cryptodigital

Disgraced FTX Founder Sam Bankman-Fried who moved his multi-million dollar crypto empire to the Bahamas in 2021, is on a third night at Metropolitan Detention Center in Brooklyn after he violated his bail order.

The 31-year-old who adopted the Bahamas as his home, courting government officials before his empire imploded and was extradited to face fraud charges in the United States, tampered with witnesses ahead of his October trial according to Judge Lewis Kaplan of the U.S. District Court for the Southern District of New York.

“My conclusion is there is probable cause to believe the defendant has attempted to tamper with witnesses on at least two… there is a rebuttable presumption that there is no set of conditions that will ensure Bankman-Fried will not be a danger.

“He has gone up to the line over and over again, and I am going to revoke bail,” Judge Kaplan said on Friday.

Since his extradition, Bankman-Fried was on bail and confined to his parent’s $4 million Palo Alto home.

What happened?

Prosecutors said, Bankman-Fried reached out to former FTX.US General Counsel Ryne Miller and used a virtual private network to watch the Super Bowl. Also, he shared part of his associate’s Alameda Research CEO Caroline Ellison’s private diary with the New York Times in an attempt to intimate her since she is a major witness for the prosecution in the case.

While on bail, prosecutors said he’s had conversations with author Michael Lewis, who is writing a book about FTX that is set for publication the week the trial begins.

After the judge’s order, Bankman-Fried was instructed to remove his navy suit jacket as two US marshalls prepared to handcuff him. His mother, Barbara Fried, attempted to approach him but was warned to stand back by a court officer and was expected to be taken to the Metropolitan Detention Center in Brooklyn.

The big story

After moving his exchange from Hong Kong to the Bahamas, Bankman-Fried flooded the Bahamas with money and donations. A little more than one year later, the millions of dollars disappeared from his exchange and it collapsed. He filed for bankruptcy.

Bankman-Fried’s trial is set for October as he faces charges of wire fraud, commodities fraud, securities fraud, money laundering and related conspiracy charges.

The industry titan courted by politicians and celebrities is now a criminal defendant facing years in prison.

Bankman-Fried’s lawyer said in court, he was protecting his reputation and intended to appeal.

FTX, the 32-billion dollar exchange, with its headquarters in the Bahamas has made a mess of the crypto market since its collapse and has now become a global conversation.

As scrutiny arises, Prime Minister Philip Davis who has welcomed former FTX CEO Sam Bankman-Fried to the Bahamas has remained mum on the fiasco, only to say “those who care about our country’s reputation” should tread carefully when they speak about the complex matter involving FTX which he says is still “unfolding.”

“There is a reason that the Bahamas won international praise for the approach we have taken, to date, on digital assets, and there is also plenty of room to have a healthy debate about the industry, but this is a story that has the world’s attention, and those who use it to mislead and score cheap political points are no patriots,” Davis said.

His comments in the House of Assembly are manipulative and are steeped in an antiquated belief system.

It’s an attempt to keep the public quiet while the world talks about the issue and suggests that to ask questions, you’re doing something wrong.

It also suggests that any attempt to discuss FTX is “unpatriotic” and will ruin the country’s image.

Davis attempts to implement an ‘us versus them’ mentality which can be destructive, divides the Bahamas from the rest of the world, and forces Bahamians to pick a side and automatically make judgments about the other side without taking a realistic view of what happened.

Opposition Leader Michael Pintard then responded stating that he was surprised “at the brevity and to a large extent, the hollowness” of the prime minister’s remarks on the downfall of FTX.

“We are facing a substantial risk to our financial services sector and one would’ve expected that since the international community’s eyes are trained on the Commonwealth of The Bahamas that on this occasion that this Davis-Cooper administration would’ve thought it necessary to break its silence much earlier with a far more comprehensive statement given the gravity of this.”

There may be circumstances where Davis’ concept of waiting until all the evidence is brought to the forefront before making allegations, could be applied, but FTX is global.  The fiasco is not a secret. The world’s a global village.

Bankman-Fried was a crypto sensation living and working in the Bahamas and rubbed shoulders with prominent US politicians and A-list celebrities. Therefore, his headquarters in the Bahamas will bring scrutiny.

Of course, Bahamians have questions and they deserve to be answered and one’s patriotism should not be based on the questions they have about FTX’s dealings and connection to the governing party.

Bahamians deserve to know more from Davis and he should willingly answer any of the questions from the Opposition leader such as did the PLP accept donations from Bankman-Fried, did it hold digital wallets with FTX, and whether it did its due diligence to screen the company before its operation in the Bahamas.

Davis should not expect Bahamians to stick to his script.

While customers are looking for billions of dollars lost in FTX’s collapse, FTX Bahamas where the exchange was headquartered, and FTX US are preparing to battle after bankruptcy documents were filed.

The Securities Commission Bahamas released a press statement on Thursday signaling a fight with FTX-US. “It is not the understanding of the Commission that FDM (FTX Digital Market) is a party to the US Chapter 11 Bankruptcy proceedings,” the statement said.

FTX US filed for bankruptcy in Delaware while FTX Bahamas filed in a New York court. Now Bahamian liquidators are demanding the US court give them control of the proceedings since the exchange is headquartered in the Bahamas.

But FTX-US believes all bankruptcy proceedings should be in Delaware to “end the chaos” so that all proceedings could “take place in a single venue.”

Late Thursday night, the Securities Commission of the Bahamas added in a statement that it ordered the transaction of FTX’s crypto wallets to government-controlled wallets last week Saturday.

It is not known why it is just making the public aware of its authorization but only stated that existing authorities allowed the commission to take action if it needs to protect clients or their funds.

Last week, nearly 600 million dollars were purportedly “hacked” from FTX. It is alleged the Bahamas government, sanctioned by Bankman-Fried removed the money as new CEO John Ray accused the Bahamas government of ordering unauthorized access to FTX’s systems in order to withdraw assets after the Chapter 11 bankruptcy was filed in the U.S.

But the Securities Commission is stating today that an order signed by Justice Loren Klein on November 12, gave them permission to transfer assets worth millions of dollars into the government digital wallet because it feared they would be stolen by hackers.

Fallen Crypto King Sam Bankman-Fried not only imploded the cryptocurrency market but dealt a heavy blow to the pocket of the governing party of the Bahamas.

The Progressive Liberal Party suffered financially since Bankman-Fried was a generous megadonor and facilitated government expenses like the Dubai Exhibition 2020, the Duke and Duchess of Cambridge Royal Banquet at Bahamar and the Hurricane Dorian Benefit Concert.

Before FTX the $32 billion bitcoin exchange collapsed into bankruptcy on Friday and the prospect of millions evaporated from its platform, CEO Bankman-Fried formed a close tie to the PLP.

He was the government’s single largest donor, who extended his wealth not only to the PLP in the Bahamas but also President Joe Biden, dishing out more than $5 million to back his presidential campaign in 2020 against Donald Trump.

It is not known how much money the billionaire doled out after he moved his company’s headquarters to the Bahamas in April, but it is believed to be millions.

At press conferences when questioned by media about the cost of national events, government spokespersons often concealed his identity, only stating that other expenses were incurred by “a corporate donor” or “the private sector.”

In January when controversy arose over the exorbitant cost and size of the contingent which traveled to the Dubai Expo 2020, Director of Communications in the Office of the Prime Minister Latrae Rahming said “The UAE has spent $3.5 million, and the Bahamian private sector has contributed half a million dollars.”

In May when the Duke and Duchess of Cambridge visited the Bahamas and the media questioned the price tag of the Royal Visit, the committee responsible for planning the event tabulated the cost, and released a statement which in part read, “On this visit, the cost of travel to and from The Bahamas will be borne by the Royal household. The Governor General’s reception is being sponsored by a corporate donor.”

FTX’s Communication Director Valdez Russell is seen in social media posts, attending events, including the Dorian Concert which featured renowned gospel artist Cece Winans, which suggests that FTX funded the concert. He  also attended the Bahamas Pavilion in Dubai earlier in the year, stating in a post, “Stopped in to see the Bahamas Pavilion and got even more excited about exciting possibilities as FTX becomes a platinum sponsor.” In addition, Russell makes his presence known at the Royal Gala held at Bahamar for Prince William and Princess Kate as he socializes with the royals and other attendees.

Other photos posted to Russell’s social media page show Former Cabinet Ministers in the Christie Administration, Allyson Maynard and Jerome Fitzgerald attending an FTX-USA event and rubbing shoulders with Chicago Mayor Lori Lightfoot.

Maynard is reported to be FTX’s lawyer and was responsible for helping Banker-Fried establish his headquarters in the Bahamas.

FTX billionaire Bankman-Fried is no stranger to tying himself to political groups, eager to woo crypto-friendly politicians. He is the second biggest donor of the Democratic Party in the USA doling out $40 million to Democrats during the 2022 midterm election, with hopes of influencing legislature and policymakers so that FTX gets special treatment in the market.

Jeff Hauser, director of the left-leaning Revolving Door Project, said “A lot of people in the Democratic Party got really close to Sam Bankman-Fried, and it reflects very badly on people who took this guy seriously,” he said. “People who in their past lives have taken on corporate power have been bedazzled by money seemingly being thrown their way.”

In October, Bankman-Fried said he could spend anywhere from $100 million to $1 billion on Democratic races through 2024, but later walked back his comments.

“We’ve never seen something like this on this scale,” said Bradley Beychok, co-founder of American Bridge 21st Century, a Democratic super PAC. “On our side, there’s a small pool of people who write these kinds of checks and they tend to be the same folks. But Sam, to his credit, came right in with a big splash.”

The crypto power broker is now being scrutinized by the US Securities and Exchange Commission for his company’s handling of customer funds. What will the PLP do as US politicians now begin to distance themselves from Bankman-Fried?

The people who worked with FTX CEO Sam Bankman-Fried were shocked at the empire’s rapid fall and tell of his “radio silence” in the midst of chaos at the second-biggest crypto exchange.

People familiar with the operation spoke to CoinDesk on anonymity citing ongoing harassment and death threats: “The whole operation was run by a gang of kids in the Bahamas.”

The 30-year-old crypto king lives in his Bahamas luxury penthouse with his nine housemates who include the company’s co-founder and Chief Technology Officer Gary Wang, FTX Director of Engineering Nishad Singh and Caroline Ellison of Alameda. The other 6 employees are former co-workers from quantitative trading firm Jane Street and others he met at his alma mater, Massachusetts Institute of Technology.

It is speculated that they were all paired up romantically and Ellison who is Alameda’s CEO, is Bankman-Fried’s on and off again girlfriend.

Alameda Research is a trading giant at the center of the company’s collapse which the Wall Street Journal reported got $10 billion of FTX customer money. This spurred allegations of FTX’s mishandling of funds when it tapped into customer accounts to fund risky bets in its trading company Alameda.

In the Bahamas, FTX and Alameda’s offices are also located steps apart in a coworking compound that also houses other crypto incubation projects.

“Gary, Nishad and Sam control the code, the exchange’s matching engine and funds,” the first person familiar with the matter said. “If they moved them around or input their own numbers, I’m not sure who would notice.”

A third person familiar with how the company operated said: “They’ll do anything for each other.”

FTX and Alameda employees told CoinDesk that they were kept in the dark regarding the events of the past week, stating that only Bankman-Fried’s inner circle may have had knowledge about the company’s dealings.

Bankman-Fried’s father, Stanford Law professor Joseph Bankman, also plays a role at the company. He is believed to be involved in the company’s charity and regulation-related projects.

“Some employees kept their life savings on FTX,” the second anonymous employee told CoinDesk. “We trusted that everything was fine.”