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Dec 14 (Reuters) - Elizabeth Howcroft Crypto Correspondent
Hello, It’s been another hectic week in the crypto world and a lot has changed for FTX founder Sam Bankman-Fried in the last few days. Here’s where we’re up to as the United States wakes up on Wednesday morning.
Here’s what happened in the Bahamas
On Monday, Sam Bankman-Fried was arrested in the Bahamas and on Tuesday U.S. prosecutors accused him of fraud and violating campaign finance laws by misappropriating customer funds.
In a sweltering courtroom in the Bahamas, Bankman-Fried’s hearing was conducted over the course of six hours on Tuesday. A judge denied Bankman-Fried’s petition for bail, which means he’ll be held in a detention centre until early February. Before his bail was denied, Bankman-Fried’s lawyer said his client was not waiving his right to fight extradition to the United States.
To recap: SBF (as Bankman-Fried is known) is the 30-year-old founder and former CEO of crypto exchange FTX, which collapsed and filed for bankruptcy last month after a surge in customer withdrawals. Investors had grown worried about the state of FTX’s finances and its relationship to Alameda Research, a crypto hedge fund also founded by SBF. It was a shocking fall from grace for SBF, who’d amassed a fortune valued over $20 billion during and built FTX into one of the world’s largest exchanges.
Reuters reported last month that Bankman-Fried secretly transferred $10 billion of customer funds from FTX to Alameda. A secret change to FTX’s code allowed Alameda to keep borrowing funds from FTX’s customer deposits, regardless of the value of the collateral securing those loans, Reuters reported on Tuesday.
The U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) also filed suit on Tuesday. Here’s a key quote from the filing: “While he spent lavishly on office space and condominiums in The Bahamas, and sank billions of dollars of customer funds into speculative venture investments, Bankman-Fried's house of cards began to crumble.”
FTX’s current CEO, John Ray, told lawmakers that FTX had lost $8 billion of client money, describing the firm’s leadership as “a small group of grossly inexperienced, non-sophisticated individuals.”
Bankman-Fried has acknowledged oversight failings at FTX but said he does not personally think he has any criminal liability.
It’s not yet known whether charges will be brought against other FTX executives, but U.S. Attorney Damian Williams said there are further announcements to come. He called Bankman-Fried’s campaign donations part of one of the “biggest financial frauds in American history.”
Even as FTX takes centre stage, there’s plenty of drama elsewhere. Binance – which is by far the world’s biggest exchange - saw $1.9 billion of withdrawals in 24 hours. The exchange also halted withdrawals of the stablecoin USDC for several hours, although a spokesperson said it always had “more than enough funds” to meet withdrawal requests.
Crypto Essentials
Bitcoin has been uncharacteristically steady in the aftermath of the FTX collapse, while many of those who remain invested are putting their bitcoin into offline ‘cold storage’, but there’s a risk of further falls if bitcoin miners are forced to sell their holdings to stay afloat as mining becomes more expensive, market participants say.
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