United States Prosecutors Seized $700 Million Assets from FTX founder Sam Bankman-Fried, $525 Million Robinhood Shares & $94.5 Million Cash in Silvergate Bank
21st January 2023 | Hong Kong
United States prosecutors have seized $700 million assets from FTX founder Sam Bankman-Fried, with $525 million from Robinhood Shares and $94.5 million cash in Silvergate Bank (Court Filing: 20/1/23). The FTX Official Committee of Unsecured Creditors (UCC) estimated current liquid assets of $5.5 billion, including $1.7 billion of cash, $3.5 billion of crypto assets and $300 million in securities (Meeting 17/1/23). FTX CEO John Ray is currently evaluating possibility of restarting FTX International Exchange. Earlier in January 2023, FTX has recovered more than $5 billion of liquid assets, including cash, cryptocurrencies and securities, and to sell non-strategic investments with book value of around $4.6 billion. FTX Lawyer Andy Dietderich to US Delaware bankruptcy Judge John Dorsey: “We have located over $5bn of cash, liquid cryptocurrency and liquid investment securities.”
“ United States Prosecutors Seized $700 Million Assets from FTX founder Sam Bankman-Fried, $525 Million Robinhood Shares & $94.5 Million Cash in Silvergate Bank “
FTX Recovers $5 Billion of Liquid Assets Including Cash, Cryptocurrencies & Securities, To Sell Non-Strategic Investments with Book Value of $4.6 Billion
12th January 2023 – FTX has recovered more than $5 billion of liquid assets, including cash, cryptocurrencies and securities, and to sell non-strategic investments with book value of around $4.6 billion. FTX Lawyer Andy Dietderich to US Delaware bankruptcy Judge John Dorsey: “We have located over $5bn of cash, liquid cryptocurrency and liquid investment securities.” FTX legal team is still working on calculating customer shortfall. The US Commodities Futures Trading Commission (CFTC) had previously estimated FTX missing funds to be around $8 billion. FTX assets (FTX’s proprietary and illiquid FTT token) that had been seized by Securities Commission of the Bahamas are not included (FTX lawyer estimated value of $170 million, Bahamas estimated value of up to $3.5 billion). Other FTX groups LedgerX, Embed, FTX Japan and FTX Europe are independent of FTX group and have segregated customer accounts and separate management teams. Earlier in January 2023, FTX Founder Sam Bankman-Fried had pleaded not guilty to money laundering, wire & securities fraud charges in New York (United States), with the trial set on 2nd October 2023. More info below.
FTX Founder Sam Bankman-Fried Pleads Not Guilty to Money Laundering, Wire & Securities Fraud Charges in New York, Trial Set on 2nd October 2023
5th January 2023 – FTX Founder Sam Bankman-Fried has pleaded not guilty to money laundering, wire & securities fraud charges in New York (United States), with the trial set on 2nd October 2023. The judge also agreed to keep the identities of the 2 people who had helped to secured his $250 million bail. Prosecutors: “One of the biggest financial frauds in American history.” FTX new CEO John Ray III: “Old-fashioned embezzlement … … grossly inexperienced and unsophisticated individuals.” FTX founder Sam Bankman-Fried had been released on a $250 million bail (22/12/22) via a Recognizance Bond secured by equity in parents’ home and signatures of his parents & 2 individuals with considerable assets. Earlier in December 2022, Alameda Research CEO Caroline Ellison and FTX Trading CTO (Chief Technology Officer) Gary Zixiao Wang have both pleaded guilty to United States Securities & Exchange Commission (SEC) charges for fraud (21/12/22), Official Announcement & Twitter Video Message below), with FTX founder Sam Bankman-Fried extradited from The Bahamas to the United States (22/12/22).
FTX Founder Sam Bankman-Fried & CTO Gary Wang had also borrowed $546 million from Alameda Research via Emergent Fidelity Technologies (EFT) to buy 8% of commission free brokerage Robinhood in May 2022. FTX customers has filed a class action lawsuit against FTX, Alameda Research, Sam Bankman-Fried & senior executives to secure first payment rights and compensation including interest. The lawsuit was filed in the United States Bankruptcy Court for the District of Delaware (27/12/22). The lawsuit is to claim the cash & assets of FTX customers, which were wrongly defrauded and commingled including with funds at Alameda Research, with the frozen funds of FTX should be prioritised to repay FTX customers first and not secured creditors or investors.
FTX Founder Sam Bankman-Fried & CTO Gary Wang Borrowed $546 Million from Alameda Research via Emergent Fidelity Technologies to Buy 8% of Commission Free Brokerage Robinhood in May 2022
29th December 2022 – FTX Founder Sam Bankman-Fried & CTO Gary Wang had borrowed $546 million from Alameda Research via Emergent Fidelity Technologies (EFT) to buy 8% of commission free brokerage Robinhood in May 2022, with Sam Bankman-Fried owning 90% of Emergent Fidelity Technologies and Gary Wang owning 10% of Emergent Fidelity Technologies. The transactions were detailed in an affidavit that surfaced during a dispute in the United Sates bankruptcy court (27/12/22). In August 2022, Robinhood announced 23% job cuts of 780 staffs (2/8/22), with Robinhood CEO Vlad Tenev acknowledging over-hiring having forecast the 2020 & 2021 market conditions would had last longer. On 27th Dec 2022, FTX customers has filed a class action lawsuit against FTX, Alameda Research, Sam Bankman-Fried & senior executives to secure first payment rights and compensation including interest. See more info below.
FTX Customers File Class Action Lawsuit Against FTX, Alameda Research, Sam Bankman-Fried & Senior Executives to Secure First Payment Rights & Compensation Including Interests
29th December 2022 – FTX customers has filed a class action lawsuit against FTX, Alameda Research, Sam Bankman-Fried & senior executives to secure first payment rights and compensation including interest. The lawsuit was filed in the United States Bankruptcy Court for the District of Delaware (27/12/22). The lawsuit is to claim the cash & assets of FTX customers, which were wrongly defrauded and commingled including with funds at Alameda Research, with the frozen funds of FTX should be prioritised to repay FTX customers first and not secured creditors or investors. The filing: “Because of the FTX Executive Defendants’ breaches of customer agreements, fiduciary duties and duties of care, millions of customers of the FTX Group who deposited cash and digital assets at either or both the FTX Group’s U.S.-based and non-U.S.-based trading platforms have been unable to withdraw, use or access the billions of dollars in assets that were contractually required to be held safely in accounts on their behalf … … Even worse, according to widespread reports, up to $2 billion in customer property is missing. At its simplest, this Adversary Proceeding is necessary because the Customer Class members should not have to stand in line along with secured or general unsecured creditors in these Bankruptcy Proceedings just to share in the diminished estate assets of the FTX Group and Alameda. Cash and assets traceable to customers, which never belonged to FTX or Alameda and do not belong to the estates, should be earmarked solely for customers, and victimized customers should likewise have priority to any other cash possessed or recovered by Debtors.” Earlier in December 2022, FTX founder Sam Bankman-Fried was released on a $250 million bail (22/12/22) via a Recognizance Bond secured by equity in parents’ home and signatures of his parents & 2 individuals with considerable assets. More info below | Track official FTX proceeding here
FTX Founder Sam Bankman-Fried Released on $250 Million Bail via Recognizance Bond Secured by Equity in Parents Home & Signatures of Individuals with Considerable Assets, Awaits Trial for Fraud & Criminal Charges on 3rd Jan 2023
24th December 2022 – FTX founder Sam Bankman-Fried had been released on a $250 million bail (22/12/22) via a Recognizance Bond secured by equity in parents’ home and signatures of his parents & 2 individuals with considerable assets. Sam Bankman-Fried will await trial for fraud & criminal charges on 3rd January 2023. Sam Bankman-Fried will also be required to wear an electronic monitoring bracelet, and not allowed to open new lines of credit of more than $1,000. On 21st Dec 2022, United States SEC released a statement on Alameda Research CEO Caroline Ellison and FTX Trading CTO (Chief Technology Officer) Gary Zixiao Wang pleading guilty to United States Securities & Exchange Commission (SEC) charges for fraud. More info below.
Alameda Research CEO Caroline Ellison & FTX Trading CTO Gary Zixiao Wang Pleads Guilty to United States SEC Charges for Fraud, FTX Founder Sam Bankman-Fried Extradited to United States
22nd December 2022 – Alameda Research CEO Caroline Ellison and FTX Trading CTO (Chief Technology Officer) Gary Zixiao Wang have both pleaded guilty to United States Securities & Exchange Commission (SEC) charges for fraud (21/12/22), Official Announcement & Twitter Video Message below), with FTX founder Sam Bankman-Fried extradited from The Bahamas to the United States (22/12/22). United States SEC: “Between 2019 and 2022, Ellison, at the direction of Bankman-Fried, furthered the scheme by manipulating the price of FTT, an FTX-issued exchange crypto security token, by purchasing large quantities on the open market to prop up its price. FTT served as collateral for undisclosed loans by FTX of its customers’ assets to Alameda, a crypto hedge fund owned by Wang and Bankman-Fried and run by Ellison. The complaint alleges that, by manipulating the price of FTT, Bankman-Fried and Ellison caused the valuation of Alameda’s FTT holdings to be inflated, which in turn caused the value of collateral on Alameda’s balance sheet to be overstated, and misled investors about FTX’s risk exposure. In addition, the complaint alleges that, from at least May 2019 until November 2022, Bankman-Fried raised billions of dollars from investors by falsely touting FTX as a safe crypto asset trading platform with sophisticated risk mitigation measures to protect customer assets and by telling investors that Alameda was just another customer with no special privileges; meanwhile, Bankman-Fried and Wang improperly diverted FTX customer assets to Alameda. The complaint alleges that Ellison and Wang knew or should have known that such statements were false and misleading.”
United States SEC Chair Gary Gensler: “As part of their deception, we allege that Caroline Ellison and Sam Bankman-Fried schemed to manipulate the price of FTT, an exchange crypto security token that was integral to FTX, to prop up the value of their house of cards. We further allege that Ms. Ellison and Mr. Wang played an active role in a scheme to misuse FTX customer assets to prop up Alameda and to post collateral for margin trading. When FTT and the rest of the house of cards collapsed, Mr. Bankman-Fried, Ms. Ellison, and Mr. Wang left investors holding the bag. Until crypto platforms comply with time-tested securities laws, risks to investors will persist. It remains a priority of the SEC to use all of our available tools to bring the industry into compliance. As alleged, Mr. Bankman-Fried, Ms. Ellison, and Mr. Wang were active participants in a scheme to conceal material information from FTX investors, including through the efforts of Mr. Bankman-Fried and Ms. Ellison to artificially prop up the value of FTT, which served as collateral for undisclosed loans that Alameda took out from FTX pursuant to its undisclosed, and virtually unlimited, line of credit,” said Sanjay Wadhwa, Deputy Director of the SEC’s Division of Enforcement. “By surreptitiously siphoning FTX’s customer funds onto the books of Alameda, defendants hid the very real risks that FTX’s investors and customers faced.”
United States SEC Announcement on Guilty Plead – Twitter
Statement of U.S. Attorney Damian Williams on U.S. v. Samuel Bankman-Fried, Caroline Ellison, and Gary Wang pic.twitter.com/u1y4cs3Koz
— US Attorney SDNY (@SDNYnews) December 22, 2022
United States SEC Announcement
SEC Charges Caroline Ellison and Gary Wang with Defrauding Investors in Crypto Asset Trading Platform FTX
21st Dec 2022 – The Securities and Exchange Commission today charged Caroline Ellison, the former CEO of Alameda Research, and Zixiao (Gary) Wang, the former Chief Technology Officer of FTX Trading Ltd. (FTX), for their roles in a multiyear scheme to defraud equity investors in FTX, the crypto trading platform co-founded by Samuel Bankman-Fried and Wang. Investigations into other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing.
According to the SEC’s complaint, between 2019 and 2022, Ellison, at the direction of Bankman-Fried, furthered the scheme by manipulating the price of FTT, an FTX-issued exchange crypto security token, by purchasing large quantities on the open market to prop up its price. FTT served as collateral for undisclosed loans by FTX of its customers’ assets to Alameda, a crypto hedge fund owned by Wang and Bankman-Fried and run by Ellison. The complaint alleges that, by manipulating the price of FTT, Bankman-Fried and Ellison caused the valuation of Alameda’s FTT holdings to be inflated, which in turn caused the value of collateral on Alameda’s balance sheet to be overstated, and misled investors about FTX’s risk exposure.
In addition, the complaint alleges that, from at least May 2019 until November 2022, Bankman-Fried raised billions of dollars from investors by falsely touting FTX as a safe crypto asset trading platform with sophisticated risk mitigation measures to protect customer assets and by telling investors that Alameda was just another customer with no special privileges; meanwhile, Bankman-Fried and Wang improperly diverted FTX customer assets to Alameda. The complaint alleges that Ellison and Wang knew or should have known that such statements were false and misleading.
The complaint also alleges that Ellison and Wang were active participants in the scheme to deceive FTX’s investors and engaged in conduct that was critical to its success. The complaint alleges that Wang created FTX’s software code that allowed Alameda to divert FTX customer funds, and Ellison used misappropriated FTX customer funds for Alameda’s trading activity. The complaint further alleges that, even as it became clear that Alameda and FTX could not make customers whole, Bankman-Fried, with the knowledge of Ellison and Wang, directed hundreds of millions of dollars more in FTX customer funds to Alameda.
“As part of their deception, we allege that Caroline Ellison and Sam Bankman-Fried schemed to manipulate the price of FTT, an exchange crypto security token that was integral to FTX, to prop up the value of their house of cards,” said SEC Chair Gary Gensler. “We further allege that Ms. Ellison and Mr. Wang played an active role in a scheme to misuse FTX customer assets to prop up Alameda and to post collateral for margin trading. When FTT and the rest of the house of cards collapsed, Mr. Bankman-Fried, Ms. Ellison, and Mr. Wang left investors holding the bag. Until crypto platforms comply with time-tested securities laws, risks to investors will persist. It remains a priority of the SEC to use all of our available tools to bring the industry into compliance.”
“As alleged, Mr. Bankman-Fried, Ms. Ellison, and Mr. Wang were active participants in a scheme to conceal material information from FTX investors, including through the efforts of Mr. Bankman-Fried and Ms. Ellison to artificially prop up the value of FTT, which served as collateral for undisclosed loans that Alameda took out from FTX pursuant to its undisclosed, and virtually unlimited, line of credit,” said Sanjay Wadhwa, Deputy Director of the SEC’s Division of Enforcement. “By surreptitiously siphoning FTX’s customer funds onto the books of Alameda, defendants hid the very real risks that FTX’s investors and customers faced.”
The SEC’s complaint charges Ellison and Wang 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 Ellison and Wang from participating in the issuance, purchase, offer, or sale of any securities, except for their own personal accounts; disgorgement of their ill-gotten gains; a civil penalty; and an officer and director bar. Ellison and Wang have consented to bifurcated settlements, which are subject to court approval, under which they will be permanently enjoined from violating the federal securities laws, the above-described conduct-based injunctions, and officer and director bars. Upon motion of the SEC, the court will determine whether and what amount of disgorgement of ill-gotten gains plus prejudgment interest and/or a civil penalty is appropriate, as well as the length of the officer and director bar and the conduct-based injunction imposed against Wang.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced charges against Ellison and Wang.
Ellison and Wang are cooperating with the SEC’s ongoing investigation, which 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 Therese Scheuer, Alistaire Bambach, Ainsley Kerr, 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 Commodity Futures Trading Commission.
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