FTX’s fallen founder Sam Bankman-Fried may be currently out on bail, but recent developments in the high-profile crypto-collapse may send him back in much sooner than anyone thinks.
According to an investigation conducted by members of the Commodities Futures Trading Commission (CFTC), the entity that filed a lawsuit against Bankman-Fried and his colleagues last December 13th, FTX executives hid up to $8 billion in a fake account created on the exchange.
Bankman-Fried himself allegedly issued the directive ordering executives to deposit the amount into what he referred to as one owned by a Korean associate or, quite simply, an odd Korean account.
Alameda Research, Bankman-Fried’s trading, and investment firm borrowed several billion dollars from FTX to be used in a number of transactions, few of which have actually flourished. Investigators noted that the money loaned to Alameda actually came from customer deposits.
According to the suit filed by the CFTC, Bankman-Fried’s directive essentially covered up Alameda’s near-empty account on FTX.
What piqued investigators’ interest was the fact that the fake account enjoyed the same privileges as other accounts held by Alameda Research which include their exemption from liquidation.
On December 14th, a day after the suit was filed, news broke out that a GitHub account under the name of ex-FTX engineering director Nishad Singh created the code hiding Alameda’s liabilities on the exchange.
What Happens Now?
The shocking collapse of FTX was considered a dark milestone for the cryptocurrency industry, especially since it came on the heels of Bankman-Fried’s assurance to investors that the liquidity issues that had long plagued the crypto market were at an end.
The fallen crypto mogul also claimed that he personally had several billion on hand as a way of supporting struggling cryptos and crypto firms and preventing further destabilization of the digital asset sector.
However, Bankman-Fried’s promises turned out to be empty ones as he filed for Chapter 11 bankruptcy for FTX as well as its 130 affiliate firms.
While Bankman-Fried is currently out on bail after paying the court $250 million, his two closest colleagues have not fared as well. Alameda Research CEO Caroline Ellison pleaded guilty to seven counts of federal fraud charges on December 18th, including a charge of conspiring to commit wire fraud on FTX’s customers, as well as money laundering.
While it is possible that Ellison could face up to 110 years in federal prison, she has bargained with officials for a more lenient sentence by assuring them of her full cooperation in ongoing investigations.
FTX co-founder Gary Wang also pleaded guilty to four counts of fraud and stands to face up to 50 years in prison. He, too, has assured the authorities of his full cooperation.