tldr

A judge kept secret that two of Sam Bankman-Fried's closest associates had turned against him so the cryptocurrency entrepreneur wouldn't get spooked and fight extradition from the Bahamas, according to court transcripts made public Friday.

Ellison is the former chief executive of Bankman-Fried's cryptocurrency hedge fund trading firm, Alameda Research.

In court Monday, Ellison said since FTX and Alameda collapsed in November, she has "Worked hard to assist with the recovery of assets for the benefit of customers and to cooperate with the government's investigation."

Ellison said she knew that if Alameda's FTX accounts had significant negative balances in any currency, it meant that Alameda was borrowing funds that FTX's customers had deposited into the exchange.

"I also understood that many FTX customers invested in crypto derivatives and that most FTX customers did not expect that FTX would lend out their digital asset holdings and deposits to Alameda in this fashion."

From July to October, Ellison said, she agreed with Bankman-Fried and others to provide misleading financial statements to Alameda's lenders, including quarterly balance sheets that concealed the extent of the company's borrowing and the billions of dollars in loans it had made to FTX executives and others.

During his plea earlier Monday, Wang said that he made changes to computer code to enable the transactions with Alameda.

I'm having trouble believing he's going to face any real punishment. I suppose I thought the same about Elizabeth Holmes, but this feels like a more nebulous kind of fraud.

Madoff will die in prison.

Edit- he died in prison.

He already did in April of 2021. It all boils down to the documentation available at this point. It's very easy to know that he was guilty of fraud, but you have to be able to prove it as well. If they have concrete emails/chatlogs where he admits anything, he is toast. If not, he will probably get a slap on the wrist for incompetence.

He basically represents crypto. The bankers are DYING for him to be found guilty. I’d be willing to bet the case is strong.

He has been making it sound complicated but it sounds like she is saying “yep it was fraud”

Do normal FEC laws apply to crypto and NFTs? Have they really caught up to all the nonsense? I'm not sure they ever caught up (or could catch up to) to regulating CDOs.

How do you regulate a service that trades in stuff like shares of bored ape pictures?

Madoff's fraud was pretty straightforward. He sent shareholders forms saying "this is how much money we are holding for you" and really there was no money. I don't know what FTX did but it sounds more complicated. Was FTX even the same kind of financial entity?

While the FTX implosion was significant, he in no way represents crypto. At its peak FTX was valued at 32b and down to 18b just a few months later. Bitcoin alone is valued at 325 billion even in this bear market. If bankers were concerned about crypto gaining ground, they would not even cheer on this, as this is good for crypto: the more scammers who get locked up, the less there will be in the future, and the more people will know how to hold their crypto

To bankers and the people they spend money on, he does. Symbolically. There will be so much media attention on this and it will be framed first and constantly that he was a crypto guy. Not a thief. A fraud, liar, cheat. A crypto guy.

Doesn't matter, FTX was also holding and misappropriating real money as well.

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Backstabbed by a sultry wood nymph

I don't understand why they need her cooperation. I'll bet there is plenty of evidence to put them both away for 100+ years if rich people were treated the same as poor people.

Er. It’s not hazy at all.

It’s clear.

He violated his own terms of agreement and stole money from his clients to bankroll his other company - and himself.

Dude is going to jail. He’s up on 6 life counts. Sure, he wont get the most harsh sentence.

But he isn’t walking from this.

Again my question is about what kind of company FTX was and did they have the same fiduciary responsibility as a bank or brokerage. They were incorporated in the Bahamas and not federally insured as they claimed.

They don't need new regulation for crypto, it's not something new or special, it's just a security with extra steps.

> did they have the same fiduciary responsibility as a bank or brokerage

Not relevant. They had the duty to follow through on contractual agreements with users, but they never had any intention of holding up their end of the agreement. Any profit based on lies is criminal fraud.

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They had a literal bank in Washington that washed millions in usd

Ftx was many companies.

Is this from Patrick Boyles videos on them? He’s great.

They filed for bankruptcy in the United States.

I love that guy. “Why are there so many children’s characters involved in finance fraud this year? If it’s not wood nymphs or Harry Potter, it’s Yoda or Kevin O’Leary”

Chatlogs? The chat room was literally called wirefraud. I know it's not proof, but come on.

Crypto really isn't a security. Pretending that it is is the whole problem here.

That's not it works, people don't just go collect someone wanted who is arrested in a country with an extradition treaty

It can take years to go through the motions of multiple appeals, take Julian Assange in the UK for example

He stole from rich people. He's gonna get the whole book thrown at him.

....smells like sniiiiiff sus

Tokens kind of are though, that’s the whole point

“This is good for crypto” Should be a sentence you know not to use by now.

“You just don’t understand” also doesn’t have much throw weight

Having the former CEO testify in open court that she was forced into doing evil deeds by SBF will play much better with a jury than making them review a 2-foot stack of printed-out emails & chats.

I understand where you're coming from. But, in reality the prosecution has wide latitude within the justice system for sealed indictments, warrants etc. Extradition can be expensive and time consuming even if there is an agreement with another country it might years before the person is extradited. Just look at example of Kimdotcom, he is fighting his extradition from NewZealand for 10 years and popping out half a dozen babies.

So, the feds have like a 97% conviction rate. So if they make it to court, he’s done. The only way he makes it out of this if he has a plea deal.

Judges gonna judge but hey good for someone in an important position just doing their job and playing that role logically.

Eh, the majority of people commenting on either side of this issue really don’t understand though.

This is an absolute savage move by the U.S Attorney’s office, good on them. This scumbag deserves to rot. Especially after the last few weeks of arrogant interviews trying to proclaim his own innocence.

Ellison knew. Wang knew. Bankman-Fried knew.

They all deserve prison for a long time. Also shaming on a town square with rotten tomatoes.

But then they let him go.

But then gets the opportunity to go on house arrest. He’s part of the club

Mostly they wait until the evidence is so extensive, that it's almost impossible to fuck up a case. And if something falls apart, they simply drop the case.

If the Alameda CEO, SBF and the CTO got together in a room and discussed doing what they ended up doing then you have an open and shut conspiracy to commit fraud. If there is a recording or video of it which I’m sure there was because they are all that stupid, then the noose gets even tighter. The FEDs obviously have enough information that they broke her and the CTO in under 2 months. SBF isn’t getting a deal, he will have the book and the building thrown at him and he is probably spending a significant amount of time in prison.

You spend all your time in stock and crypto subs. You brain is boiled cabbage

I think the velocity of an extradition should be somewhat of a indicator for the evidence.

Yeah. But she deserves to as well…

It, out on bail at parents house? That wasn’t where all the money went; judges don’t make that much.

It'll be interesting to see how this goes. On one hand he was incredibly wealthy, and we all know the United States has a completely different justice system once you hit a certain amount of 0's in your bank account. On the other hand SBF violated one of the central tenets of the rich peoples justice system: "don't fuck over other rich people".

It’s kind of early in the case but I’d wager he will see more time than Holmes.

Are you kidding? The FTX fraud was a fucking joke: basically he said "hey, I'm unregulated - give me your money" and cryptobros are so fucking stupid they did. It took Madoff decades to get to the position of confidence were he was able to convince relatively sophisticated people to invest in his (allegedly) regulated business. When regulator started sniffing around, Madoff had to charm them.

FTX was the equivalent of a cardboard box wrapped in tinfoil with BANK written on with crayon.

Exchanging real currency for a representative asset with a value attached is almost textbook definition of securities and trading.

Yep.

You can rob the middle class all you want, but when you embarrass rich people... Party is over.

They don't have a video but they talked about the fraud in coded language electronically. I believe they called the account where they hid the loses the "Korean account" or something dumb like that.

Kind of what I figured and why so many of them seem to act with such impunity.

SBF couldn't get pregnant and try to gain sympathy from the public.

They will do 10+ and he will get life in jail.

That's a smart move by the judge. I don't see a defense from SBF with two of his leadership team pleading guilty to multiple counts.

There should be more indictments. Three people alone didn't pull off this fraud.

Had he not given any interviews he probably would be in less trouble. In the interviews he strongly alluded to the fact that all customers money was in one big bucket and Alameda had open access to all of it. His justification was that some of those customers agreed to the terms of service that allowed for the trading/risk. Too bad "some" doesn't mean "all."

He is definitely going to rot.

They do but you know how this will go down. SBF will get ~20 years. Ellison <4 for cooperation. Their families are too rich and "important" for them to suffer actual consequences.

Damn, 20 years doesn’t count as “actual” in your book

I mean, it's a lot, no doubt about that. But he would deserve more imo.

Absolutely nothing compared to the 100 he could be facing.

20 years in prison isn’t “absolutely nothing” compared to anything. It’s definitely something.

He should die imprisoned like Madoff.

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SBF is the mastermind of t to he fraud.

This is how the system works. Go easier on the henchmen so they’ll cooperate to help bag the mastermind

Intent. SBF will try to plead ignorance. Caroline Ellison can testify that he knew what he was doing was fraud and he did it anyway.

I never stated otherwise. I simply said she deserves to rot in jail as well, even if she rats on the others.

This seemed pretty obvious to me. Given that was soon as news dropped that he was being moved we heard about their cooperation from official sources with a decent amount of detail.

What's the agreement? My understanding is not your crypto it's not your money and

Your money is earning interest we will try to pay you back

SBF and his company didn’t just do some gray area it may or may not be illegal shiz you can argue in court. They committed straight up fraud and embezzlement. Stealing billions of dollars of customers funds for personal use. SBF is getting at least 20 years if not 40 or 60. It’s just so blatant what was done that everyone both in the private financial side and the government regulators want SBF to be made an example of.

20 years for frauding or stealing billions? Some people are in jail for 20 years for selling drugs

20 years obviously counts as "actual consequences". If he's so important why not less?

Yeah but unfortunately if you break the deals you offer people stop taking them so it would be bad long term to ignore the deal with her

The judge needn’t have worried. He was in a hellhole prison in the Bahamas and desperately wanted to come back. He is going to get a ClubMed-like prison in the US, like the Theranos crooks and all the other rich folk.

The Bahamian government was cool with letting him chill out waiting for months/years. But in the jail, not out on bail waiting to flee to Dubai, or wherever he might be able to bribe his way to the next spot to flee.

Well shit. When you put it that way....

That’s quite true, but I just don’t see the need for pleas here; the evidence and insight into the fraud is right there.

And some people are in jail for less than 20 years for murdering someone. Sentencing can be messed up and very arbitrary. Fortunately, the federal system uses a set of Federal Sentencing Guidelines that can help make the process more objective.

Elizabeth Holmes only got 11 years. Sadly.

20 years in prison might not be enough for you, and it might empirically not be enough in general, but 20 years in prison, when you’ve spent the first thirty years of your life with a silver spoon up your ass, is going to be harsh.

Gary must have been talking to authorities prior to the public bankruptcy. Nishad to perhaps?

Caroline appears to be relatively new to talking.

His parents appear relatively relaxed and blasé. Suspect they can pull of deals and by 35, all will be forgotten.

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Bring back the tomato shaming!