The FTX saga continues, with its embattled ex-CEO, Sam Bankman-Fried (SBF) arrested in the Bahamas.
Considering how SBF was still going on a media blitz to defend himself after running a US$32 billion company to the ground, this arrest has been a long time coming. More so for a world-class swindler whose hubris has proved to be his greatest downfall.
Seen as a flight risk, SBF has been denied bail and detained in custody before extradition to the United States to face charges early next year.
A massive fall from grace
Once the golden boy of cryptocurrencies, SBF has charmed politicians and celebrities with his rhetoric of effective altruism.
He donated millions to Biden’s presidential campaign, rubbed shoulders with supermodel Gisele Bundchen, and sat on a panel with former British Prime Minister Tony Blair. All the while clad in shorts and t-shirts, portraying an ascetic existence and devil may care attitude.
It is all the more infuriating because SBF portrayed an image of ethical trustworthiness. And yet, he had betrayed our trust in the most disingenuous way possible, even admitting outright to be a charlatan who was in over his head.
According to sources from the New York Times, the Department of Justice will be throwing a litany of charges at him, which includes money laundering, securities fraud, and wire fraud.
However, given the web of complexity in the FTX empire, investigators and prosecutors will have a tough time building a compelling case to send SBF to prison, Bernie Madoff style.
As director of the Texas State Securities Board, Joe Rotunda said, “Bad investments don’t necessarily mean prison.”
A circle of crooks
While SBF is at the centre of blame, his arrest has raised many questions about whether or not he is solely responsible for the collapse of FTX.
After all, SBF was surrounded by cronies, namely a bunch of inexperienced kids given c-suite-level roles not because of merit but by being good friends or romantic partners of SBF.
Caroline Ellison, CEO of Alameda Research, FTX’s trading arm, has lost billions of user funds. FTX co-founder and Chief Technology Officer Gary Wang, along with Director of Engineering Nishad Singh, are also key players in this catastrophe.
Each of these individuals has a lot to answer for, especially on their Signal group, aptly named “Wirefraud”, which was used to discuss company operations.
While innocent until proven guilty, millions of investors will be hard-pressed to believe the Bahamas gang are not complicit in crypto’s biggest downfall. Even to the causal onlooker, it would seem improbable that employees who lived and worked so closely together in a bubble could be oblivious to what SBF was doing.
What’s next for FTX and crypto?
With crypto companies being so intertwined, the collapse of FTX has brought about a domino effect of closures for many others who had put their money and trust into the fallen firm.
Crypto lender BlockFi, bailed out by FTX over the summer, has filed for bankruptcy. Another casualty of the collapse, Genesis Global Capital, has halted customer withdrawal and called in restructuring experts in a last-ditch effort to save the company.
The knock-on effect is massive, and we might see more companies going under in the new year as a result of their exposure to FTX.
As for SBF, besides looming criminal charges, a class-action lawsuit has also been filed against him and a host of paid celebrity promoters who have endorsed FTX.
While the world tries to make sense of who or what led to the spectacular collapse of FTX, there is no doubt that this episode in crypto history will have far-reaching consequences.
From investors’ confidence to regulatory measures, the wild west of crypto as we know it is coming to an end. And for that, we have SBF to thank for.
Featured Image Credit: Copingape