The $1.9 billion of withdrawals of tokens based on the ethereum blockchain mark the largest daily outflow over a 24-hour period since June 13, the Nansen data showed, and accounted for the majority of the funds being pulled in the last seven days.
[...]
Earlier on Tuesday, Binance halted withdrawals of USDC, citing a "token swap" - where digital token holders exchange their crypto coins, typically over different blockchains.
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Zhao said on Tuesday swapping USDC with two other tokens - Paxos Standard and Binance USD - requires using traditional dollars at a bank in New York. "The banks are not open for another few hours. We expect the situation will be restored when the banks open."
USDC, issued by U.S.-based firm Circle, is the world's second-biggest stablecoin. Dante Disparte, Circle's chief strategy officer and head of global policy, said that there will be "challenges" relating to liquidity and redemptions when assets are swapped in the way Binance has done with USDC.
Defendant concealed his diversion of FTX customers’ funds to crypto trading firm Alameda Research while raising more than $1.8 billion from investors
FOR IMMEDIATE RELEASE
2022-219
Washington D.C., Dec. 13, 2022 —
The Securities and Exchange Commission today charged Samuel Bankman-Fried with orchestrating a scheme to defraud equity investors in FTX Trading Ltd. (FTX), the crypto trading platform of which he was the CEO and co-founder. Investigations as to other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing.
According to the SEC’s complaint, since at least May 2019, FTX, based in The Bahamas, raised more than $1.8 billion from equity investors, including approximately $1.1 billion from approximately 90 U.S.-based investors. In his representations to investors, Bankman-Fried promoted FTX as a safe, responsible crypto asset trading platform, specifically touting FTX’s sophisticated, automated risk measures to protect customer assets. The complaint alleges that, in reality, Bankman-Fried orchestrated a years-long fraud to conceal from FTX’s investors (1) the undisclosed diversion of FTX customers’ funds to Alameda Research LLC, his privately-held crypto hedge fund; (2) the undisclosed special treatment afforded to Alameda on the FTX platform, including providing Alameda with a virtually unlimited “line of credit” funded by the platform’s customers and exempting Alameda from certain key FTX risk mitigation measures; and (3) undisclosed risk stemming from FTX’s exposure to Alameda’s significant holdings of overvalued, illiquid assets such as FTX-affiliated tokens. The complaint further alleges that Bankman-Fried used commingled FTX customers’ funds at Alameda to make undisclosed venture investments, lavish real estate purchases, and large political donations.
"We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto," said SEC Chair Gary Gensler. "The alleged fraud committed by Mr. Bankman-Fried is a clarion call to crypto platforms that they need to come into compliance with our laws. Compliance protects both those who invest on and those who invest in crypto platforms with time-tested safeguards, such as properly protecting customer funds and separating conflicting lines of business. It also shines a light into trading platform conduct for both investors through disclosure and regulators through examination authority. To those platforms that don’t comply with our securities laws, the SEC’s Enforcement Division is ready to take action."
"FTX operated behind a veneer of legitimacy Mr. Bankman-Fried created by, among other things, touting its best-in-class controls, including a proprietary ‘risk engine,’ and FTX’s adherence to specific investor protection principles and detailed terms of service. But as we allege in our complaint, that veneer wasn’t just thin, it was fraudulent," said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. "FTX’s collapse highlights the very real risks that unregistered crypto asset trading platforms can pose for investors and customers alike. While we continue to investigate FTX and other entities and individuals for potential violations of the federal securities laws, as alleged in our complaint, today we are holding Mr. Bankman-Fried responsible for fraudulently raising billions of dollars from investors in FTX and misusing funds belonging to FTX’s trading customers."
The SEC’s complaint charges Bankman-Fried with violating the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC’s complaint seeks injunctions against future securities law violations; an injunction that prohibits Bankman-Fried from participating in the issuance, purchase, offer, or sale of any securities, except for his own personal account; disgorgement of his ill-gotten gains; a civil penalty; and an officer and director bar.
In parallel actions, the U.S. Attorney’s Office for the Southern District of New York and the Commodity Futures Trading Commission (CFTC) today announced charges against Bankman-Fried.
The SEC’s ongoing investigation is being conducted by Devlin N. Su, Ivan Snyder, and David S. Brown of the Crypto Assets and Cyber Unit and Brian Huchro and Pasha Salimi. It is being supervised by Amy Flaherty Hartman, Michael Brennan, Jorge Tenreiro, and David Hirsch. The SEC’s litigation will be led by Amy Burkart and David D’Addio and supervised by Ladan Stewart and Olivia Choe. Additional assistance to the investigation was provided by Steven Buchholz, Erin Wilk, Serafima McTigue, William Connolly, and Howard Kaplan.
The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the FBI, and the CFTC.
Dude literally bragged about defrauding investors, caused billions in economic damage and ruined thousands of lives with his snake oil. Ross Ulbricht got two life sentences without the possibility...
Dude literally bragged about defrauding investors, caused billions in economic damage and ruined thousands of lives with his snake oil.
Ross Ulbricht got two life sentences without the possibility of parole for less. Let that sink in.
Sam Bankman-Fried and other members of the inner circle of the collapsed cryptocurrency exchange FTX allegedly formed a chat group on the encrypted platform Signal under the name “Wirefraud”.
The Australian Financial Review reported that the Wirefraud chat group was used to send end-to-end encrypted information about FTX and its hedge fund, Alameda Research, in the run-up to the implosion of the exchange. According to the newspaper, members of the secret group included Bankman-Fried, his FTX partners Zixiao “Gary” Wang and Nishad Singh, and the CEO of Alameda Research Caroline Ellison.
Shortly before he was arrested in the Bahamas at the request of the US government on Monday night, Bankman-Fried denied the story. “If this is true then I wasn’t a member of that inner circle (I’m quite sure it’s just false; I have never heard of such a group),” he said on Twitter.
[...]
The lawyer John J Ray III is scheduled to give testimony in the congressional hearing in Bankman-Fried’s place. Ray has taken over as CEO of FTX in order to steer the firm through bankruptcy as well as the multiple criminal and other investigations it is now facing from law enforcement and regulators in the US and abroad.
FTX filed for bankruptcy last month after a lightning collapse in its fortunes left it with a multibillion dollar gap in its accounts. In his drafted statement to the House committee, Ray said that it was already known that FTX assets had been “commingled with assets from the Alameda trading platform” and that “Alameda used client funds to engage in margin trading which exposed customer funds to massive losses”.
Cryptocurrency entrepreneur Sam Bankman-Fried walked out of a Manhattan courthouse Thursday with his parents after they agreed to sign a $250 million bond and keep him at their California home while he awaits trial on charges that he swindled investors and looted customer deposits on his FTX trading platform.
Assistant U.S. Attorney Nicolas Roos said in federal court that Bankman-Fried, 30, “perpetrated a fraud of epic proportions.” Roos proposed strict bail terms including the $250 million bond — which he said is believed to be the largest federal pretrial bond ever — and house arrest at his parents’ home in Palo Alto.
An important reason for allowing bail was that Bankman-Fried, who had been jailed in the Bahamas, agreed to be extradited to the U.S., Roos said.
Magistrate Judge Gabriel W. Gorenstein agreed to the bond and house arrest, though he required that an electronic monitoring bracelet be affixed to Bankman-Fried before he left the courthouse. Roos had recommended it be attached Friday in California.
His bail conditions also require that he not open any new lines of credit, start a business or enter financial transactions larger than $1,000 without the approval of the government or the court.
The bond was to be secured by the equity in his parents’ home and the signature of them and two other financially responsible people with considerable assets, Roos said. The bail was described as a “personal recognizance bond,” meaning the collateral did not need to meet the bail amount.
While he was in the air, the U.S. attorney in Manhattan announced that two of Bankman-Fried’s closest business associates had also been charged and on Monday had secretly pleaded guilty.
Carolyn Ellison, 28, the former chief executive of Bankman-Fried’s trading firm, Alameda Research, and Gary Wang, 29, who co-founded FTX, pleaded guilty to charges including wire fraud, securities fraud and commodities fraud.
U.S. Attorney Damian Williams said in a video statement that both were cooperating with investigators and had agreed to assist in any prosecution. He warned others who enabled the alleged fraud to come forward.
“If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it,” he said. “We are moving quickly, and our patience is not eternal.”
Meanwhile:
Binance withdrawals hit $1.9 bln in 24 hours, data firm says (Reuters)
[...]
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Official Press Release from SEC.gov:
SEC Charges Samuel Bankman-Fried with Defrauding Investors in Crypto Asset Trading Platform FTX
Dude literally bragged about defrauding investors, caused billions in economic damage and ruined thousands of lives with his snake oil.
Ross Ulbricht got two life sentences without the possibility of parole for less. Let that sink in.
Sam Bankman-Fried and other FTX staff allegedly had ‘Wirefraud’ chat group (The Guardian)
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FTX founder Bankman-Fried allowed $250M bond, house arrest (AP)