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You are here: Home / Economics / C.R.E.A.M. / Monday Evening Open Thread: Crypto-Grifter SBF Busted

Monday Evening Open Thread: Crypto-Grifter SBF Busted

by | 98 Comments

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We enter the Find Out section of our FAFO narrative:

Per Reuters:

… A spokesman for the U.S. Attorney’s office in Manhattan confirmed Bankman-Fried had been arrested in The Bahamas but declined to comment on what the charges were.

“As a result of the notification received and the material provided therewith, it was deemed appropriate for the Attorney General to seek SBF’s arrest and hold him in custody pursuant to our nation’s Extradition Act,” the office of The Bahamas Attorney General Ryan Pinder said…

In a series of interviews and public appearances in late November and December, Bankman-Fried acknowledged risk management failures but sought to distance himself from accusations of fraud, saying he never knowingly commingled customer funds on FTX with funds at his proprietary trading firm, Alameda Research.

“I didn’t ever try to commit fraud,” Bankman-Fried said in a Nov. 30 interview at the New York Times‘ Dealbook Summit, adding he doesn’t personally think he has any criminal liability.

FTX, which had been among the world’s largest cryptocurrency exchanges, filed for bankruptcy protection on Nov. 11 in one of the highest-profile crypto blowups after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal.

The liquidity crunch came after Bankman-Fried secretly moved $10 billion of FTX customer funds to Alameda, Reuters reported, citing two people familiar with the matter. At least $1 billion in customer funds had vanished, the people said…

Reader Interactions

98Comments

  4. 4.

    Birdie

    I made the mistake of clicking through on that SDNY tweet. Won’t do that again! (Also, the crypto clowns replying “took you long enough” to federal law enforcement seem… dumb)

  5. 5.

    catclub

    go read matt levine for useful, jaundiced views of the crypto zoo.

    Levine thinks that FTX may have been doing market manipulation to crash the Luna token, and  the general collapse of crypto from it bounced back on FTX.

    Market manipulation is something the sdny may go after.  I have my doubts that FTX even had to keep customer money protected as a bank might.[i.e not really a crime to lose the customer’s money]  They were NOT a bank, but tried to act like one.

  6. 6.

    Alison Rose

    I wish his second last name started with a C so I could make one of those twin Spiderman memes and label them both SBC. No one else would find it funny, but I would, and that’s what matters.

  7. 7.

    Ken

    @Birdie: There’s a joke circulating that the delay in filing charges was because he kept going on TV and web chats and confessing to more crimes.

    Also it should be noted that

    • “among the largest crypto exchanges”
    • “filed for bankruptcy”

    were about three days apart.

  8. 8.

    David ⛄ 🎅The Establishment🎄 🦌 🕎 Koch

    Welcome to Biden’s America.

    You can’t even flee the country after committing crimes anymore.

  11. 11.

    Bill Arnold

    adding he doesn’t personally think he has any criminal liability.

    There’s criminal liability, and there’s his continued existence being a liability among criminals.

  15. 15.

    SpaceUnit

    The entitled crypto-bro chutzpa of announcing publicly that you are refusing to accept a Congressional subpoena is truly off the chart.  Damn.

    ETA:  Nice to see the dude got slapped in the face with the Clue Fish.

  16. 16.

    CaseyL

    @SpaceUnit: It’s a widespread condition: how many Trumpies simply ignore Congressional subpoenas?  Esp. while SFB was still in office and Barr was still AG, when there was simply no point in referring anything to DoJ.

  18. 18.

    UncleEbeneezer

    THREAD: Why is the investigation of Donald Trump taking much longer than it took the DOJ to investigate and charge Sam Bankman-Fried?  (Unrolled Thread-Reader, not link to Musk Hellsite)

  19. 19.

    Barbara

    @SpaceUnit: You can refuse to accept service but it’s stupid at this level.  I predict the next development in crypto world will be profession of shock that something so risky could be sold without regulation. I’m not actually expecting a demand for a bail out but I wouldn’t bet against it.

  21. 21.

    azlib

    Hopefully, the whole crypto fad will go the way of Dutch tulips.  The whole thing was always a complete scam. Blockchains do not scale at all and the whole “mining” exercise is a waste of a lot of computer power.

  22. 22.

    Martin

    @catclub: I suspect it’s worse than that. Someone is leaking Signal chats between the major crypto dudes including CZ and SBF and a bunch of other major players. From the read of them (assuming they’re legit) it looks like SBF was trying to take down Tether.

    I’m guessing the chat is legit given that both NYT and WaPo published it. And the read of the whole thing is that the big players just treat this like a giant game where they’re trying to run up the score and everyone else are just disposable NPCs.

    Not that that’s normally illegal.

  25. 25.

    Ken

    @Parfigliano: Want kind of morons “invest” in this shit?

    The kind of people who read an ad promising a 20% annual return on investment and think “That sounds totally believable and very profitable.”

  26. 26.

    Cameron

    He didn’t ever try to commit fraud?  What, it just sort of happened?  What kind of stupid-ass bullshit is that?  “In crypto, fraud commits you!”

  27. 27.

    mali muso

    Open thread? Just watched the David Letterman interview with Zelenskyy on Netflix. Filmed in a subway underground station on a makeshift “stage” and the trains roaring past every so often definitely gives it a bit of a surreal air. Very inspiring but down to earth discussion.

  32. 32.

    Geminid

    @Nicole: Kathy Garcia came really close by the time all the ranked choices were counted. Ironically, under the old system she would have faced Adams in a runoff. His 33% of first choices was well short of the 40% that used to be required to avoid a runoff. Garcia might have beaten Adams head to head in a second round.

  34. 34.

    Jeffro

    @Nicole:Why, oh why, couldn’t we have had the nice boring lady win?

    Truly, the reporting and op-ed writing on this topic is LAAAAACKING!  (and by topic and boring lady, I am assuming you mean Hillz)

    But we are not a remotely serious country, so the only thing worth talking about is…whatever stupid shit ‘Elmo’ just put out there on Twitter, his new playtoy

  35. 35.

    FelonyGovt

    Don’t know (or care) much about SBF, or crypto for that matter, but every time I read about him I think about an article I read discussing how a woman tech (or anything else) executive couldn’t possibly get awY with the sloppy casual look SBF, and to some extent Zuck, regularly sport.

  36. 36.

    Martin

    @Cameron: The problem is that crypto is fraud. It’s just tolerated fraud. So where’s the line between that and more conventional forms of fraud?

    And that’s a big part of the problem – if you accept these other activities are proper, illegal fraud, and work backward, then crypto itself has to be seen as fraud. So the whole regulatory space is in a kind of paralysis because they both don’t want to declare the whole enterprise to be illegal and also don’t have an idea how to put forward an economic philosophy that allows crypto but disallows the other stuff.

  37. 37.

    Kent

    @frosty: apparently only 2% of FTX customers were Americans.  I expect there are lots of Mexican cartel and Russian oligarch types who are not amused to see their Ill gotten millions vanish into smoke at the hands of a smarmy American tech bro.

  38. 38.

    Gin & Tonic

    @mali muso: Don’t have Netflix so haven’t watched, but the thing about most stations in the Kyiv metro is that they are *very* far below ground, which means that they are, and have been in earlier wars, effective  bomb shelters. They are also (most of them) works of art.

  40. 40.

    Kent

    @SpaceUnit: there is no legal mechanism for a bailout and no incentive for Congress to invent one since 98% of customers were foreigners and it doesn’t seem to be affecting broader markets anyway.  The Dow was up 500 today for example.

  42. 42.

    mrmoshpotato

    In a series of interviews and public appearances in late November and December, Bankman-Fried acknowledged risk management failures but sought to distance himself from accusations of fraud, saying he never knowingly commingled customer funds on FTX with funds at his proprietary trading firm, Alameda Research.

    “I’m not a fraud-committing bitchass!  It was risk management failure!”

    I look forward to the unsealed indictment.

    Now do the other SFB!

    Edit – I swear I saw this crypto dipshit identified as SFB by some.

  43. 43.

    Eric S.

    Open thread… In 1996 I started working on Chicago’s Loop. One of the very first staple Characters I remember is Walking Man. His name was Joseph Kromelis, a homeless man that always had on a blazer or sports coat with long flowing locks of hair.

     

    Seven months ago a semi sentient POS poured gasoline on Joseph while he slept and lit him on fire. Joseph suffered burns over 50% of his body and was not expected to survive. After 7 months in the hospital he died Sunday.

    For someone I said hello to no more than a few times in my life I find myself incredibly sad and even more enraged.

  44. 44.

    Martin

    @FelonyGovt: Oh, you need to go read up on Caroline Ellison. She certainly was able to pull off the sloppy casual look. She’s also a good illustration of the double standard by, well everyone, for how undeserving she was to be CEO given her nerdy affect. Mind you, I think she was undeserving because she never took responsibility for what was happening at Alameda and repeatedly said she just did what Sam told her to do, and constantly made it seem like Alameda was an unserious institution throwing around billions of dollars. But Sam is equally guilty on that front and everyone loved the shit out of him because he’d play League during investor calls. It’d be one thing if he was good at League, but he wasn’t – he was shit. And if you’re going to be shit, at least be shit at DoTA, the better game.

  45. 45.

    mali muso

    @Alison Rose: Yes, it was a good joke. The irony was strong.

    @Gin & Tonic: the use of the underground as bomb shelter was definitely mentioned. At least once during the interview, air raid sirens went off. Hope you have a chance to watch the interview at some point. I thought it was well done and hopefully brings more awareness and attention to the ongoing need to support Ukraine. 🇺🇦

  50. 50.

    jonas

    Crypto is completely unregulated. This is like indicting someone for running some crooked 3-card monty game on a street corner. Can you indict someone like SFB on anything more than running an elaborate confidence game? Maybe if they did it using the postal system or some other federally-regulated communications system, but IANAL, so I’m not sure.

  51. 51.

    mrmoshpotato

    @Kent:

    also FTX isn’t even an American company. 

    Damn.  Some really really then needs to be punched in the dick in Major League Baseball.

  52. 52.

    Poe Larity

    After 2008, I don’t understand the prosecution of crytpo-currency scams. We should be handing out medals to anyone scamming edge-lords.

  55. 55.

    jonas

    @Eric S.: ​
      Fuck, that’s messed up. I’m so sorry. Hope they catch the mf’er did this, but I know it’s going to be an uphill battle between probably not having prominent family/survivors to advocate for him and the extreme indifference of law enforcement to shit that happens to homeless people.

  57. 57.

    Jim, Foolish Literalist

    @Starfish: I wonder what the board/s of Tesla and SpaceX are thinking these days

    ETA: People on twitter, so as ever FWIW, are saying Musk has crossed the line into defamation with his tweets accusing Fauci of lying to Congress. I doubt Fauci will sue, but sooner or later I think he’s gonna tweet his way into.a lawsuit, maybe many

  58. 58.

    Captain C

    @mrmoshpotato: This is the second time in a couple decades that Major League Baseball has taken a sponsor whose ultimate product was essentially fraud (cf. Enron Stadium).  Guess the money seemed really good at the time.

  63. 63.

    BlueGuitarist

    @Jeffro:
    boring lady here is Kathryn Garcia, who finished a close 2nd in NYC mayoral election; NYC sanitation commissioner, slogan: “get shit done”

    eta see geminid at 32

  65. 65.

    SpaceUnit

    @mrmoshpotato:

    Okay, so a number of years ago a friend of mine and I built a little wooden puppet theater for a bunch of kids in our social circle.  They used sock puppets mostly.  We set it up outside a restaurant that another friend owned in a mall right across from a movie theater.  Mall management was okay with it.  There were always people milling about waiting to go into the cineplex.

    We called it The Bughouse Theater.  Our best play was called Last Train to Clueville.  It was by far our biggest hit. The main character was a hapless possum who was told by everyone that he needed to get a clue.

    So he undertook a journey on the Clue Train to the remote town of Clueville, where he stayed for a night at the Clue Hotel before venturing off on the Clue Trail to follow the Clue River deep into the Clue Mountains to seek out the advice of the Clue Bird.

    It was funny.  And the kids were just superstars.  Good times.

  67. 67.

    Uncle Cosmo

    @Gin & Tonic: ​[T]he thing about most stations in the Kyiv metro is that they are *very* far below ground, which means that they are, and have been in earlier wars, effective bomb shelters.

    True also of the Prague and Budapest** metros, and very intentionally built in the Communist era deep enough for dual use. (Getting passengers up and down, those long escalators used to haul arse – til both nations joined the EU and the regulators forced them to slow down out of safety concern. I nearly lost a bag on my first day in Hungary when one of them snagged a loose strap and tried to eat it whole…)

    ** In fact 2/3 of the latter. Line 1 is the oldest subway line on the Continent, built long before “the fury of aerial bombardment” was a thing. The Hungarians essentially tunnelled out Andrassy ut just deep enough to lay the tracks and cars below street level.

  68. 68.

    sanjeevs

    @UncleEbeneezer: I love how Mariotti just handwaves away Trump walking off with a ton of classified documents almost 2 years ago with zero consequences.

    The contrast with SBF arrested 31 days after FTX bankruptcy is stark.

  71. 71.

    Tony G

    @Parfigliano: I think that they’re the same kind of morons who think that they can get rich betting at casinos or betting on FanDuel.  Back in the late nineties I used to work with a guy who was certain that he’d become rich by buying and selling “rare” Beanie Babies.  (Spoiler alert: he did not get rich.). There is no shortage of idiots out there.

  73. 73.

    BR

    By the way — people were asking how they can keep up with news on Mastodon — here’s a partial answer:

    https://newsrelay.org/public/local

    This looks like it’s a Mastodon server that is pulling from the RSS feeds of major news outlets and posting links. A decent option for now.

  75. 75.

    prostratedragon

    @BlueGuitarist: ​ I recall some “media” saying almost exactly that during the campaign. If people want to be entertained in NYC, there are theaters of all kinds, concert halls, night clubs, and taking walks on the goddam street. Why it’s a value in a public official is beyond me.

  77. 77.

    Steve in the ATL

    @azlib:
     

    Hopefully, the whole crypto fad will go the way of Dutch tulips.

    Last time I was in Amsterdam—yesterday—there was a tulip store in the airport. If that’s not a good omen for crypto, I don’t know what is!

  79. 79.

    Eric S.

    @cain: They arrested a suspect shortly after the incident. He was charged with arson and attempted murder (I think). I imagine those charges will be upgraded.

     

    As far as I know it was random. I really can’t fathom what mentality it takes to do this. I don’t think I want to.

    Edited to fix typo.

  80. 80.

    Formerly disgruntled in Oregon

    And I thought we had too many new acronyms at work! I can’t keep up with the news acronyms now…

  82. 82.

    Jim, Foolish Literalist

    @sanjeevs: The contrast with SBF arrested 31 days after FTX bankruptcy is stark.

    that’s… kind of the point of the thread?

    and I don’t know how you get “hand waves away” when he predicts trump will be indicted in a. matter of weeks

  83. 83.

    Barbara

    @jonas: ​I guess we’ll see the evidence, but from what I understand, the most serious allegations relate to him simply siphoning money from customer accounts to offset losses in his investment fund. I mean, the concept of customer accounts in crypto currency is itself a bit misleading, but I’m pretty sure you can’t just use them as your personal piggy bank. It’s just wild that so many people put faith and trust in people like him.​

  84. 84.

    sanjeevs

    @Jim, Foolish Literalist: The Trump call to Raffensperger was reported in February 2021 and its only now they are seeking a subpoena. Not the actions of a serious investigation.

    The documents case has also been dragging on for almost two years. Last action by the SC was to seek a contempt motion, not something he’d be doing if anyone other government employee had disappeared with a pile of classified documents.

    Meanwhile the Peruvian ex President is in a jail cell immediately after his attempted coup.

  85. 85.

    jonas

    @Barbara: Right, but if all these transactions are happening in bitcoin, or fraudcoin, or whateverthehellcoin, in offshore accounts, how do US regulators have standing to charge someone over that? I assume there’s some angle here where he used US-based resources to carry out his scheme and that’s why he’s been arrested, but so far they’re keeping the actual charges under wraps. I guess we’ll find out tomorrow.

  86. 86.

    Ken

    @Barbara: There is this utterly insane curious notion in cryptocurrency, something like “the code is the contract”. This means that if the code allows you to move money or tokens in some way, that must be legal, even if it looks completely fraudulent.

    I think the idea is that everyone who has given money to a crypto system has read the code — it often is open-source — and completely understands it, so there is an implied consent here. The “prospectus” for these systems is sometimes literally the code, or a page full of complicated mathematical equations which the code supposedly implements.

  88. 88.

    jonas

    @sanjeevs: ​
      The Fulton county DA has has been all over the election interference case since day 1, so I assume the Feds are letting those people deal with that since it was state election laws that were being violated. There’s almost certainly an indictment coming down there shortly. The stolen documents issue was being dealt with by NARA from day 1 as well, until last summer, when it became clear that Trump was 1. straight-up lying about how many government records he had taken with him and 2. just how sensitive the classified information in those documents was. Then the FBI and DOJ stepped in because it had become a national security/counter-intelligence operation at that point. At this point, I don’t see how he escapes indictment on this. His lawyers have already basically admitted he stole the stuff, but that he had a right to because anything that crosses a president’s desk automatically becomes a personal memento, or something. That, as they say, is not how any of this works.

    The wheels of justice grind slowly, but finely. Trump just got his ass handed to him in court with the dismissal of the special master case. It won’t get any better from here. I don’t think there’s any cause here to think anyone at DOJ, the FBI or state-level authorities are purposely slow-walking anything.

  90. 90.

    sanjeevs

    @jonas:

    January 6: Adam Schiff criticizes slow pace of DOJ probe into broader plot | CNN Politics

    He also questioned how the various investigations have been delegated, saying he doesn’t understand why the DOJ has left Fulton County, Georgia, to investigate on its own former President Donald Trump’s efforts to overturn the 2020 election result in the state.
    “That may be changing too, but it’s a long time coming” Schiff said.
    The longtime lawmaker reflected Saturday on how the process for sharing information between the January 6 committee and the DOJ developed, saying he found it “breathtaking” that the initial ask from the DOJ was for all of the committee’s work product.
    “It would be equally breathtaking if we were to say to the Justice Department, ‘Turn over all of your files,’” he said. “My first reaction when we got the request – ‘Turn over all your files to us’ – was: ‘Why don’t you have your own damn files? Why haven’t you been conducting your own investigation? Why do you need us to do it?’”

    Schiff has been completely vindicated.
    Unfortunately it looks like Garland is determined to slow walk the espionage case also

  92. 92.

    Bill Arnold

    @BlueGuitarist:

    NYC sanitation commissioner, slogan: “get shit done”

    Via the wayback machine, a very recent job listing (1 Dec 2022):
    NY City Job Listing for Director of Rodent Mitigation

    About the Role:
    Do you have what it takes to do the impossible? A virulent vehemence for vermin? A background in urban planning, project management, or government?
    …
    Cunning, voracious, and prolific, New York City’s rats are legendary for their survival skills, but they don’t run this city – we do
    …
    The ideal candidate is highly motivated and somewhat bloodthirsty, determined to look at all solutions from various angles, including improving operational efficiency, data collection, technology innovation, trash management, and wholesale slaughter.
    …
    Salary Range:
    $120,000 – $170,000

  93. 93.

    livewyre

    @sanjeevs: He’s entitled to his opinion, but I wouldn’t necessarily take it as one informed by subject matter expertise. Although since you mention vindication I suspect expertise may not be the idea.

    Somewhere (maybe an earlier thread) I saw a point made that having public hearings, while maybe politically helpful or even necessary, could also have interfered with the actual investigation due to quality of testimony. Despite not being a subject matter expert myself, that sounds plausible to me, even though I am not at all equipped to validate it. But it could serve as an example of the kinds of factors that have to be taken into account in an investigation like this in order for it to reach a conviction rather than an exoneration.

    Law isn’t easy, even if it were perfect, which it isn’t. And even if we wish things were fine, they aren’t. They have to be made incrementally more tolerable by whatever process we have. Maybe the best thing we can do is familiarize ourselves with the process and how to help it along rather than speculating on the inner motives of the most prominent names we can find. It can’t be about them.

  94. 94.

    Geminid

    @Ken: Tesla stock might bounce back some. But there has been a loose ratcheting effect this year where it never makes up the ground lost before it drops to a lower low. And today’s drop occurred  on a day when the overall market was up, I think.

    On the bright side, its price to earnings ratio is down to about 50 to one. Toyota’s is more like 10.5 to one. If Tesla stock drops another75% its P/E will finally be in line with that of the competition.

  95. 95.

    Jim, Foolish Literalist

    @livewyre: the DOJ needs to see everything potential witnesses have said. Schiff should know this. The committee being cagey about sharing their information is one of the strangest things I’ve seen in a while

    as to the difference between hearings and trials, one key example is Cassidy Hutchinson. I believe much of her most notable testimony would be inadmissible in a court.

  96. 96.

    Kent

    @mrmoshpotato: Even though it is run by American tech bros, FTX is actually based and registered in the Bahamas, probably for tax-evasion and regulation-evasion purposes.  And 98% of the customers are not American either.

    If it needs bailing out, let the Bahamans do it.  It’s their company.

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