What Comes Can Easily Be Taken Away

Sam Bankman Fried Has Another $700 million Seized by The US

The fall of FTX, once one of the most popular cryptocurrency exchanges, has been a dramatic one. The company filed for Chapter 11 bankruptcy in November of 2022, following a liquidity crisis with billions of dollars missing from the exchange. The company’s founder and former CEO, Sam Bankman-Fried, now faces a variety of charges from the U.S. Department of Justice, Securities and Exchange Commission (SEC), and Commodity Futures Trading Commission (CFTC) related to his actions at the company.

The latest development, in this case, is the seizure of nearly $700 million worth of assets either owned by FTX or tied to Bankman-Fried. Federal authorities in the Southern District of New York have seized just over $698 million worth of assets linked to the disgraced crypto founder, according to a court filing first reported on by CNBC.

The bulk of the value comes from a stack of shares that Bankman-Fried purchased in Robinhood, the stock and crypto trading app, allegedly using stolen FTX customer funds. The document submitted by U.S. Attorney Damian Williams details the holdings, with nearly 55.3 million shares of Robinhood stock seized on January 4. As of this writing, the shares are collectively worth about $526 million. They were held by Emergent Fidelity Technologies, a shell company that Bankman-Fried created with FTX co-founder Gary Wang.

In a December affidavit, Bankman-Fried wrote that he and Wang formed the new company—using funds loaned by FTX sister company Alameda Research—to acquire shares in Robinhood Markets Inc. totaling $546.4 million. FTX customer funds were reportedly used to plug a trading hole in Alameda’s balance sheet last summer, ahead of the exchange’s eventual collapse.

Other funds seized on January 4 include $20.7 million held by Emergent at ED&F Man Capital Markets, Inc, and another $49.9 million at Farmington State Bank, held under FTX Digital Markets. Between January 11 and 19, authorities seized just over $100 million of FTX’s funds held in Silvergate Bank. Today’s court filings also list three accounts held at rival cryptocurrency exchange Binance and its Binance US affiliate. However, the value of the assets in those accounts was not specified.

The FTX restructuring team, led by new company CEO John J. Ray III, said last week that it has separately recovered more than $5 billion worth of company assets between cryptocurrency, cash, and liquid investments in securities. But the seizure of these assets linked to Bankman-Fried and FTX shows that the legal troubles for the company and its former leader are far from over.

The case against Bankman-Fried is drawing comparisons to that of Bernie Madoff, the infamous “Monster of Wall Street” who was convicted of securities fraud in 2009. Just as Madoff’s Ponzi scheme defrauded thousands of investors, the collapse of FTX has left many customers out of pocket. The potential for a life sentence for Bankman-Fried highlights the severity of the charges against him, and serves as a cautionary tale for other individuals and companies in the cryptocurrency industry.

The fall of FTX and the trial of Sam Bankman-Fried serves as a reminder that the cryptocurrency industry is still in its infancy and regulatory oversight is essential to protect investors and prevent fraud. It also highlights the need for transparency and accountability in the industry, to ensure that customers are not left at the mercy of unscrupulous individuals and companies.

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