Alameda, with knowledge of the associated risks.

Creditors Accuse BlockFi Of Inadequate Due Diligence

Prince discussed BlockFi’s due diligence process regarding Alameda’s collateral, comprised of tokens affiliated with FTX. The judge requested plainer terms during Prince’s explanation, prompting an analogy using car loans. 

Per the report, the prosecution questioned the adequacy of BlockFi’s due diligence, as creditors accused the company of failing to recognize warning signs before offering substantial loans to Alameda.

Prince’s testimony highlighted that providing “unaudited balance sheets” is an industry norm for borrowers seeking loans. The defense sought to establish that BlockFi knew the risks of lending to Alameda and acted within industry norms.

Zac Prince’s testimony in the trial against Sam Bankman-Fried provided a deeper understanding of the intertwined relationships within the crypto industry. BlockFi’s exposure to Alameda and FTX and its subsequent bankruptcy offered insights into the potential repercussions of alleged fraudulent activities. 

The differing narratives presented by the prosecution and defense underscore the complexities of the case. As the trial unfolds, the court will continue to examine the details surrounding BlockFi’s lending practices and the extent of Bankman-Fried’s involvement in the alleged schemes.

It is important to note that BlockFi can no longer be utilized for crypto-related activities, as the company declared bankruptcy and suspended withdrawals in November 2022. The bankruptcy filing indicates that BlockFi owes between $1 billion and $10 billion to over 100,000 creditors.

FTX
FTX’s native token FTT downtrend on the daily chart. Source: FTTUSDT on TradingView.com

Featured image from NBC, chart from TradingView.com



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