RED FLAGS: November 2, 2022,
a sus document would be released: the balance sheet of a mysterious trading firm called Alameda
research. Alameda research was the sister firm of the famed cryptocurrency empire that was FTX,
and at first glance, this document was actually reassuring. It showed that Alameda research had
$14.6 billion worth of assets, a testament to the pure size and scale of the FTX empire. But,
on closer examination, there were a few concerning line items, specifically Alameda’s unusually large
stake in FTT, an altcoin created by FTX. Not only did FTT account for $3.66 billion but it was the
single largest asset on their balance sheet. And the 3rd largest asset on their balance sheet was
$2.16 billion worth of collateral on FTT. This made it clear that Alameda Research and FTX were
far more connected that anyone initially expected but this in itself didn’t implicate FTX. All we
knew was that FTX was likely using their sister company to pump up the price their own token. But
all of this would change just 4 days later when the CEO of Binance, CZ, announced that they would
be liquidating their entire stake in FTT due to recent revelations. Just 15 minutes later,
Alameda research who was scrambling would announce that they would buy Binance’s entire
stake in a behind the scenes deal to soften the sale’s impact on the market price of FTT. Now,
this was a red flag. Why was Alameda so scared of an open market sale? How
dependent were they really on FTT? We didn’t get the answer to this immediately but we would hear
some more unexepcted news. On November 8, 2022, Binance announced that they were entering a non
binding contract to buyout FTX to help them with their “liquidity crunch”. Now, this was really
concerning. Up until this point, FTX was the one that was bailing out other exchanges and now FTX
themselves needed a bailout? This couldn’t be good news and as expected, just one day later,
Bloomberg announced that US regulators were investigating FTX for mishandling customers
funds. This was the beginning of the end for Sam Bankman Fried and FTX. Here’s what happened next.
ARRESTED: Once regulators got involved, Sam would throw
in the towel almost immediately. He would announce that Alameda research was shutting down, and just
one day after that, FTX would file for bankruptcy. In retrospect, it’s obvious why Sam decided to do
this but at the time, this move was for more concerning. This was the first indication from
Sam himself that there was more going on that what met the eye. If all FTX needed was just funding,
there was no need to throw in the towel so early as they may have still been able to get funding
given their size and reputation. But, if there was something more sinister going on, it was better
that Sam came clean sooner rather than later given that this would no longer be about saving FTX,
it would be about saving himself. And just as people worried, FTX users’ worst fears would
come to fruition just two days later. $1 billion worth of client funds were missing. And just when
you thought things couldn’t get worse, FTX would get hacked leading to $477 million moving off
the exchange. The walls were quickly closing in on Sam and he knew it. On November 15, a class action
lawsuit would be filed against FTX and all of its celebrity influencers including the likes of Kevin
O’Leary, Shaquille O’Neal, and Stephen Curry. Congress would also soon get involved announcing
that they would be holding hearings regarding the FTX implosion in December. But, despite all of
this, Sam would play it off rather cool at least publicly. While he admitted that he had screwed up
big time, his biggest regret was actually having filed for bankruptcy. He went on to argue that he
may have been able to raise the required funds and that this entire crisis could have been avoided if
he hadn’t filed for bankruptcy. But, while there may have be some reality in which this may have
worked, this isn’t exactly making customers whole. Rather, this would just extend the deception. Not
only would customers be getting fooled but so would investors who would all be covering for
what at best was gross negligence and ignorance and what at worst was straight up financial fraud
on Sam’s side. And make no mistake, those are the only two options as it’s highly unlikely that this
was actually just an honest mistake. You see, even before the whole FTT token thing, Alameda research
had lost $3.7 billion between 2019 and 2021, so the core of FTX was never really as strong as Sam
portrayed and people were starting to realize. And in a last ditch effort to save face, Sam would try
pulling off a massive publicity stunt. Starting at the November, Sam would constantly appear
on financial news networks, crypto podcasts, conferences, and community townhalls. His goal
with all of this was crystal clear: he wanted to paint his own narrative. Yes, he had had messed
up with FTX but it wasn’t because of malicious intent or deliberate wrongdoing. It was because
he just didn’t know. And hey maybe that is his truth, but the reality for everyone else doesn’t
get any better whether he did it on purpose or not. And soon enough, he too would understand
this reality as his Congree hearing was rapidly approaching on December 13. But this hearing
would never take place as on December 12, 2022, Sam Bankman would be arrested in the Bahamas.
THE CARDS FALL: Sam would continue holding strong
to his story but the same could not be said about his business partners or should I say accomplices.
Less than 10 days after Sam’s arrest, FTX co founder, Gary Wang, and Alameda Reserach co-CEO,
Caroline Ellison would both plead guilty and agree to cooperate with prosecutors. Wang pled
guilty to conspiracy to commit wire fraud, wire fraud, conspiracy to commit commodities fraud
and conspiracy to commit securities fraud. And Ellison pled guilty to two counts of wire fraud,
two counts of conspiracy to commit wire fraud, conspiracy to commit commodities fraud,
conspiracy to commit securities fraud and conspiracy to commit money laundering. And
now that these two had turned on Sam, we would see a lot more damning evidence come out about just
how involved Sam may have really been. According to Gary Wang, Sam had directly instructed him to
create a secret backdoor to siphon client funds from FTX into Alameda research. Gary went onto
accomplish this by hiding a single line of code in a sea of millions giving Alameda a total credit
line of wait for it $65 billion. Alameda allegedly used some of this money to buy planes, houses,
throw parties, and make political donations. Apparantly, FTX owned a total of a quarter billion
dollars worth Bahamin real estate and spent as much as $6.9 million on food and entertainment
within a matter of 9 months. Officially speaking, FTX wasn’t stealing any clients funds, they were
just “borrowing it” without permission. It looks like Sam took Mr. Krabs advice to heart. Luckily
for Sam though, he only had to spend 10 days in jail until he would make bail for a whopping $250
million which is thought to be the largest bail in history. If this was just 2 months earlier,
Sam being able to afford $250 million for bail by himself wouldn’t have been all that surprising,
but with FTX being bankrupt, you’re probably wondering how he secured the bond. Well,
a part of the answer is that he got help from his parents who put up their Palo Alto home as
collateral. Speaking of their Palo Alto home, after making bail, Sam would be put under house
arrest at his parent’s home. Since then, Sam has mostly flied under the radar only talking
to the press behind the scenes but he has made some notable appearances on headlines here and
there the first of which was on Jan 3, 2023 when he pled not guilty as expected. Something that was
not expected though was his headline appearance in mid February when a judge ordered him to stop
using VPNs to access the internet. According to his lawyers, Sam was just using a VPN to watch
the Super Bowl, but it’s very possible that he could have been doing something to influence
the case in his favor which would not be all that surprising given that he would do exactly
that just 6 months later. It August of 2023, it came out that Sam may have been tampering
with the witnesses. According to prosectuors, Sam had shared documents with the press that made it
seem that Caroline was just a “jilted lover” who had worked alone. This of course could not only
influence how Caroline testifies but may also influence how other witnesses testiyfing. And
as such, a federal judge would revoke Sam’s bail putting him back behind bars on August 11, 2023.
TRIAL BEGINS: Sam’s lawyers have tried
to argue that Sam being in jail is preventing him from being able to prepare for trial, but a judge
knocked this argument down saying that Sam has already had several months and extensive access
to electronics resources to prepare. And all of this leads us into Sam’s trial which officially
began on October 3, 2023 with jury selection. The criminal trial is expected to last up to six
weeks meaning that most of the case should play out by mid November, but that doesn’t mean that
we’ll get a verdict right after. Jury delibrations can take anywhere from a few few minutes to even
a few months. Also, Sam may be up for a second trial next March but we don’t know if that trial
will ever see the light of day. So, chances are that unless we see some sort of crazy roadblock,
we should have a verdict by the end of this year. What will that verdict be? Well, Sam
is currently facing these 7 charges which carry more than 100 years worth of prison time. But,
even if he does convicted on all these charges, it’s almost certain that Sam won’t be spending
anywhere near a 100 years in prison. According to legal experts, similiar charges are usually
grouped meaning that prison time is will be assigned in a concurrent manner as opposed to
a consecutive manner. As such, if Sam does end up getting convicted, his total prison sentence
will probably be in the 10 to 20 year range. It’s unlikely, however, that he would actually end up
spending all of that time in prison. For starters, if the case isn’t going his way and his lawyers
feel that he’s probably gonna be found guilty, it’s very possible that they negotiate a plea deal
with the prosecutors which could bring his prison time to less than 10 years. Also, if he is guilty,
he would likely have a lot of dirt on the people around him that made all of this possible meaning
that he could cash in his knowledge for an even shorter sentence. This is exactly what
the Wolf of Wall Street did. Originally, he was sentenced for 4 years in prison,
but by turning on his associates, he was able to get out after 22 months. With that being said,
it’s highly unlikely that Sam gets away with no prison time either just due to the scale of his
disaster. So, the most likely outcome is probably some amount of prison time but not for the rest of
his life which if he is guilty, you could argue he deserves. With over $8 billion worth of customer
funds missing according to the CFTC, it’s no question that Sam has completely ruined the lives
of countless people. We’re talking about people who lost their entire life savings, college funds,
retirement funds, and house funds. And according to Sam himself, this money is invaluable. In fact,
in a post he made about altruism before all of this, he posed the question “Just how much
impact can a dollar have?” His answer was 1/2000 of a life. So, if Sam really is the reason that
people lost over $8 billion, then Sam’s “mistake” by his own words are worth four million lives. And
whether he spends rest of his life in jail or not, this damage is something that he’ll
likely never be able to make up for, and that’s what happened to Sam Bankman-Fried. Someone else
that’s facing legal consequences is Amazon who may be broken up. Check out this video to learn more.