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Notes -
Sam Bankman-Fried has been arrested.
There had been some speculation on when and even whether he would be arrested. Just yesterday someone told me to expect it to take two years. So, why right before tomorrow's hearing? And why not wait for him to give more interviews and provide more evidence?
So, I read a breakdown of the SEC complaint (Original PDF)
Someone was asking if Wang and Singh should go down too...and based on this claim of SBF spreading the money via loans to all of them...yes
Wang, Singh, hell, his parents (who he put in this position. Can't imagine...)
No wonder SBF said Singh felt "ashamed and guilty" (not content to snitch on himself!) in the Vox interview.
Speaking of snitching: his own comments are cited, as everyone thought:
I kinda wish that Bankman-Fried had been permitted to testify at the House committee today, because the members are not happy and some at least of them are trying to get John J. Ray to say Bankman-Fried is a deliberate criminal. The information coming out is really bad, the $1 billion 'loan' that Bankman-Fried gave himself, he claims he re-invested it into FTX, but Ray says there is no trace of what it was for or where it went.
This is really making crypto sound like the biggest scam ever created, all crypto. Anyone who believes crypto is the future of finance, this is not alone two black eyes for the cause, it's breaking arms and legs as well. Anybody who has fond dreams of decentralised finance, the sheer lack of accountability or accounting around billions is going to break that back too.
EDIT: They are now discussing the correct pronunciation of "dogecoin" 🤣
EDIT EDIT: >Wang, Singh, hell, his parents (who he put in this position. Can't imagine...)
Oh crap, one of the committee members just asked if there is any evidence his parents were involved in operations. Bankman-Fried is bringing everybody down with him.
Apparently, he was arrested because he wouldn't testify.
But yes, this has the potential to be a gut shot for crypto. Honestly, the low information "Boomer" voter who sees crypto once on C-Span (he is one of the 6) and decides it's a scam isn't the only problem: even people who do some research will think the whole thing is shady. Binance and Tether have similar "just trust us" policies to SBF and refuse to ever provide audits...
Binance is currently facing huge outflows (which tells you something about confidence even with the crypto-familiar audience) while saying ,as SBF did, that all is fine. If Binance goes...
There are two committees; one is the House committee on Finance, where he agreed to testify (maybe in person, maybe remotely) which is the meeting today, and the other is the Senate committee on Banking on Wednesday, where he refused to attend even under subpoena.
I think the latter may be a reason why he was arrested so fast; not accepting the subpoena does sound like "getting ready to run".
Ah, thanks for the clarification.That would explain why he had his remarks for today already made (and now leaked).
The House committee was on Tuesday, livestream of proceedings here. Since Bankman-Fried was not available, the nearly four hours all went with Mr. Ray, and it got very repetitive towards the end. But the first hour or two are worth watching, because clearly if Bankman-Fried had been there, what Ray said would have sunk him.
I'm hoping to be able to catch the Senate committee hearing later (I have an appointment when it's live) because I imagine they are ready to burn him at the stake, given his refusal to appear and subsequent arrest 😁
I actually did listen to some of it while doing some light work. I couldn't see her face, but the tone of voice when one rep asked "Quickbooks?!" came through clear enough. That's gonna be a scene in the inevitable miniseries lol.
Also Ray's understated way of basically calling FTX amateur hour compared to Enron was funny. There's a lot of talk that Ellison might have flipped but, tbh, Ray was damning enough. He came across as not just as a credible expert witness but just...as a fucking adult, in stark contrast to everything he described about FTX. He just seemed taken aback that even basic precautions didn't exist. Really sells the impression that FTX might as well have been a kid's lemonade stand in terms of how much effective oversight there was over SBF as he was handling people's money.
I'd say he's lucky but he's in a Bahamian jail now so...
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I'm so tired of keeping up with the stupid story and people just taking random pot shots at crypto in general. This scam has as much to do with crypto as a concept as 2008 has to do with loans as a concept. Yes, it's a high profile scam, but it's a scam that makes no use of anything crypto related besides the abundance of credulous money. Everything about crypto, besides that it is new and unregulated, makes it harder for this to happen by making wallet balances public.
Which some of the committee members have pointed out. But Bankman-Fried was presenting himself and FTX as the respectable face of crypto, of being regulated, of not being a shady fly-by-night scam scheme. How did that pan out? How is the ordinary person watching the news going to take it? "One more billion dollar scam of this weird dodge".
You can talk about wallets until you are blue in the face, but when people are making and losing fortunes like this, it's not sounding like "this is the future of money", it's sounding like "one more crook fooling people with a get rich quick scheme".
Ordinary people are not watching this at all.
Maybe, maybe not. But it is certainly a news story, and even if people aren't familiar with the ins and outs of it, they will have some idea about "oh another big financial scam in the news".
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Wives who are angry that their husbands listened to Tom Brady and put their life savings on FTX might qualify as fairly ordinary.
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Depends on how you define “ordinary people” this is huge news in the business press. Enron is certainly a household name because of their much more sophisticated and difficult to understand scandal.
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Is it supposed to be doggy-coin or like dojo without the last o?
They tried all those and settled on "dojo without the o" like the Venetian Doge 😁
Mr Perlmutter
1:12:00
let's say I have doji coin or I don't even know how you say it but I have 10 doji coin which a year ago is a doggy
1:12:08
coin or doji Doge Dogecoin all right I have 10 doge coins all right
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This is apparently the new idea floating around parts of (Crypto?) Twitter right now: that SBF might get "Epsteined," meaning he will end up dead in a manner most suspicious. I don't want to give it any credence, but maybe the people saying it would have taken years for the long arm of the law to nab SBF were onto something, since if they're getting him this quickly, then one of two possibilities must be true:
The Occam's Razor explanation: SBF running his mouth for the past month or so has given the government all the ammo they need to throw the book at him, saving a lot of time and effort in building a solid case against him.
The Tinfoil Hat explanation(s): TPTB are planning for anything but SBF seeing a day in jail. Either the speed of the actions against him are meant to blow their load early, preventing a substantial investigation that would end in his punishment (and thus letting him walk away scot-free), or they really are going the conspiracy theory-type route of planning to have him murdered and (try to) make it look like an accident/suicide.
I've joked at home that if it were me, I'd already be at my distant uncle's house in Iran. "Hey uncle Mo, bad news is you're stuck with me and I speak very little Farsi, good news is even after the decline I still have $2mm in stolen Bitcoin."
No prosecutor wants to see the big fish run away to Russia. Would Israel extradite him? That's not even that bad a country to live in.
That mysterious hack which took an unknown sum of money certainly sounds like somebody stashing funds away, and it strongly indicates Bankman-Fried or one of his two co-founders. If it was Bankman-Fried, it's surprising that he stuck around so long and didn't run. But he may have believed he could spoof his way out of trouble and that any arrest would be far in the future.
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Wasn't he supposed to be under close observation on account of that very foreseeable risk? The guards being bribed to turn a blind eye, conveniently forget to confiscate potential makeshift ligatures, and loudly announce they're taking a sudoku puzzle to the bathroom doesn't look too dissimilar to corrupt officials ending his life. If you can accept that his lawyers bribed the guards then you can accept that the guards were amenable to bribes from anyone else. From his POV he can kill himself at any time, he's not going anywhere, so why the urgency? With billions of dollars and a black book of high level connections I'd think he could take a punt on mitigating his punishment to tolerable levels - IIRC he'd done so before. He wasn't a penniless benzo addict in withdrawal facing life in a Siberian labour camp.
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does not surprise me. that is what I thought would happen eventually. There is nothing to gain politically by protecting him, no matter how many donations he made. The outrage over Marc Rich marked the end of that era. I predict he gets the book thrown at him. Ellison? a lesser sentence in exchange for further incriminating him. SBF has the same problem Ross Ulbricht and Madoff had, which is that the buck stopped with him. It's hard to think how he could negotiate his way to a lesser sentence.
He's also an impressively unsympathetic character in all this. If he had kept his mouth shut, some fraction of bystanders would have taken a charitable viewpoint because of the glowing coverage of his past. His continual interviews have made that a lot harder, and I cannot take a position other than one of "he's a greedy dumbass that got in way over his head" and "he's a complete and utter conniving scumbag".
I know very little about Ellison outside of the wood nymph silliness, and so don't have the same burning desire for her to see the inside of a prison cell for decades.
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Will everyone who said he would walk away Scot Free because he's in bed with NYT or Dems or whoever please adjust your priors or whatever?
Why? Hopes of him getting arrested fell after the MSM were running what could only be described as kids' gloves stories (if not outright puff pieces), giving ample cover for the "it was just a mistake" scam he was doing. The media is owned by powerful interests in any society, and so how they treat a person is often indicative of that person's social standing (which isn't the same as their financial muscle).
Even leading CEOs in the industry, like the guy running Coinbase, was publicly admonishing the media for going supersoft on him. The fact that many people are surprised over this development is a testament to the extreme deference he was shown.
Moreover, it wasn't just the media. It took the authorities a long time to get to this. They now claim it's a slam-and-shut case of fraud. Newsflash: it always was. So there was likely deliberation, otherwise he'd have gotten arrested weeks ago as his scam wasn't particularly sophisticated, as the SEC now acknowledges.
What made the scales to tip over, we'll never know. But I am not willing to bet that he will be persona non grata forever. He may be stupid in finance, but he's politically savvy. Look at someone like Michael Milken. He went to prison for securities fraud and has now re-invented himself as a benign political benefactor. SBF may still have a few cards to play, even if he gets indicted.
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Every once in while we get these triumphalist "this latest happening proves the game is clearly not rigged, where are all the naysayers now!" posts. Half of them end up being proven wrong within a week (the last one I remember was "see, Cloudflare is clearly standing up for free speech! It's not true the wokes control the corporate sector with an iron grip!", and I literally never saw a progressive "please adjust your priors" people adjust their priors.
If the "game" was rigged to an extent that you could avoid jail for large-scale financial crime by bribing a few democrats, there wouldn't be many big fraudsters in jail. There isn't a game that can be rigged or not, there's many very complicated aspects of society, some or all of which may be evil, but each so in complicated ways that allow society to continue and grow - the game is rigged is not a useful way to understand them. It's not just 'the libs/elites are good' or 'the elites are mean'.
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The person you are replying to didn't claim "the game is clearly not rigged". They are pointing out that the numerous predictions that SBF was not going to be prosecuted were wrong, and predictably wrong. I'm pretty sure I predicted that he would definately be indicted and go to jail. I predicted this because it seemed obvious that his connections would not in fact protect him: the case is too clear-cut, the public too furious, and there's zero benefit to be gained. I can't think of a single example of a democratic supporter being caught anywhere approaching this clearly, for a crime anywhere near as significant and clear-cut as this one, and actually being protected.
I personally believe that the game is rigged. But the way the game is rigged is that things don't get to this point. The rigging works at the margins, not by providing obvious immunity to blatant, high-profile criminals who've been caught red-handed.
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SBF was 100% going to get charged. The posters here were reacting to the tender treatment he got in the NYT and Vox right after the scandal, compared to how those outlets and journalist personalities would normally treat a "tech bro scandal" (e.g. Coinbase, David Sacks, Joe Lonsdale). A lack of pure vitriol from journalists was weird, and on the part of NYT, was likely the result of a political editorial decision. But there's only so much damage control anyone can run for massive securities fraud.
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Can we get away from the vague, mean-whatever-you want insults a bit?
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Others may disagree, but I think this comment would be better with links.
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Nope. At worst he gets the Trump treatment of a fashionably late pardon. Best case, an early release. Unless this guy somehow managed to screw over the wrong jews I don't think he will face anything real.
The SDNY is not well known for slaps on the wrist. He is facing serious charges and is high profile. They will go for the kill.
This. SDNY is where very ambitious lawyers go. They plan to then go into electoral politics, or to change teams and make a ton of money as Former Prosecutors representing the types of folks charged with financial crimes. The media attention on SBF surely has them salivating.
Tangent: as someone who enjoys books on financial scandals, remembering reading about a very hungry Rudy Giuliani when he went after Michael Milken, while watching hair die drip down his face in the parking lot of a landscaping business, was wonderfully tragic, in the original theatrical sense.
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There's two indictments being read into the records: one is the indictment by the SDNY and one is by the SEC and CFTC. So he's in big trouble.
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like many things, amazing how fast sentiment changes. When I made my post this morning, none of those people showed up
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Granted, I didn't expect him to be arrested but we'll see if he actually does any time.
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it's possible he thought he would not be extradited
hiding is very hard. you'd have to plan it well in advance of the blowup .
He has the perfect recent example in the OneCoin mogul, Ruja Ignatova, where it's unclear what's happened. Top theories are hiding in the Arab world somewhere, or killed by the Bulgarian mafia (or is that cover for the hiding?).
She arranged a diplomatic passport to Dubai a while before her disappearance.
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If he thought that he's an idiot. If you don't want to be extradited you either go to a country without an extradition treaty with the US or at least a country that's known for being difficult when it comes to extradition. You don't pick a country that has a history of going out of its way to expedite US extradition requests. You should also see the writing on the wall when the local government is investigating you for similar crimes to the ones you're likely to be charged with back at home.
Well, from what we know, defense against extradition was not the reason FTX chose the Bahamas, the reason was financial, IIRC.
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a criminal mastermind he is not (unless he somehow gets a short sentence and has $ stashed away somewhere that he does not disclose)
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If the USA wants you publicly prosecuted, you shall be publicly prosecuted. The only places you can run to are - Cuba, China & Russia. China wants nothing to do with people like him, and Cuba & Russia might not be much better than the poshest prison cell you can afford.
What?
Let me clarify. Being an incredibly visible refugee in Russia mid-war might not be much better than the poshest prison cell you can afford.
I can imagine a Snowden style house-arrest.
Any one and everyone you love will probably never be able to see you again. At least prisons have visitation.
Russia will be all too happy to use you as a pawn in a bigger negotiation, which opens you up to prisoner trades and assassination.
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Small planes flying below radar detection and landing on improvised air strips are a viable means of covert transport.
You remember the guy who flew a Cessna and landed on the Red Square in Moscow during the Cold war?
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Dubai... probably somewhere in the Middle East. The smart thing to have done would have been to get citizenship to a country that does not extradite, or at least not easily .
If you have enough money to make friends with the right Gulf royal family, I think you are pretty safe too.
E.g. see Ruja Ignatova, another crypto scammer, who disappeared, and arranged a diplomatic passport to Dubai a while before her disappearance. The report I watched claimed Dubai didn't extradite foreigners, but I haven't looked deeper.
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Caroline was seen in New York last week. Speculation was that she was there cutting a deal with prosecutors. This would seem to confirm that. Its one thing to give someone enough rope to hang themselves, its another to let him run around making a mockery of the legal system by admitting to felonies every day while nothing happens.
I wonder how this will be remembered, if it will be remembered, in future discussion of the prisoner's dilemma. The standard nash equilibrium is pretty stale and well known- everyone should cooperate- but this is a pretty good case where cooperation with one party is highly suspect given his current, and previous, acts the undermine credibility.
I feel like you're missing a step here, defect-defect is the stable equilibrium.
Maybe he means the iterated game but yeah it's a weird way to put it
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There’s no universe where Sam gets out of charges by turning in Caroline, a non-equity holder who shouldn’t have had access to FTX funds in the first place.
I do expect a rigorous cross-examination of Ellison at the trial however. If SBF’s lawyer can convince the judge or jury that Caroline mislead or deceived Sam as to how much risk Alameda was taking on, that could cut out years or even decades of jail time.
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I thought this would potentially take years. The relatively quick arrest makes me think the government has an extremely strong case. I’d guess he’s getting 15+ years.
he'd be lucky to only get 15
True, 15 is likely the low end. Sounds like he has a real possibility of a 50 year type sentence.
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This being Federal, it has to go by the sentencing guidelines. And while the indictment lacks enough specificity to really pinpoint it, based on the information that's available I would guess 15–20 years. Madoff got more because his sentences ran consecutively rather than concurrently. This is pretty rare and I don't think it would be done here. Madoff spent years running a pyramid scheme where he was depositing investor money directly into his personal account and paying it back out of the same account, all the while lying to investors about the returns they were getting. SBF got in a quandary where he misappropriated money to bail out his failing businesses. The whole thing played out over months rather than years. There's also the fact that Madoff simply plead guilty to all the charges without negotiation. Not only did he miss his chance at a deal, but he gave the Justice Department the impression that he was trying to shield his associates from prosecution by eliminating his own incentives to cooperate.
He did slightly more than that; for instance, the billion dollars in loans he took out of the business. Ray's testimony is damning; for some of those 'loans', Bankman-Fried was signing off both as issuer of the loan and recipient of the loan. Any claims he made about what he did with the money (allegedly re-invested in the business) can't be backed up.
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The House committee is now asking questions about the charitable foundation(s), so they're definitely chasing down all the money. And the trend of the questions is not "it was only wealthy VCs, they can afford to take a hit", they do sound like "grandma's life savings". Bankman-Fried is probably going to prison, but I wouldn't bet on a soft, short sentence.
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maybe, but men get way worse sentences than women. Unlike Holmes, it seemed he worked almost alone, which hurts his case. I would be shocked if he only get 10.
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https://www.cnbc.com/2022/12/12/sam-bankman-fried-has-been-arrested-this-is-what-happens-next.html#:~:text=That%20means%20Bankman%2DFried%20could,that%20prosecutors%20will%20reportedly%20pursue.
Size of the loss is a huge factor in sentencing. Shkreli got 7 years even though the investors he defrauded actually made >2x returns, and frankly he got lucky with his judge. SBF isn't quite as infamous as Shkreli, but he's close. 20 years is a better guess.
No way. My normie siblings were eventually making Shkreli jokes, while I haven't heard anyone talk about this FTX guy outside of The Motte, ACX, and Twitter.
This will likely turn into a bigger story.
Maybe objectively, but I can't imagine my boomer relatives picturing this guy as a villain in the same way, and thus they won't be able to care as much. "Evil patent troll businessman jacks up the price of important medicine 1000%**" is an easy story for normies to digest and understand, while "Finance tech bro guy gets money from investors and turns it into imaginary (?) fake(?) digital internet money and then spends the real money which he argues he was allowed to do but actually there were two different companies involved and etc. etc.**" is a lot harder to understand and thus harder to get outraged about.
I remember the 2008 financial crisis, and while there was general outrage at "banks," I don't recall a lot of hate targeted at specific individuals involved in the subprime mortgage and exotic derivative stuff because it's just too hard to understand. In contrast Bernie Madoff was excoriated because "Lying greedy bastard pulls giant pyramid scheme con" is easy to grasp.
I imagine this will just make normies think "gee, crypto sure is a shit show, that guy should probably go to jail I guess" and that's about it. I feel like there's an ACX essay to be written titled "Be Nice, At Least Until You Can Coordinate Illegibility of Your Crimes to the Public"
**not saying this is an accurate summary -- it's an approximation of these events will be remembered in the public memory
it can be (accurately) summarized to "weird rich guy on drugs stole more money that you can imagine and lost almost all of that"
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You got there just before me 😁 So, this happened faster than I expected, but everyone downthread saying he'd never be arrested/it wouldn't be for years, seems we were all wrong.
As to why now right before the hearing? No idea, unless (1) somebody (Ellison?) dropped a lot of testimony into their laps so they could do it now or (2) they had reason to suspect he wasn't going to turn up but was going to do a runner or (3) it's simply because there has been so much talk going around about "he donated all this money to the Democrats, he's bought his freedom" and this isn't a good look for the current administration to be suspected of 'get away with crime thanks to bribery'.
EDIT: News just in! Allegedly he refused to testify before the committee, so looks like if he wouldn't co-operate, he's going to face the consequences:
I guess he's learning the benefit of taking the 5th, huh. about a month late
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I honestly think a lot of people ensconced in an online world of overnight Prime shipping don't realize that it takes time to actually build evidence, even for something obvious, and to get things done. Note, as a social democrat, I get upset w/ my more left-leaning friends who expect Congress to act like a Doordash order, as well.
There was likely no fishiness about how long it took, outside of the usual fishiness when you're dealing with a defendant who might actually have good lawyers, which means the gov't actually has to be careful, as opposed to some random DA going after some random gang member who shot another gang member.
I agree with this. I thought the fraud aspect in particular would take awhile to gather evidence to prove. The DoJ moving this quick makes me believe they have strong hard evidence (emails, slack messages, testimony from executives) that prove intent. SBF is cooked.
I did think it would take a lot longer, which does give more credence to the speculation that Ellison was cutting a deal with the prosecutors by turning over everything she knew/had about Bankman-Fried. And if he was backing out of turning up to the Senate Banking Committee hearing (allegedly due to his counsel - whoever that is today EDIT: Cohen and Gresser of New York - refusing to accept service of the subpoena), then I imagine the gloves came off. All the shooting his mouth off didn't help, either. And I wonder about Wang and Singh, the other co-founders - are they cutting deals too?
If so, then there may well be enough evidence for charges this fast, and the Bahamian authorities are certainly being very co-operative. Did Bankman-Fried expect them to hold out longer and even give him refuge? If so, he made another bad decision there.
He does seem to have agreed to testify before the House Financial Services Committee (all these committees are confusing) but given that he's now been arrested, will that still go ahead?
It looks like he agreed to turn up to the Tuesday (House) committee but refused to testify before the Wednesday (Senate) committee, which may have stoked fears that he was only showing up so he could go on the run in the US and/or try to get out, which might have been easier than trying to fly out of the Bahamas. I have no idea, but the arrest might well be precautionary so he doesn't pull a "here today, gone tomorrow" stunt.
The Senate committee (via a letter sent to him) wanted a written statement from him, so that might be why he declined to appear: he's relying on showing up and burbling something at the House committee, because he seems to be good at slinging words words words in person, but if he writes anything down that's fatal, that is providing the rope to hang himself.
EDIT: While I'm waiting for the next matches in the World Cup (semi-final between Argentina and Croatia this evening, France versus Morocco tomorrow), there will be a livestream of the House Committee on Financial Services hearing today at 10:00 a.m. ET (3:00 p.m. my time) with John J. Ray as witness and potentially? Sam Bankman-Fried as well. I will have to tune in to see if he does turn up or if he can't make it due to being in the slammer 😁
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