FTX’s SBF goes from on-chain to in chains

The Future. After a few weeks of high-profile media interviews, Sam Bankman-Fried has been officially arrested and charged with a litany of crimes over the collapse of his cryptocurrency exchange FTX. Once seen as the industry’s golden boy, the unmasking of the 30-year-old fraudster may scare off investment in the crypto market at large — from institutional investors and everyday traders.

SBF’ed
SBF was arrested by Bahamian authorities instead and is being extradited to the US. The charges are like pulling back the curtain on the Wizard of Oz.

• SBF was charged with eight counts of fraud, conspiracy, campaign law finance violations, and money laundering, per Axios.
• And that comes just hours after the Securities and Exchange Commission filed a civil suit against him, alleging that he knowingly defrauded FTX investors — a fact that critics say SEC head Gary Gensler should’ve caught much earlier.

SBF was supposed to testify in front of Congress yesterday (you can read his whole testimony here), but that will now be left to newly-installed FTX CEO and crisis manager John Ray (famed for saving Enron from annihilation).

He’s been going through FTX’s (lack of) books and shockingly testified that the company apparently did all of its accounting using QuickBooks — a fact that Yahoo! Finance shared hilariously mimics a scene from Breaking Bad.

House of crypto
So, now down to the nitty-gritty: what is the key insight into FTX’s criminal crypto enterprise and its mix-up with SBF’s supposedly independent hedge fund, Alameda Research? The SEC complaint sums it up best:

• “There was no meaningful distinction between FTX customer funds and Alameda’s own funds.”
• And then SBF “used Alameda as his personal piggy bank to buy luxury condominiums, support political campaigns, and make private investments, among other uses.”

That’s some blatant embezzlement, and all a big yikes. Of course, none of that was disclosed to FTX users… leaving untold thousands of people victims of a Ponzi scheme.

At a time when crypto was just breaking into the broader culture, it’s possible that the whole FTX drama (seriously, Hollywood is already on it) may erode mainstream confidence in the financial innovation for good.