Unchained - How Much Prison Time Is FTX's Sam Bankman-Fried Facing? - Ep. 432

Starting point is 00:00:00 Just a quick note before we begin. Unchained is doing its annual survey. Head to surveymonkey.com slash R slash Unchained 2020 to tell us how you think we're doing and how we could improve, whether it be on the podcast, in the newsletter, or in our premium offering. Looking forward to hearing your thoughts. Again, the link is surveymonkey.com slash R slash Unchained 2022. And you can also check the show notes for the link. Hi, everyone. Welcome to Unchained. you're no hype resource for all things crypto. I'm your host, Laura Shin, author of The Cryptopians.

Starting point is 00:00:35 I started covering crypto seven years ago, and as a senior editor, Forbes, was the first mainstream media reporter to cover cryptocurrency full-time. This is the December 16th, 2020 episode of Unchained. Every week, I interview crypto builders exclusively for Unchained Premium subscribers. This week, I discussed stablecoin ratings with economist Garrett Jones. Visit Unchained Crypto.substack.com to get access. With the crypto.com app, you can buy, earn, and spend crypto in one place. Download and get $25 with the code, Laura. Link in the description.

Starting point is 00:01:10 Today's guest is Ari Redboard, head of legal and government affairs at TRM Labs. Welcome, Ari. Laura, thank you so much for having me. Looking forward to the conversation. This was a dramatic week in the FTX slash Alameda saga. Monday night, Sam Bankman-Fried, the former CEO of FTCS, was arrested by Bahamian authorities at the behest of the United States, Tuesday morning, which was the time when SBF was supposed to testify in front of the House Committee on Financial Services, the Securities and Exchange

Starting point is 00:01:40 Commission, the Commodity Futures Trading Commission, and the Department of Justice's Southern District of New York, all either unsealed or published their charges against SBF. Can you walk us through all of these charges? Yeah, no, and to echo your sentiment, this has really been a truly extraordinary week. I mean, normally we see one of the types of things that you just mentioned, right? We have multiple regulators taking action. You mentioned the CFTC, which really is talking more about market manipulation, you know, the activities that SBF undertook at FTX, you know, what impact did they have on what the CFTC calls

Starting point is 00:02:17 the commodities market, right, more sort of the Bitcoin Ethereum ecosystem. Then you have the SEC, which is slightly different, right? The SEC is the securities regulator. So what they're talking about is potential securities fraud. What representations did he make that ultimately defrauded investors and manipulated the securities market? And finally, and in my opinion, you know, having spent a lot of time at DOJ, sort of the most interesting is the criminal indictment that was unsealed this week that includes eight charges

Starting point is 00:02:46 of wire fraud, securities fraud, that talks about actually campaign finance fraud and really sort of lays, starts to lay out what a case here will look like. And one of the reasons I say sort of most interesting is, is a lot of people are sort of wondering, well, how do all these cases happen at one time and how do we deal with this? And the reality is that those, those regulatory cases, the civil actions, those are about money. They're ultimately enforcement actions about sort of trying to, you know, get restitution for victims or ultimately a fine. Those will take a backseat to the DOJ criminal prosecution because that case involves, you know, potential incarceration deprivation of liberty, the types of things that sort of go first. And SBF has constitutional

Starting point is 00:03:30 rights. And one of those rights is sort of not to necessarily testify, but that would mean that he couldn't do depositions and couldn't provide interrogatories in the civil cases. So those will take a backseat as these criminal charges progress. And there's still a lot to happen with those. And we can talk about those sort of as we go through. Oh, that's interesting. So because I was going ask you this later, but I'll ask you this now. Representative Maxine Waters, who's the chair of the House Financial Services Committee, expressed dismay that Sam's arrest meant that he would not be able to testify at that scheduled hearing. So do you think that that timing was intentional? Like, you know, because of what you said about how, according to the Constitution, he can't testify, or I don't remember

Starting point is 00:04:13 the phrasing that you use, but like, would his testimony in front of Congress have kind of imperiled that situation? You know, it could have. And I'm not sure. I know. I know. I know. answer to why the timing, why the sort of day before he was going to testify before Congress, I think from my time as a prosecutor, I can tell you that criminal cases sometimes take on a life of its own and prosecutors make decisions about when to charge based on when they have the indictment. You know, if he had come to the U.S., potentially there would have been an arrest earlier because there would have been potentially an arrest warrant, they made decisions to arrest him in the Bahamas when they did for whatever those reasons were. But I will say it makes it very, very difficult

Starting point is 00:04:49 for him to testify before Congress. He. has a right to remain silent to not incriminate himself. You know, he's made decisions sort of unlike most criminal defendants, quite frankly, to be relatively outspoken over the last few weeks to the media in kinds of conversations, which is very, very different than what you typically see and very, very different what lawyers than what your defense lawyers typically advise. All of that said, he, you know, the CFTC case, the SEC case will likely be stayed pending the completion of a criminal investigation. I'll also say if this case ultimately resolves its. in a guilty plea, which it may. And again, we can talk about that more in a moment. Those other

Starting point is 00:05:27 civil or regulatory cases could potentially be kind of wound into any kind of ultimate settlement of the charges here. Okay. But so I feel like just one thing that I need to ask is so if he had testified in front of Congress, are you saying that that would have complicated the DOJ's case? Like it would have been harder for them to charge him or? No, I don't think so. In fact, he could have potentially made false. or misleading statements that would have resulted in other charges. I think the reality is I don't believe that it mattered in this instance to DOJ. I don't have sort of the inside baseball on that other than to say sort of the timing was the timing here. But no, I don't think so at all. You know,

Starting point is 00:06:08 one DOJ is really is the executive branch agency that would bring charges if someone perjured themselves before Congress, for example. Okay. And so given the eight criminal charges, is based on all of those, if he's convicted, what is Sam potentially looking at in terms of prison time? Yeah, no, it sounds like a simple question, but it is pretty complicated. What we have in the United States today are what they call the federal sentencing guidelines. And they used to actually be mandatory. But the Supreme Court ruled that that was actually unconstitutional and that each judge should be able to make up their own decision on what sentences should be. However, most judges across the country rely on them for sort of help crafting a sentence.

Starting point is 00:06:55 I admittedly have not done a very close calculation of the federal sentencing guidelines, but it's really important in this case to talk about them. So, for example, if you commit fraud, one of the major drivers of your federal sentencing guidelines is the amount involved in the fraud. They've even updated this since I was a prosecutor. I noticed when I looked at this earlier to try to understand this a little bit better, that now the top number caps out at about $550 million in terms of the fraud. That's the top number you get to.

Starting point is 00:07:23 Here we're talking about arguably more. So he is capped out at that number. So if you put all, and I did this calculation really only for one charge. And again, I don't have the charges. I don't know exactly what DOJ's case is. But I think that he's probably looking at something based on the federal sentencing guidelines like life in prison. And that is really truly extraordinary in this.

Starting point is 00:07:46 type of case. I will say one thing that's really important, there are also mitigating factors, right? The things we're talking about now are what get your federal guidelines sentence up. There are also things that get them down. Like, did he cooperate? You know, did he waive a detention hearing, right? Is he going to waive his extradition hearing, right? He's reserved his right to have one, but that doesn't mean he will. He could eventually waive that right. We can talk about extradition and what that will look like in a moment. But there are also mitigating factors. Does he cooperate here? Does he help the government get money back? does he help in the bankruptcy sort of proceeding to get, you know, users made whole?

Starting point is 00:08:20 There are things he can do to cooperate to potentially get that sentence down. All right. Yeah. I do believe I saw CNN reported that potentially when you add it all up, it could be like 116 years. So given that that's, you know, well beyond the normal lifespan and he's like 30 or something clearly. Yeah. Look, I mean, you also, you also, there are multiple charges here, really. The quick calculation I did, quite frankly, was for one. So like, you know, he's looking at you know, very, very significant sentences. But judges also have some latitude. You know, we'll ultimately see what a judge determines. But oftentimes when you see a fraud this large, it really often results in a plea of some kind. And that's because someone is sort of staring

Starting point is 00:09:02 down the barrel of a life in prison. They want to do whatever they can to kind of get that, those numbers down. And when we talk about sort of cooperation, and again, I don't know what he's going to do in this case or what his ultimately his options will be. People will say, well, How can he cooperate? Because they assume that it means cooperating against someone higher than you, right? And he is the chief executive of this company. But the reality is there are other things he can do. When I was a prosecutor, we were very focused on trying to make the victim's whole in whatever the case was. You know, can he help recover funds. Is there any other information that he has that could be helpful as prosecutors are looking into this case more deeply? So there are certainly things that can be done here. But again, this is going to take some serious time also to play out. We're I mean, we're literally still in the Bahamas. We've had one extradition hearing. And the next, I'm sorry, we've had one essentially detention hearing. And there's an extradition hearing set for February.

Starting point is 00:09:55 One thing that I actually wanted to ask before we get into things like, you know, whether or not there's a plea is I just, you know, was curious because this all happened a lot more quickly than I think most people expected. And I noticed that the Enron scandal was just on a much different timeline. Like, for instance, I noticed the first indictment took almost a year before. that was for Enron's chief financial officer. And then it was actually two and a half years before the former CEO was indicted. So why do you think it took only a little over a month for SBF to be indicted? I think it's a great question for a number of reasons. First, I think it's really astute to compare this to Enron, for example. I'll age myself a little bit here. I was a young associate at law firm during that sort of age of what I'd call like accounting fraud at Enron WorldCom. And it is really

Starting point is 00:10:43 the same kind of case where investigators and agents are really waiting through a mountain of evidence essentially trying to create something that's understandable for a grand jury. They ultimately present that case to the grand jury, and that takes a lot of time. This case is extraordinary. The FTCS case is extraordinary for a number of reasons, but to me, the number one reason is the speed of that indictment. You know, we forget, Laura, because you and I are, you know, we don't sleep anymore, but it was only a month ago that we saw the collapse.

Starting point is 00:11:13 of FTX and we're already talking about indictments and detention hearings and extradition, that is really unprecedented. So I think there's a couple reasons. One, I think the strength of the evidence. I think there was already been essentially admissions. It seems like publicly that funds were commingled. I think that you probably have a lot of cooperation now happening with the current leadership of FTX as they're sort of working through the bankruptcy. But I also really credit, you know, teams of agents and investigators. I think people have been working around the clock 24-7 looking at millions of transactions, thousands of documents, interviewing, you know, myriad witnesses to get us to this point. But it's, I'm not sure I have the best

Starting point is 00:11:53 answer for you other than to say it's really, it is extraordinary and it's great that you sort of, you know, identify that. All right. I'm going to ask you a few other questions about potentially how the prosecutors might have done this work so quickly. But first, we're going to take a quick word from the sponsors who make this show possible. Join over 50 million people using crypto.com, one of the easiest places to buy, earn, and spend over 250 cryptocurrencies. Spend your crypto anywhere using the crypto.com visa card. Get up to 5% cash back instantly. Plus, 100% rebates for your Netflix and Spotify subscriptions and zero annual fees. Download the crypto.com app now and get $25 with the code Laura. Link in the description.

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Starting point is 00:13:09 It began on the shores of New Jersey. Calls of gym, tan, laundry, reverberated north to Canada, where a new type of party animal resides. They move as a herd migrating to their favorite watering holes, asserting dominance by flexing, grinding, and twerking. Coupling is quick, steamy, and sometimes in hot tubs. When morning arrives, they do it all over again. Canada Shore, new original series, now streaming on Paramount Plus. Back to my conversation with Airy. I'm sure you probably saw on crypto Twitter that people have been speculating that the speed of the charges indicates that a lot of the other kind of high-level executives are probably cooperating and giving information to the prosecutors.

Starting point is 00:13:53 Would you say that's a fair assessment? Yeah, no, I too have been getting my information from crypto Twitter. The short answer is I don't know. I will tell you from my experience as a prosecutor for a long time, you know, the first thing you do is going to try to talk to witnesses. who will know. And, you know, one thing those witnesses, particularly the senior executives, will be doing is, you know, hiring lawyers who understand that the sooner you cooperate with the government, the sort of better ultimately your sentence will likely be. Because if you are a defense attorney with a cooperating witness, you always want to sort of help the prosecutor almost

Starting point is 00:14:29 build the best case for you when ultimately you go to sentencing. I want to be able to tell that judge, hey, this person came in on day one, started cooperating. So sometimes there's a little bit of a rush to actually start cooperating. We may have seen that here. I don't know, but certainly cooperating witnesses, plus, you know, a mountain of evidence that is frankly controlled by people who are likely cooperating, right? The current leadership of the company who have access to these records, I think move things along much, much, much more quickly. But again, like, it's, I do have to give credit to the agents and prosecutors involved here because, you know, there are cases with lots of evidence, with lots of great cooperators, and they still don't move this quickly. You know,

Starting point is 00:15:07 Enron, WorldCom, those cases all had cooperating witnesses. None of them moved this quickly. Yeah, I guess the reason why I'm confused when you talk about how even the bankruptcy team could be helping is because Enron filed for bankruptcy, I think it was like the end of 2001. And then yet still, it took another year for that CFO to be indicted another, I guess it was another year and a half or something for the CEO. So it's, it's things that are moving very, very quickly. And that's why at the end of the day, it's like it really comes down to the work that that's being done here to some extent and just and having access to records. Again, you know, there are also maybe a handful of cooperating witnesses. Okay. So whether or not, you know, they are cooperating,

Starting point is 00:15:52 assuming that they are, is it the case that either they won't be punished or that their punishment will be more lenient or, you know, how does that factor in? It's an excellent question. And essentially usually what happens is sort of when you have someone who is susceptible to criminal charges, right? They will come in. Maybe they've been charged already. Maybe there's a sealed indictment. Maybe there's sealed charges. Maybe not. But when they start cooperating, it's not that you sort of get away or move away, Scott-free. In fact, quite the opposite. If you're a cooperating witness almost all the time, you're ultimately going to plead to a criminal charge. and the reason I say it really becomes important because at trial, okay, you don't want to sort of have that bias, or if you're a prosecutor, you don't want to have a witness with having had the bias of cooperating with you to get out of certain criminal charges. So oftentimes that cooperating witness will have to eat, for lack of a better description, the lead charge, a big charge. Maybe here it would be wire fraud. But what's really important, we talked about the federal sentencing guidelines earlier. One of the ways that a judge,

Starting point is 00:16:57 essentially does a doubt, what they call a downward departure from those federal sentencing guidelines is for substantial assistance to the government. And the sort of golden ticket for a cooperating witness or a defendant in a case is for the government to go to a judge and say, I'd like to make a motion for substantial assistance. And that allows the judge to essentially go off those federal sentencing guidelines entirely and depart dramatically. We've seen that in a number of cases recently. So whenever you're sort of thinking about, why, is the case taking so long to plead, a lot of times you see cooperation here, and this could certainly happen. Okay. Yeah. So I don't know if you want to speculate on, for instance,

Starting point is 00:17:39 if it's true as reported that Caroline Ellison, Nashad Singh, and Gary Wang were the three others that knew about how customer funds at FTX were being used at Alameda, then if, let's say that all three of them are cooperating, what would you say that would mean for their prison time? As a prosecutor for over 11 years at DOJ, one thing I learned is never to speculate on what a potential sentence would be like. So, no, I don't know other than to say that cooperation is one way to get a significant downward departure from the sentencing guidelines. And that's what every cooperating witness defendant always hope for in one of these kinds of cases. Okay. So as we talked about earlier, SPF is being held in the Bahamas pending extradition. Tell us what that process looks like and how long it could take.

Starting point is 00:18:33 Yeah, it's a really important question now because it's going to dictate sort of a lot of what we see over the next coming weeks and months. Basically, what happened this week is that essentially they held a detention hearing. And the real question was, should he stay or should he be released? well, the extradition treaty with the U.S. essentially asks the court to hold a defendant under these circumstances. But even so, there were arguments made. He needed access to medicine. He needed access to different types of food. He has real estate in the Bahamas. And the reason that was relevant is when someone has sort of a nexus or a connection to a place, they're less likely to flee, to be a flight risk. Well, the judge decided that none of that was enough, that he was going to be held,

Starting point is 00:19:12 that he's likely a flight risk. And another thing the court often considers is the strength of the evidence, right? Is this a strong case? Is this likely going to result in a conviction? So he's held now, his lawyers did not waive the right to an extradition hearing, but that also doesn't mean they're going to have one. You know, I've read some articles about sort of what the conditions are in the jail in which he's being held today. Doesn't seem like a great, doesn't seem like a place you would want to be. Oftentimes, when a defendant's held anywhere, no matter how nice or not nice, a hold or often has a defendant start to think about, should I just waive extradition, should I, should I move as quickly as possible with the case? And we may very much see that here. If there is an extradition hearing,

Starting point is 00:19:55 and this is sort of, I think, an important point, it'll kind of almost take on a life of like a preliminary hearing. You're going to learn more facts about the case because the strength of the evidence will be important. And SBF's lawyers will likely challenge the charges. And one thing that's really interesting in an extradition hearing is most extradition treaties require that the charges in the case are applicable in both jurisdictions. So essentially, when U.S. prosecutors crafted this indictment, they had to be sure that these types of charges were also punishable by jail time, essentially, or really severe penalties, also in the Bahamas. And when he gets brought back to the United States, when the defendant gets brought to back to the United States,

Starting point is 00:20:38 they cannot change those charges at all. What you are doing is that you're essentially promising the Bahamas that these are the charges that you like him extradited on, and those charges will not change. So what SBF lawyers will do, and when I was a prosecutor, I had this done to me, they will, they will challenge the charges here saying, no, no, no, there's not a corollary here that makes sense under Bahamian law. That could be potentially one of the ways you challenge this. I think in this case, it's going to be very, very difficult because these are pretty straightforward, serious fraud charges, but those are the types of arguments lawyers will make against extradition. he will likely be extradited, but it will ultimately be up to him and sort of how long it takes and how much you fight it.

Starting point is 00:21:18 And maybe there's a world you just want to move on with the case, come to the U.S. and sort of face the charges. But that will ultimately be up to the defendant and his legal team. And so if they decide to hold an extradition hearing, it's because they're saying we want to fight this extradition. Here's our reasons for why either this case or SPF himself should stay in the Bahamas. Is that the purpose of that? How did you just say that so much more succinctly than I did? Yes, that's, that is, that that's exactly right. Okay. But if he, if he attempts to do that, then because I don't know if you have been following also, well, we, we, I'm just going to ask you a direct question about this because this is the other thing that is like a little bit of a sideshow and it's a little bit like, what's going on there? There's this jurisdictional battle between the American legal team and then the liquidators that were appointed by a Bahamian court and the U.S.-based bankruptcy,

Starting point is 00:22:09 lawyers are refusing to give access to the Bahamian-based liquidators to some of the computer systems saying that they colluded with SBF to fraudulently mined hundreds of millions of dollars worth of new tokens. They also say that before the bankruptcy, when the Bahamian citizens were allowed to withdraw what ended up being $100 million worth of crypto from FTCS, that that was you know, kind of in collusion again with Bahamian authorities. So what are you, kind of watching out for when it comes to this jurisdictional battle. How could that affect things? Yeah, I think the short answers, I don't know. I think the sort of more nuanced answer is that, or sort of how we even kicked off the show today, is the criminal case is always going to take

Starting point is 00:22:53 priority, particularly sort of for, for the defendant himself. His lawyers will have to have access what they need to mount his defense. And the criminal lawyers will likely be very different than the people involved in the bankruptcy hearing. So as I said, sort of the short answers, I don't really know how the impact will be. But I think the focus here will be on his detention, extradition, and then ultimately how to sort of fight these charges in the U.S. What is so unique and extraordinary about this case is there's so much that's going to be going on in the background in terms of the bankruptcy proceedings, regulatory action. You're going to see civil cases from plaintiffs, you know, users, customers of all this. And the bankruptcy case, people are going to line up

Starting point is 00:23:30 and that's going to be sort of that piece. But from a pure criminal standpoint, you know, that case is going to proceed first. Okay, so even SBF, his focus will be on the criminal part. And, you know, it sounds like what you were saying is that if he tries to fight extradition, then that means he could end up getting a more severe punishment. You know, it's hard to say exactly how fighting extradition will sort of impact the case. But certainly it will delay the case if there's a, you know, weeks or potentially months. And extradition hearings that are, that are, you know, aggressively fought can take time. And will that, but that will mean. that it'll be delay in the extradition, which will delay the criminal case from moving forward, which will ultimately delay any kind of resolution. So it will, and then it will delay resolution of all those civil cases. So a prolonged extradition hearing will definitely set the case back, and it's a case that is already going to likely take a long time just based on the facts of it.

Starting point is 00:24:27 All right. And as for the plea deal, isn't that something that could kind of shorten the timeline? It can absolutely shorten the timeline. I mean, but a plea will, like would likely have to result in some type of cooperation. Again, this is me sort of speculating just based on experience. And cooperation, especially in complicated cases, can take time. What cooperation means is not sort of sitting down and chatting through sort of what happened once. It really means a series of meetings over the course of months where you're debriefing with teams of agents and investigators and prosecutors on sort of what happened. So A, they can maybe try to find the funds and B, so they can ensure this doesn't happen again. Really sort of like,

Starting point is 00:25:07 what do prosecutors and agents and investigators and even regulators need to know here to ensure that there's not another FTX? Those are sort of the ways that he can probably provide the most information, but that takes time. So essentially, like his bargaining chips, if he does a plea deal, is he like kind of helps them come up with guidelines to prevent this from happening again? Is that because he can't turn on other people, right? That, like, it seems like. Right. That's kind of the interesting thing. So people ask, well, how can you cooperate if you can't turn on other people? Well, you know, A, there's always the potential to turn on other people, and I think we'd have to figure out maybe those people are within FTCS, maybe they're not. But I think more interestingly, his chip is, hey, I can help you recover the funds for the victims here. You know, I know where X amount of money is that could potentially make victims whole. So that's probably where more of his sort of real knowledge here lies. And we'll see how it plays out. I oftentimes when you get this high, it's hard to get a plea because it's hard to have cooperation. But we'll see how it ultimately plays out.

Starting point is 00:26:05 All right. Well, is there anything else that I didn't ask you about this case that you think my listener should know? You know, it's, it is, it is extraordinary on so many levels. I think you really got to the heart of it when you talked about the speed of the of the indictment here and sort of the work that's gone into it. But I think it's, I think it's important to be patient and let the justice system at this point play itself out. And for better or worse, that that often takes time. But, but, but I think that that now we're sort of have a better roadmap just based on experience of sort of how. this is going to play out from extradition, ultimately to a what will be a preliminary hearing or is a tension hearing when he arrives in the U.S., then ultimately to either it's a period of negotiation or it's a period of litigation and getting ready for trial. And this would be a pretty interesting trial. So we're now sort of understanding what the roadmap is going to look like,

Starting point is 00:26:54 but we are literally pre-first inning when it comes to sort of what ultimately this, the ballgame will look like. Okay. If you were to put odds on a plea deal versus a trial, what would those be? You know, it is very, very hard to go to trial when you're looking at a guideline range of life in prison. And that typically is sort of the biggest hammer that the government has. The government is really the way if you cooperate, if you help, you can potentially get down from that type of range. So I would say, you know, I'm not a betting man and wouldn't put a number on it. But it's really hard to go to trial when you're staring down the barrel of life in prison. All right. Well, thanks so much, Ari. This has been a really great conversation. I appreciate that you came out on chained.

Starting point is 00:27:40 Thank you so much for having me always. Don't forget. Next up is the weekly news recap. Stick around for this week in Crypto after this short break. Thanks for tuning in to this week's news recap. While Ari and I spoke a lot about Sam Bankman-Fried and FTX during the interview, there are a few other things that happened this week that we didn't get to cover. committee has been established to represent unsecured creditors of FTCS and more than 100 affiliated companies in the U.S. bankruptcy proceedings. The committee will serve as a voice for FDX customers in court and allow the proceedings to move forward. The White House declined a comment on whether it would return campaign donations by a bankman freed to President Joe Biden or whether other elected officials should return similar donations. Financial institutions are looking to buy claims from FDX customers, who would then be able to receive payouts now rather than in years.

Starting point is 00:28:38 Investors such as Apollo Global Management and attester have shown interest, and 507 Capital has already purchased claims from hedge funds seeking quick exits from FTC. Before FTX filed for bankruptcy, Cryptosecurity Company Bitgo, the custodian of Wapt Bitcoin or WPTC, prevented Alameda research from selling $50 million worth of the wrapped coin. The CFTC complaint against SPF alleged that in September, SPF contemplated closing down Alameda, noting that it wasn't making enough money. Lawyers representing the new management of FTCS directed by new CEO John Ray III urged a bankruptcy judge to deny lawyers for FTX digital markets,

Starting point is 00:29:21 the Bahamian-based entity, access to the computer systems of that subsidiary. They contended that the Bahamian government and FTAX executives, had transferred assets illicitly in an effort to avoid the U.S. bankruptcy process. Bankman Freed is also being accused of creating and transferring hundreds of millions of dollars of digital tokens to Bahamian government officials by his FTX appointed bankruptcy team. Bankman Freed is also being accused of creating and transferring hundreds of millions of dollars worth of digital tokens to Bahamian government officials by FTC's appointed bankruptcy team, Bloomberg reported. The complaint alleges that Bankman Freed had an

Starting point is 00:29:59 alarmingly chummy relationship with Bahamian liquidators. The Financial Times reported that Ryan Salem, the former co-CEO of FTX, tipped off Bahamian authorities that FDX had misused customer funds to prop up Alameda's failed trading. At a hearing Tuesday for the House Financial Services Committee, Ray revealed that FTC's staff used consumer-level tax software quickbooks for accounting, as well as Slack for invoicing and expenses, which caused not only consternation, but also laughter. Binance passes a stress test, but faces financial and regulatory headwinds. After Binance issued its proof of reserves report last

Starting point is 00:30:39 week, with many noting that it was not a true audit, Binance has been facing doubts about its solvency. Despite these fears, over $3 billion worth of crypto assets were withdrawn from the exchange with no major problem. This is an environment in which investors are withdrawing unprecedented levels of cryptocurrency from trading platforms. In an interview with CNBC on Thursday, Binance CEO Cheng Peng Zhao clarified why the exchange temporarily halted USDC withdrawls earlier this week. Zhao explained that the New York Bank that helps swap Paxos-iss-issued B-USD to U.SDC was not open at the time. He said Binance does not need margin or leverage to be able to convert USDC holdings into Paxos-issued B-USD. Additionally, CZ warned his staff that the crypto industry is headed for tough times and

Starting point is 00:31:29 reassured them that Binance would be in a strong financial position to weather the storm. He said that the company faced extra scrutiny following the FTX collapse and customer withdrawals, but that Binance would survive the crypto winter and come out stronger than before. This week, Reuters reported that prosecutors in the U.S. Department of Justice are split over whether to charge Binance, which has been under criminal investigation since 2018, for a allegedly facilitating money laundering and sanctions violations on his platform. Finance has denied the allegations claiming that are compliant with anti-money laundering regulations. New crypto bill targeting blockchain infrastructure players outrages the industry.

Starting point is 00:32:11 Senators Elizabeth Warren and Roger Marshall proposed a bill to increase U.S. anti-money laundering rules for digital assets. The bill would require all entities that facilitate the running of blockchain networks to record personally identifying information on users and prohibit them from using and interacting with crypto mixers on decentralized networks. In their joint statement, the senators said that the same common sense rules should apply to the crypto industry as applies to banks, brokers, and Western Union. The proposed bill royaled the crypto community. Peter Van Valkenberg, research director at Crypto Think Tank Coin Center, said, the bill is the most direct attack on the personal freedom and privacy of cryptocurrency users and developers we've seen yet.

Starting point is 00:32:54 It would force anyone who helps maintain blockchain infrastructure to register as a financial institution. Niraj Agrawal, Director of Communications at Coin Center, added, nothing about the bill would prevent the next FTX. In fact, it puts users at more risk. Additionally, the Financial Stability Board, the world's leading global financial watchdog group, is reportedly developing an operational framework to regulate the crypto sector, to be unveiled in early 2023.

Starting point is 00:33:23 Dietrich Domonski, the Secretary General of the FSB, noted that this work plan would reflect the urgency needed for supervising digital assets and decentralized finance. However, Domonski cautioned against rushing into decisions without first understanding the nuances of the crypto markets. On a similar note, Royd has reported that economic leaders of the G20 are gathering in Bangaluru, India, to develop an agreement on policy for crypto assets

Starting point is 00:33:49 and provide guidance to global regulators. The Block CEO, who secretly took loans from SPF, steps down. Michael McCaffrey resigned as CEO of the Block, a crypto media outlet, after it came to light that the company was secretly funded over the last two years by Sam Bankman-Freid's Alameda Research. Alameda gave three loans worth $43 million, which McCaffrey used to buy out other investors, fund day-to-day operations,

Starting point is 00:34:14 and purchase real estate in the Bahamas for himself. Bobby Moran, the Block's former chief revenue officer, has stepped into the role of CEO. McCaffrey has not been accused of trying to influence the Block's newsroom or research teams, particularly in their coverage of SBF, FTX, and Alameda research. Doquan is believed to be in Serbia. Doquan, the founder of the collapsed Terra ecosystem, has fled to Serbia via Dubai, according to a CoinDus Korea report on Monday. In previous weeks and months, South Korea said that it had issued an arrest

Starting point is 00:34:47 Warren and Interpol Red Notice for the co-founder, alleging violations of the Capital Markets Act in Korea. The sole Southern District Prosecutor's Office reported Monday that Kwan is in Serbia with the Ministry of Justice requesting Serbian authorities for assistance in the investigation. Maple Finance and support for Solana to focus on Ethereum. Maple Finance, a crypto platform that has suffered tremendously since the collapse of FTX, has announced that it is ending support for the Solana blockchain in its 2020 strategy. The under collateralized lending protocol will instead focus on Ethereum, which it is calling the dominant chain.

Starting point is 00:35:25 The team cited Ethereum's transition to proof of stake in its thriving ecosystem as motivating factors for their decision. This comes in the week of a decrease in total value locked or TVL from $900 million to $290 million on Solana, as well as a decrease in Ethereum's TVL from $100 billion to $24 billion. due to industry-ride Black Swan events this year. And in response, Maple Finance is planning to upgrade his protocol to version 2.0, which will aim to increase opportunities on-chain by introducing features such as diversifying with real-world assets,

Starting point is 00:35:59 as well as giving pool delegates the ability to declare early default and liquidate loans if a borrower doesn't pay within a certain period. Tether will remove secured loan backing in 2023. USDT issuer Tether announced plans to remove secured loans from the stablecoins backing in 2023, following concerns that the company won't be able to honor redemptions in the event of a bank run. Tether is professionally and conservatively managed, and this will be demonstrated once again by successfully winding down the lending business without losses, since all loans are over collateralized by liquid assets, the company said in a statement.

Starting point is 00:36:36 Bitcoin miners are in distress. The Bitcoin mining industry is struggling to remain profitable in this bare market. In November, Bitcoin mining hit its lowest profitability since 2014. Due to the crypto-winter, high electricity costs and miners switching to more profitable altcoins, the profitability of Bitcoin mining stands at only 5 cents per day for one tarahash per second. Bankless Times reported Investment Bank B. Riley Financial offered to provide core scientific $72 million in financing to help the company remain viable and avoid bankruptcy. In response, the company's shares skyrocketed 94%. Bitcoin miner Clean Spark reported significantly less than expected revenue of

Starting point is 00:37:18 $26.2 million in the three months ending in September, missing the average estimate of $27.1 million. Additionally, the company reported a much larger net loss than expected at $42.3 million compared to the estimated $15.4 million. Moreover, a class action lawsuit has been filed against Bitcoin miner Iris Energy after the first of the first. firm said its revenue was not enough to satisfy its financing commitments. Lastly, Bitcoin Mining Company Argo accidentally published a document that suggested it might file for Chapter 11 bankruptcy. While this was not actually the case, the firm is looking to sell off assets and take out a loan in an effort to prevent bankruptcy. Coinbase to support mistakenly sent ERC20

Starting point is 00:38:03 tokens. Over the years, Coinbase users sent many unsupported ERC20 tokens to the exchange, only to have them disappear into the ether. Now, the exchange will help users recover any such assets worth more than $100 for a fee of 5%. Coinbase claims it is the first major crypto company to offer the recovery of such assets. Justin Sun deploys capital. Justin Sun, the billionaire founder of the Tron blockchain, mimicked Doquan's infamous tweet and said he was deploying more capital amid fears that Tron's native stablecoin, USDD, would depeg. In response to USDD dropping to its lowest point ever of 97 cents, Sun acquired roughly $773,000 worth of the coin to prevent a deeper DPEG from the U.S. dollar.

Starting point is 00:38:52 USDD is an algorithmic stable coin and its market cap currently stands at $711 million and it is the eighth largest stable coin. Time for fun bits. $78 worth of tokens sparks a lawsuit. Compound Dow and Compound Co-Found. owners Robert Leshner and Jeffrey Hayes are being sued for allegedly selling unlicensed securities and causing the plaintiffs to suffer damages by holding comp tokens. You might be wondering, what's funny about this? The value of the tokens held by these people is under $100. The value of the comp token when purchased by plaintiffs Amanda Houghton, Susan Franklin, and Charles Douglas

Starting point is 00:39:32 is, respectively $75, $3, and $2. Trump wants some company for dinner? Donald Trump launched a collection of 45,000 fantasy non-fungible tokens or NFTs for sale on Truth Social, the platform he founded after he was blacklisted from Twitter, Facebook, and others. Hello, everyone. This is Donald Trump. Hopefully your favorite president of all time, better than Lincoln, better than Washington,

Starting point is 00:40:01 with an important announcement to make. I'm doing my first official Donald J. Trump NFT collection right here and right now. They're called Trump Did You. digital trading cards. Crypto Twitter had a heyday over these NFTs. As Eric Wall tweeted, Wait a minute. These NFTs give you access to a community.

Starting point is 00:40:20 A dinner with Trump. Golfing with Trump. Zoom calls. One-on-one meetings. Autographs. These aren't baseball cards? This is a simp-dow. Thanks so much for joining us today.

Starting point is 00:40:31 To learn more about Airy, the charges against SPF, and how the process might play out. Check out of the show-as for this episode. Unshined is produced by me, Laura Shin, without from Anthony Yun, Mark Murdoch, Matt Pilchard, Juan Arvanovich, Sam Shri-Rom, Pamajimdar, Shoshank, and CLK transcription. Thanks for listening.

Unchained - How Much Prison Time Is FTX's Sam Bankman-Fried Facing? - Ep. 432

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