According to a new filing in the bankruptcy case of cryptocurrency exchange FTX, it was an insider who spilled the beans on the company’s founder, Sam Bankman-Fried.
CNBC reported that Wednesday’s filing contained a letter from the Securities Commission of the Bahamas to the commissioner of police saying it had been informed of potential fraudulent activity within FTX by the company’s co-CEO, Ryan Salame.
Salame warned the commission about the “possible mishandling of clients’ assets” by Bankman-Fried, the report said.
The letter, dated Nov. 9, was sent one day after the crucial midterm elections in the U.S. and just two days before FTX declared bankruptcy.
Salame told authorities the possible fraud involved the illegal transfer of funds between FTX and sister company Alameda Research.
Trending:
As CNBC reported, “Salame told regulators that only three individuals at FTX — Bankman-Fried, Nishad Singh and Gary Wang — had the kind of access and authority to engineer the possibly fraudulent transfers to Alameda, a hedge fund and trading firm.
“Commissioners understood Salame to have said the fund movements and commingling allegedly authorized by Bankman-Fried were contrary to ‘normal corporate governance’ practices.”
After contacting the Securities Commission, Salame returned to the U.S., where he owns homes in Massachusetts, Washington, D.C., and New Jersey, the report said.
Ryan Salame, who was co-CEO at FTX, disclosed “possible mishandling of clients’ assets” by Sam Bankman-Fried to Bahamian regulators just before FTX’s bankruptcy filing. https://t.co/aXkxE7g1kL
— CNBC (@CNBC) December 15, 2022
Additionally, CNBC noted that Salame had donated $20 million to the GOP. Meanwhile, Bankman-Fried is the second-largest donor to Democrats, having given about $38 million to the party and associated groups in the last election cycle.
Wednesday’s filing was the “first public acknowledgment” that an insider had turned on the crypto king. Salame’s cooperation with authorities will provide prosecutors with invaluable information and may trigger other insiders to turn against Bankman-Fried.
There is wide speculation that Caroline Ellison, Bankman-Fried’s ex-girlfriend and the former CEO of Alameda, is a likely candidate. The New York Post reported Wednesday that she already might be cooperating with prosecutors.
Former Securities and Exchange Commission lawyer Howard Fischer told the Post, “She would have among the greatest incentives to cooperate, as it was seeming likely that in his effort to exculpate himself, Bankman-Fried would try to finger her.”
“The speed of the indictment and the breadth of the charges” against Bankman-Fried could indicate that “someone relatively senior is cooperating with the federal authorities in exchange for leniency for their own potential misconduct,” he said.
Fischer added, “It is possible Bankman-Fried’s publicity tour, in which he repeatedly disclaimed either knowledge of — or responsibility for — mishandling or theft of customer assets, spurred senior officers to fear that he would specifically blame them.”
Bankman-Fried was arrested Monday evening in the Bahamas after regulators had received a sealed indictment prepared by the U.S. Attorney’s Office for the Southern District of New York.
During a hearing the following day, he was denied bail by a Bahamian judge who considered him to be a flight risk.
Were Democratic politicians involved in FTX?
Yes: 100% (6 Votes)
No: 0% (0 Votes)
According to a news release from federal prosecutors, the eight charges against Bankman-Fried include “two counts of wire fraud conspiracy, two counts of wire fraud, and one count of conspiracy to commit money laundering, each of which carries a maximum sentence of 20 years. … [one count of] conspiracy to commit commodities fraud, [one count of] conspiracy to commit securities fraud, and [one count of] conspiracy to defraud the United States and commit campaign finance violations, each of which carries a maximum sentence of five years.”
Today we charged FTX Trading Ltd CEO and co-founder Samuel Bankman-Fried with orchestrating a scheme to defraud equity investors. Investigations as to other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing.
— U.S. Securities and Exchange Commission (@SECGov) December 13, 2022
Bankman-Fried has indicated he will fight extradition to the U.S., according to Bloomberg.
Curiously, his arrest came the day before he was scheduled to appear at a House Financial Services Committee hearing about the stunning collapse of his company.
Given Bankman-Fried’s close ties and status as a major contributor to Democrats, some wondered whether the timing of his arrest was intended to prevent his testimony to Congress.
“I don’t understand why the Justice Department would not want him on record today and potentially tomorrow in a Senate hearing spilling his guts,” Republican Rep. Lance Gooden of Texas said, according to Fox Business.
“It’s very frustrating,” he said.
