Everything You Need to Know About the Case Against Sam Bankman Fried

After the demise of his FTX crypto empire in November, the US Securities and Exchange Commission, Department of Justice and Commodity Futures Trading Commission filed civil and criminal charges against Bankman-Fried

What was FTX? It is the trading venture that Bankman-Fried co-founded in 2017, and FTX Trading Ltd., a crypto exchange based in the Bahamas and founded in 2019. All told, he raised more than $1.8 billion from equity investors

How did it grow so big? Alameda initially made profits by applying traditional techniques of arbitrage to the Bitcoin market. Bankman-Fried and co-founder Gary Wang found ways to buy the world’s biggest cryptocurrency on Asian exchanges where it was selling for slightly less, and sell it on exchanges where it was selling for slightly more

At its peak in early 2022, FTX was valued at $32 billion by its equity investors.

How did it get into trouble?

According to the SEC, Bankman-Fried had “from the start” improperly diverted assets that customers had deposited with FTX for use by Alameda to fund its trading positions and venture investments, as well as personally make  lavish real estate purchases and large political donations.

What led to its collapse?

FTX issued its own token known as FTT. Alameda had begun using FTT as collateral for its borrowing activities. But like most crypto tokens, FTT isn’t backed by substantial reserves of assets. That meant its value was tied closely to the fortunes of FTX itself, making it worthless . When questions were raised about FTT, clients began to withdraw funds from FTX

What charges does Bankman-Fried face?

Bankman-Fried was charged in a Manhattan court with eight criminal counts, including conspiracy and wire fraud. He’s also being sued by the SEC and the CFTC for misleading investors.

What has been the reaction in the world of crypto?

Bankman-Fried’s assertions have been met with little sympathy by his former peers, many of whom are worried that the string of bankruptcies triggered by the FTX collapse could crush the crypto markets for years to come

The company sold itself as a benchmark of stability in a volatile industry, and Bankman-Fried frequently and loudly said he was eager for FTX to be regulated. But in the end, tokens it either owned or invested in — such as FTT token and another called Serum — crumbled to dust.

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