Silicon Valley crypto-billionaire and once wunderkind Sam Bankman-Fried, 30, was arrested in Nassau, Bahamas today, denied bail and remanded until Feb. 8, 2023 to the notorious overcrowded rat, vermin-invested Fox Hill prison. Considered a math genius at his 56,620 a year Silicon Valley pre-school, where he eventually graduated from Massachusetts Institute of Technology [MIT] in 2020. Denied bail by a Bahamian judge, Bamankman-Fried was hugged by his parents, both former Stanford University law professors. Bankman-Fried started the crypto-currency trading platform and hedge fund in 2019, duping investors in a multi-billion dollar Ponzi scheme, whose net worth was over $20 billion. When investors demanded to cash out, Bankman-Fried declared bankruptcy Nov. 11, leaving at least 100 million creditors with a debt exceedting $3.1 billion, in yet another Wall Street Ponzi scheme.
U.S. Securities and Exchange [SEC] and Commodity Futures Trading Commission [CFTC], through the U.S. Attorney in the Southern District of New York, accused Bankman-Fried of defrauding billions from investors in the biggest scam since the walls caved in on former Nasdaq chief Bernie Madoff.Dec. 11, 2008. Fried lived high-on-the-hog as a billionaire crypto-currency trader, capitalizing on zealous investors from all walks of life looking to making a killing in the esoteric crypto-currency market, something hailed by industry leaders Bitcoin and CoinBase as the currency of the future. Founded by fictitious Satoshi Nakamoto in 2010, Bitcoin took off like rocket, one reaching $50,0000 before collapsing to $15,000 in 2022. Bankman-Fried emulated Bitcoin, creating FTX by attracting over one million investors to engage in wild crypto-currency speculation.
When former President Bill Clinton, during the dot.com bubble, ended the 1933 depression-era Glass-Steagall Act in 1999, prohibiting banks from stock market investing, it opened the door to Bernie Madoff and other con artists like Bankman-Fried. Sitting in the medical war of Fox Hill prison awaiting his extradition Feb. 8, Bankman-Fried has plenty of time to mount his defense, claiming accounting errors for the massive Ponzi scheme fraud perpetrated on investors. Bankman-Fried had no compunction about buying himself luxury real estate, cars and jewelry before his abrupt Nov. 11 bankruptcy proceeding. Charged in federal court with securities fraud, bank fraud, money laundering and campaign finance violations, Bankman-Fried can only wait. Bankman-Fried’s attorney parents reportedly laughed an acted inappropriately in the Bahamian courtroom, attesting to their role in their son’s scam.
FTX’s sudden collapse happened when CoinBase reported a highly concentrated position in self-issued FTT coins that Bankman-Fried’s hedge fund, Alameda Research, used as collateral for billions in FTX crypto loans. Another crypto exhange, Binance, said it would sell its stake in FTT, spurring the run-on-the-bank that exposed FTX as another Wall Street Ponzi scheme. FTX froze all its assets and declared bankruptcy immediately after Binance tried to sell its stake in FTT. SEC and CFTC indicated that FTX had commingled customer funds with Bankman-Fried’s hedge fund, announcing that billions in customer deposits had disappeared. Glass-Steagall’s protection were aimed at keeping institutional investors like commercial banks from engaging in the wild speculation seen in crypto-currency market, a unique space hyped by Bitcoin’s Satochi Nakamato as the currency of the future.
Nakamoto claimed that never before in human history had currency trading been so advanced, so sophisticated, so perfected by today’s new computer technology, allowing currencies to survive in perpetuity based on evolving sophisticated technology. Whatever technology the math whiz Bankman-Fried used, it satisfied investors insatiable appetite for unprecedented profits, all based on Bankman-Fied’s con artist sales job. Bankman-Fried told a Nassau judge yesterday that he was down to $100,000, an astonishing fall-from-grace after claiming a net worth of $20 billion When Bankman-Fried faces security fraud charges in Federal Court in 2023, it’s going to take more than attributed the collapse to accounting errors. Theranos CEO Elizabeth Holmes was sentenced Nov. 18 to 11 years in federal prison for her scam blood-testing company. What happens to Bankman-Fried, should be far more egregious.
Watching another spoiled, arrogant entrepreneur con investors into his crypto-currency Ponzi Scheme, the government is likely to come down on Bankman-Fried with a ton of bricks. “We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto,” SEC Chairman Gary Gensler said Dec. 13 in a statement. However the trial eventually shakes out, Bankman-Fried, who claims he’s down to his last $100,000, will mount a rigorous defense, blaming the run-of-the-bank to accounting discrepancies beyond his control. FTX secured $1.1 billion from about 90 U.S.-based investors according to the SEC, alleging he raised 1.8 billion total in investments. Bankman-Fried has a long time to sit in Nassau’s notorious Fox Hill prison to think about what he plans to tell a federal court.
About the Author
John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He’s editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.
