Caroline Ellison and SBF responsible for FTX collapse

Edward Anderson on January 2, 2023

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Caroline Ellison: The former CEO of FTX’s sister company, Alameda, testified before a judge that she and Sam Bankman-Fried misrepresented lenders about their financial information.

Ellison agreed with the former FTX CEO that Alameda’s lenders were provided “materially misleading financial statements.”

The news

After Caroline Ellison’s trial testimony was given on December 19, SBF was not released on a $250 million bond until three days later, at which point the transcript of her testimony was released publicly.

Judge Ronnie Abrams of the US District Court listened as the former Alameda CEO said, “I am truly sorry for what I did – I knew that it was wrong.”

“Did you also know that it was illegal?” the court asked her to clarify.

“Yes,” Ellison answered.

Federal charges

Last week, Caroline Ellison and Gary Wang, the other co-founder of FTX, pleaded guilty to federal charges for their involvement in the frauds that caused the company’s collapse.

The two had been charged, according to attorneys for the Southern District of New York on Wednesday.

The Securities and Exchange Commission alleges that they were charged with participating in a scheme to defraud equity investors.

The Commodities Futures Trading Commission (CFTC) stated that a revision had been made to its fraud complaint.

Ellison and Wang, according to US Attorney Damian Williams, accepted guilty pleas.

Williams also thanked the assistance of the Bahamas, the US Embassy there, and the Justice Department’s Office of International Affairs.

The Southern District of New York is cooperating with Gary Wang and Caroline Ellison.

They didn’t disclose their plea deals until Sam Bankman-Fried was on his way from the Bahamas to the US.

The financial statements

The misleading financial statements, according to Caroline Ellison, were derived from “quarterly balance sheets that concealed the extent of Alameda’s borrowing and the billions of dollars in loans that Alameda had made.”

“I agreed with Mr. Bankman-Fried and others not to publicly disclose the true nature of the relationship between Alameda and FTX, including Alameda’s credit arrangement,” said Ellison.

The following people reported about the transcript after reading it:

New York Times
Reuters
Bloomberg

Matthew Russell Lee of Inner City Press tweeted a portion of the transcript.

Early reports

The employees of FTX and Alameda were either aware of or oblivious of what was happening between the two companies, according to reports that surfaced last week.

Before Ellison and Wang submitted guilty to their charges, the ambiguity was the subject of much speculation.

However, Caroline Ellison’s remarks confirmed rumors that FTX had treated Alameda uniquely.

Alameda was given permission to take money out of its sister company.

Ellison said:

“I understood that FTX executives had implemented special settings on Alameda’s FTX.com account that permitted Alameda to maintain negative balances in various fiat currencies and crypto currencies.”

“In practical terms, this arrangement permitted Alameda access to an unlimited line of credit without being required to post collateral, without having to pay interest on negative balances and without being subject to margin calls or FTX.com’s liquidation protocols.”

The company’s huge debt and what it entailed were both recognized to the former Alameda CEO and others, she said.

“I understood that if Alameda’s FTX accounts had significantly negative balances in a particular currency,” she continued.

“It meant that Alameda was borrowing funds that FTX’s customers deposited onto the exchange.”

SBF

Sam Bankman-Fried and other executives, according to Caroline Ellison, allegedly took loans from Alameda while participating in a number of “large illiquid venture investments.”

She said that she and others had agreed to borrow from FTX in the billions of dollars in order to pay back the loans.

“I understood that FTX would need to use customer funds to finance its loans to Alameda,” Ellison shared.

“Most FTX customers did not expect that FTX would lend out their digital asset holdings and fiat currency deposits to Alameda in this fashion.”

Caroline Ellison also spoke to the FTX collapse victims, saying:

“I want to apologize for my actions to the affected customers of FTX, lenders to Alameda, and investors in FTX.”

“Since FTX and Alameda collapsed in November 2022, I have worked hard to assist with the recovery of assets for the benefit of customers and to cooperate with the government’s investigation.”

“I am here today to accept my responsibility for my actions by pleading guilty.”

References:

Caroline Ellison ‘knew that it was wrong,’ implicates Sam Bankman-Fried

Caroline Ellison, Gary Wang plead guilty, cooperating in FTX investigation

SEC says Ellison, Wang ‘knew or were reckless in not knowing’ about FTX fraud

Sam Bankman-Fried to receive bail for $250 million

Leah Cooper on December 26, 2022

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Sam Bankman-Fried: A federal judge in New York issued a ruling on Thursday that allows the FTX developer to be released on a $250 million bond.

He is in the process of being prosecuted for fraud and other crimes.

The news

Sam Bankman-Fried, his parents, attorney, and court security left the Manhattan US District Court at around 2:00 p.m.

The prosecutors and his attorneys accepted the bail conditions for Bankman-personal Fried’s recognizance.

On January 3 in New York City, Judge Ronnie Abrams will preside over the 30-year-old’s next hearing.

He will enter a plea and answer the allegations there.

Bond

A recognizance bond is a written promise from the defendant to appear in court in response to a summons.

After being released, Sam Bankman-Fried won’t be required to meet all of the bail’s collateral requirements.

The bond was signed by his parents and two other people with substantial assets and was secured by the equity in his family’s home.

The prosecution described the $250 million package, which also includes an electronic monitoring bracelet, as the biggest pretrial bond ever.

He must agree to obtain mental health therapy and abstain from going to the Southern, Eastern, and Northern Districts of California and New York.

In the court

Judge Gabriel Gorenstein said that after being permitted to return to his parents’ California home, Bankman-Fried would require continued supervision.

The parents of SBF, who are both Stanford law professors, were in the courtroom.

The creator of FTX was surrounded by two US marshals dressed in blue suits and brown shoes.

He swapped his ankle shackles for an ankle monitor while in the courtroom.

Sam Bankman-Fried remained silent until the judge inquired whether he understood the repercussions of breaking the bail conditions.

“Yes, I do,” said SBF.

Furthermore, Bankman-Fried is prohibited from opening new credit accounts with a total balance of more than $1,000.

Federal regulators describe him at his crypto-empire as a “brazen” fraud as they wait for the trial to start.

SBF was at the core of “a fraud of epic proportions” during the court proceedings, according to Assistant US Attorney Nicolas Roo.

SBF, according to Roos, had significantly decreased his financial holdings, had freely returned to the US and had never attempted to run.

Sam Bankman-Fried, a former $32 billion cryptocurrency tycoon, purportedly stated that he only had $100,000 in his bank account.

The outcome was a swift fall from grace for the man.

Accusations

Sam Bankman-Fried is accused of the following:

Perpetrating a multibillion-dollar fraud on his investors
Using customer funds to purchase properties
Funding political donations
Backstop trades at his hedge fund Alameda Research

On Monday, the Commodity Futures Trading Commission brought fresh allegations against SBF, FTX, and Alameda Research.

They claimed that FTX mixed up customer funds and that Bankman-Fried violated the Commodities Exchange Act.

According to allegations, Alameda Research had access to more than $8 billion in client funds.

Since the company’s founding in 2019, FTX client funds have been accessible to and used by Alameda for its operations and activities, including:

Trading
Funding
Investment
Borrowing/lending

The SEC’s accusations that Sam Bankman-Fried operated his empire as a scam from the start were echoed by the CFTC.

FTX sought bankruptcy protection in Delaware on November 11.

John Ray III, who succeeded Sam Bankman-Fried as CEO of FTX, said he had never seen such a loss of corporate control.

SBF’s lieutenants

On Wednesday, Caroline Ellison, a former co-CEO of Alameda Research, and Gary Wang, a co-founder of FTX, both pleaded guilty to federal charges.

Gary Wang acknowledged the following allegations:

Conspiracy to commit wire fraud
Wire fraud
Conspiracy to commit commodities fraud
Conspiracy to commit securities fraud

Caroline Ellison had done the following:

Two counts of wire fraud
Two counts of conspiracy to commit wire fraud
Conspiracy to commit commodities fraud
Conspiracy to commit securities fraud
Conspiracy to commit money laundering

The public was informed of their plea agreements on Wednesday.

SBF

The US Attorney accused Sam Bankman-Fried of eight charges, including securities fraud and money laundering.

He was transported by air from the Bahamas to New York on Wednesday night.

SBF has a far higher bond than other federal white-collar defendants.

Bernie Madoff obtained a $10 million bail in anticipation of his imminent trial for running a Ponzi scheme.
Former Enron CEO Jeff Skilling posted a $5 million bond.
Elizabeth Holmes, the Theranos founder, posted a $500,000 bond.

Reference:

FTX founder Sam Bankman-Fried to be released on $250 million bail, will live with his parents

CFTC piles on new charges against Bankman-Fried, FTX and Alameda

FTX’s Gary Wang, Alameda’s Coraline Ellison plead guilty to federal charges, cooperating with prosecutors

Crypto Exchange FTX Owes Millions of Individuals and Businesses

Leah Cooper on November 21, 2022

When the crypto exchange FTX went bankrupt, it left more than a million people and companies stranded with no way to withdraw their funds.

The news of a possible hacker infiltration into FTX has raised concerns among those who invested in their business.It’s a buyer beware market, with crypto assets primarily unregulated and lacking any protection for consumers.

More than six million people in the UK have invested into crypto or own digital assets. This means that there is a 1 out 10 individuals ratio, despite experts warning of its risks.

The Financial Conduct Authority has sounded the alarm on FTX, warning that they might be providing financial services or products in Great Britain without proper authorization.

“You are unlikely to get your money back if things go wrong,” it said bluntly.

The watchdog handled a recent page with the FTX liquidation. On this particular instance, it’s important to note that those who’ve put their money into this doomed fund have limited options going forward.

Vanishing Crypto

In the case of FTX, there is a process to split up their remains and distribute them among those who are owed money by it.

University of Liverpool ‘s Associate Professor in Financial Technology Gavin Brown referenced the latest report, which found that “42% of exchanges which failed simply disappeared without a trace.”

However, bankruptcy doesn’t offer any comfort.

“In the event of exchange failure, or even bankruptcy, it is the investors who are on the hook for losses,” Prof Brown said.

He, alongside other experts, cautioned that in most cases, small investors get placed at the back of the priority line. This is in case the remains are split up among creditors. Furthermore, they don’t think creditors will juice any more money.

“The unfortunate news is that the money’s all gone. It’s just not there anymore. Investors should expect pennies on the dollar,” David Gerard, crypto blogger and author, said.

Gerard said there are “real liabilities but imaginary assets.” Moreover, a considerable amount of the assets are in exchangers’ own tokens like FTX’s FTT token, to which “they’ve assigned a spurious value in billions.”

Close to No Options

As per the FCA, individuals concerned about their finances should approach a government-supported organization, Moneyhelper. However, Moneyhelper is an advice service. It can only provide recommendations on ways to push through when your savings disappear.

In a few conventional investments, it’s possible to gain compensation if an organization falls down through the Financial Services Compensation Scheme (FSCS). Examples of that are a bank or building society.

However, FSCS said it doesn’t cover crypto assets due to its unregulated financial product nature. They said all they can provide is a caution for consumers about the risk. Furthermore, they could offer tools to inspect if a scheme safeguards their investment.

The organization added that consumers asked about cryptocurrency every week. It’s either through its customer service department, social media, or scanning for data on its website.

According to it, “crypto” is one of the most searched words on its website.

Crypto report: Binance loses $570 million in a heist after hackers target cross-chain bridge

Claire Peterson on October 10, 2022

Theft has become a recurring problem in the crypto and NFT space, and Binance has become the latest victim of a significant robbery.

The report

On Friday, a Binance spokesperson revealed that a Binance-linked blockchain was involved in a $570 million hack last Thursday.

On Thursday, the cryptocurrency exchange platform tweeted that Binance had temporarily suspended BNB Smart Chain, its blockchain network.

The company claimed that the action was the result of irregular activity.

On Friday, Binance released a statement claiming that hackers stole two million BNB cryptocurrency tokens, which were worth $ 570 million at the time.

Changpeng Zhao, the CEO of Binance, initially tweeted that about $100 million worth of cryptocurrencies had been stolen.

On Thursday, he tweeted:

“Your funds are safe. We apologize for the inconvenience.”

According to Binance, tokens worth $100 million remain “unrecovered” and have been removed from the chain by the hacker.

At the moment, the remaining funds of the BNB chain are being frozen.

The hack

The big heist was carried out when the hackers targeted what is known in the crypto space as a cross-chain bridge.

Recently, bridges have become the target of most hackers.

Bridges are the infrastructure that allows users to exchange crypto assets on different blockchains.

Their services usually hold large reserves of various coins.

This puts coin reserves at the center of the hackers’ radar.

According to blockchain analytics firm Elliptic, coin reserves have made blockchain bridges prime targets for theft.

Theft

Elliptic reports that about $1.83 billion was stolen from bridges in August, with the majority ($1.21 billion) in 2022.

Binance was not alone as others experienced major thefts in 2022.

Other losses include $190 million stolen from cryptocurrency bridge provider Nomad in August.

In June, California-based Harmony announced a loss of $100 million at the end of June.

Axie Infinity’s Ronin Bridge lost $625 million in March.

Effects of the Binance hack

The latest hack caused the BNB blockchain to go offline for about nine hours.

BNB made a corporate post saying that the chain’s ecosystem contacted the chain’s validators to prevent the incident from spreading further.

Chain validators are people who verify that transactions on the blockchain are legitimate.

According to a tweet from the company, the channel went back online around 2:30 a.m. ET.

Reference:

Binance-linked blockchain hit by $570 million crypto theft

SEC charges prominent crypto influencer Ian Balina for unregistered ICO four years ago

Jason Robinson on October 3, 2022

The US Securities and Exchange Commission (SEC) says crypto influencer Ian Balina broke the rules during Sparkester’s $ 30,000 ICO more than four years ago.

As a result, the SEC charges the crypto influencer.

The charge

The SEC says the crypto personality has not filed a registration statement with the Commission for listing and selling Sparkster’s SPRK tokens.

There was reportedly no exemption from registration.

According to the SEC, Balina did not disclose the commission he received for promoting the initial offerings of SPRK or ICOICO coins on social media.

Sparkster initially offered investors a portion of its “No Code” software development platform by purchasing SPRK tokens.

Tokens are designed to allow users to develop software with minimal technical programming skills.

As a result, the SEC is calling for “injunctive relief, disgorgement, civil penalties, and other appropriate and necessary equitable relief.”

If the allegations are confirmed, Balina will no longer be able to promote the titles.

The Ethereum contribution

According to the filing, contributions were made to Ethereum to participate in the ICO in the United States.

The file goes:

“[Users’] ETH contributions were validated by a network of nodes on the Ethereum blockchain, which are clustered more densely in the United States than in any other country.”

“As a result, those transactions took place in the United States.”

Balina’s reaction

The crypto influencer responded to the news by taking to Twitter, where he announced he was excited to “go public with this fight.”

“This frivolous SEC charge sets a bad precedent for the entire crypto industry,” he tweeted.

“If investing in a private sale with a discount is a crime, the entire crypto BV space is in trouble.”

“Turned down settlement so they have to prove themselves.”

ICO promotion

Balina awarded the Sparkster token a 90% Hall of Fame rating in its ICO investment chart.

It also promoted it to users of a private Telegram group of about 50 people, according to the SEC filing.

Since then, the Cayman Islands-based company has been dissolved.

The SEC approved ICO SPRK took place between April and July 2018.

It raised about $ 30 million from nearly 4,000 investors in the United States and abroad.

Balina is said to have signed an agreement to invest $ 5 million from Sparkster’s offer before promoting the token on YouTube, Telegram, and other social media platforms.

Although the SEC said he accepted a 30% bonus on the tokens purchased in the offer, Balina has never revealed his consideration for the promotion.

The SEC

Yesterday the SEC announced that Sparkster and CEO Sajjad Daya agreed to pay $ 35 million to interested investors.

Carolyn M. Welshhans, deputy director of the application of the century, said that the agreement has made it possible to give an important amount to investors.

It also calls for additional measures to protect these investors, including disabling tokens to prevent future sales.

She also said the Balina lawsuit is protecting investors “by seeking to hold accountable an alleged crypto asset promoter for failures to follow the federal securities laws.”

Reference:

SEC charges crypto influencer Ian Balina over unregistered ICO in 2018

Vitalik Buterin hopes Ethereum Merge paves the way for others to follow

Edward Anderson on September 28, 2022

Innovation is important for the success of brands in technology, and Ethereum Merge is one of the best examples to highlight such advancements.

The Merge is an update to the Ethereum blockchain, and its innovation will push the crypto space in a new direction.

Vitalik Buterin, the co-founder of Ethereum, believes that other blockchains should also evolve and move to proof-of-stake.

Hoping that other blockchains will follow

Now that the Ethereum Merge is complete, Buttrin thinks other blockchains, including Dogecoin and Zcash, should follow a similar path.

During Friday’s Mainnet Messari conference, he said on video:

“As proof of stake matures, I expect it to just increase in legitimacy more and more over time.”

“I hope that Zcash moves over. I am also very hopeful that Dogecoin is going to evolve over to proof of stake at some point soon.”

The Merge

In early September, Ethereum finally hosted the highly anticipated Merge event.

The Merge moved the core network from the energy-intensive proof-of-work (PoW) model to the more energy-efficient proof-of-stake (PoS) model.

According to Buterin, the high-stakes event went smoothly, although there were bugs with each merge test.

The Mainnet Conference

During the Mainnet Conference, Buterin spoke with Messari CEO Ryan Selkis and Electric Coin Company CEO Zooko Wilcox-O’Hearn.

“You emailed me your plan for Ethereum, and I was like, ‘Holy shit. This is so exciting. And it’ll never work,’” said Wilcox-O’Hearn.

“And then you and the Ethereum [developers] proved me wrong. It totally worked.”

Zooko, best known for his association with the privacy coin PoW Zcash, shared that he initially thought the Ethereum Merge would never work.

Later, however, his feelings about the Merge changed.

“You should be proud of yourselves for the rest of your life,” Zooko said, referring to Buterin and Ethereum developers.

The CEO of Electric Coin Company said he is waiting to see how Ethereum has fared since the upgrade to see if Zcash should hold its own Merge-like event.

“We’ve literally been waiting to see what we can learn from Ethereum,” said Zooko.

“I guess what we’ve learned is that it actually works.”

Buterin and the transition to PoS

As for other channels making the leap to proof-of-stake, Vitalik Buterin is willing to wait, but he thinks some will.

“For the other chains, we’ll see,” he said. “Some of them might; I’m sure at least some of them never will.”

“There might even be some compromise middle ground where some chains end up moving to some kind of hybrid proof of stake.”

The Ethereum co-founder has been relieved of the company’s status for the time being and says it will be better positioned after the Merge.

“A sky that has been cloudy for almost a decade finally cleared,” Buterin described of the Merge.

Reference:

Ethereum’s Vitalik Buterin ‘very hopeful’ Dogecoin moves to Proof of Stake

Match Group and Tinder Remove CEO, Metaverse Plans Scrapped

Jason Robinson on August 22, 2022

Online dating giant Match Group recently announced a series of changes to the Tinder management team.

The company also announced a number of changes to move the company forward.

Shareholder letter

Match Group CEO Bernard Kim expressed his dissatisfaction with Tinder’s performance in a letter to shareholders.

The letter reveals that the popular dating app has failed to achieve its usual monetization success over the past few quarters.

As a result, Match Group’s original earnings growth forecast for the second half of 2022 will not materialize.

Kim attributes Tinder’s troubles to some improvements and poor implementation of new product initiatives.

However, he said that the product implementation and application speed could still be improved.

Departure and change

Also on Tuesday, it was announced that Tinder CEO Renate Nyborg will be leaving the company after less than a year with the company.

With Nyborg gone, Tinder will also reorganize its management team, including:

Former Match Group Chief Strategy Officer Faye Iostaluno becomes COO of Tinder
Newcomer Mark Van Liswick takes on the role of Tinder’s Chief Product Officer with experience as a gaming CEO
Tom Jack, an 11-year Match Group veteran and CTO of Tinder, has been the company’s Chief Technology Officer for the past five years.
Amarnath Thombre, CEO of Match Group Americas and a 15-year veteran, advises Tinder executives on the roadmap and product growth.

Bernard Kim has revealed that he will oversee the team as Tinder continues its search for a permanent CEO.

Engagement

This number suggests younger users are less likely to use dating apps like Tinder. This is a cultural shift beyond the impact of the pandemic.

People are coming out of the COVID-19 lockdown and returning to their normal routines, according to a report, but they’re not as ready to dive into online dating apps for the first time as they were before the pandemic.

Conversely, Match Group found that the most engagement on Tinder came from existing users.

Metaverse

With the revamp of Tinder, the “Metaverse” plan has been reduced.

With the acquisition of Hyperconnect, Match Group plans to develop a new form of online dating in a virtual environment.

However, the idea was shelved as Match Group plans to address other issues.

“Given uncertainty about the ultimate contours of the metaverse and what will or won’t work, as well as the more challenging operating environment, I’ve instructed the Hyperconnect team to iterate but not invest heavily in the metaverse at this time,” Kim wrote.

“We’ll continue to evaluate this space carefully, and we will consider moving forward at the appropriate time when we have more clarity on the overall opportunity and feel we have a service that is well-positioned to succeed.”

Crypto

Match Group has also been proposed to unlink cryptocurrency as an experiment with Tinder Coins (which the company will use for its Metaverse plans and long-term roadmap).

“After seeing mixed results from testing Tinder Coins, we’ve decided to take a step back and re-examine that initiative so that it can more effectively contribute to Tinder’s revenue,” said Kim.

“We also intend to do more thinking about virtual goods to ensure that they can be a real driver for Tinder’s next leg of growth and help us unlock the untapped power users on the platform.”

Revenue

Match Group reported revenue of $ 795 million in the second quarter of 2022, up 12% year-over-year.

However, the figure was below the Wall Street average estimate of $ 804.22 million. The company also reported a loss of $ 31.86 million.

The estimates for the next quarter are also not good, as the company expects steady growth in the third quarter from $ 790 million to $ 800 million, which is lower than its estimate of $ 833 million.

Reference:

Tinder to kill virtual currency, metaverse plans amid Match Group earnings loss;Tinder loses its CEO