In November of 2022 The Cryptocurrency Exchange FTX froze withdrawals and declared bankruptcy, causing billions of dollars of losses for millions of customers around the world. Over the next couple months, Ftxs founder Sam Bankman freed or SBF was holed up in the Bahamas giving numerous interviews both to the mainstream media outlets and to Twitter spaces. He categorically denied all wrongdoing and blamed pretty much everyone except himself. We covered this topic extensively last year and I've linked previous videos in the description below.

If you want more background on the FTX collapse in today's video, we'll be focusing on what happened after he was arrested in December of 2022. As a lot of New Revelations have come out, he was extradited to the US where he now faces interrelated charges of wire fraud Securities fraud, money laundering, conspiracy to commit both wire and securities fraud and violation of campaign Finance laws. The charges alleged that he stole customer money from FTX deceived his creditors and investors, and used stolen customer funds to make political campaign contributions as well as many other uses. He faces a maximum sentence of 115 years.

He posted a $250 million bail bond and pleaded not guilty on all accounts. His trials expected to begin in October of 2023. While on bail, he resided in his parent. San Francisco Mansion Since then, a lot of new developments have come to light, so we'll go through them in chronological order following the collapse of FTX SPF claimed that he lost almost everything substantially all of his previous net worth were ownership of Alam and FTX which are now worthless.

He had some other assets, including a stake in the brokerage company Robin Hood but these were all Frozen In his public interviews, he said that he had less than $100,000 in his bank account. This makes it surprising that he was able to post his $250 million baill in January of 2023. Spf's parents Barbara Freed and Joseph Bankman are professors at Stanford University and own a multi-million dollar home in San Francisco they posted their home as collateral for the bond. Two other Stanford professors who were friends of Spf's parents also co-signed the bail bond.

They would technically be on the hook to pay the $ 250 million if S SPF fails to show up in court. Of course, none of these people actually had $250 million, but this large bail amount was largely symbolic. S SPF forfeited his passport and agreed to wear an ankle monitor. He was basically under house arrest, so the chances of fleeing were extremely low.

With his trial scheduled for October SPF Had 10 months to prepare his legal defense as goals to play League of Legends which is one of his Great Hobbies This probably would have been the best use of his time as he won't be able to play any video games in federal prison here. We need a quick refresher on the alleged fraud. FTX Customers deposited money onto the exchange with neither the consent nor knowledge of the customers. Their funds were loaned to Alam a proprietary crypto hedge fund owned by San Bankman freed his one-time girlfriend Caroline Ellison was the CEO of Alam Research as the owner of Alam SPF extracted hundreds of Millions Millions if not billions of dollars from Alama research which he used to fund his lavish lifestyle as well as speculative.

Investments These Investments include $500 million worth of Robin Hood shares. This is wire fraud because the FTX customers were deceived into sending their money into FTX. They were told that their deposits would remain their property and FTX had no right to lend them out. Allegedly, the customer deposits were used as Spf's personal slush fund and he used the money for whatever he wanted.

Spf's main defense is that he was not operational involved at Alam Research since 2021. When he handed the Reigns over to Caroline Ellison to become CEO. He said that there was a glitch in their software which allowed Alam to extract billions of dollars worth of customer funds from FTX Without his knowledge, he's effectively trying to shift the blame to Caroline Ellison to the extent that Alam was knowingly stealing money from FDX customers. It would be Ellison's fault, not his because since 2021 he was no longer involved in decision-making at Alam s.

SPF Hired a law firm called Cohen Agressor to lead his legal defense. Cohen Andor is a prestigious firm which has represented large corporations including Goldman Sachs and Samsung Electronics as well as high-profile individuals including Gain. Maxwell It's safe to assume their services aren't cheap in December of 2022. SPF was scheduled to testify before the US Congress to explain what happened with the FTX collapse.

He was unable to attend because he was arrested the day prior, but a transcript of his opening statement was leaked to the media. In his opening statement, SPF claimed that he had left Le than $100,000 left in his bank account and he's not sure he'll be able to pay the legal fees he's likely to rack up. Not only that, but he's trying to divert whatever funds he can find away from paying lawyers and towards bringing value to FDX customers. This begs the question: How is he now able to afford such a prestigious and presumably expensive Law Firm According to a recent lawsuit filed by FTX is current liquidation team, his parents might be involved Spf's dad Joseph Bankman was a professor at Stanford University where he taught tax law law.

SP SPF hired him as a senior adviser to FDX where he helped them minimize their tax liabilities Barbara Freed did not hold an official position at FTX but she was involved in their political campaign contributions, which we'll discuss in more detail later in early 2022 SPF Allegedly gifted his parents $10 million which came from Alam as well as a $16 million mansion in the Bahamas paid for by FTX. It is further alleged that S. Spf's parents are using this $10 million gift to pay for their son's legal expenses. Thus, SPF may be funding his defense with stolen money.

In May of 2023, we got our first official glimpse of S. Spf's defense strategy. When Cohen and Gresser filed a motion seeking to dismiss many of the charges brought against him, This motion was rejected. A lynchpin of their argument is that Mr Bankman Freed began transitioning away from Alam when he founded FDX in 2019 and formally resigned and handed off control of Alam in 2021.

The argument is to the extent that there was any fraud it was at Alam and S. SPF wasn't even involved. As we will see, there are some major problems with the story. Shortly after FDX collapsed, three members of S.

Spf's Inner Circle pleaded guilty and agreed to testify against SPF in exchange for lenient sentencing. These include Gary Wang his co-founder and chief technology officer, Nishad, Singh the former head of engineering, and Caroline Ellison the CEO of Alam Research. Spf's defense relies heavily on his claimed ignorance of what was going on at Alam. Thus, Caroline Ellison being the CEO of Al Meda during the relevant period is perhaps his biggest threat.

In December of 2022, Ellison's guilty plea was made public. The following is a direct quote from 2019 through 2022. I Was aware that Alam was provided access to a borrowing facility on FTX Dcom I understood that FTX Executives had implemented special settings on Alam's Fx.com account that permitted Alam to maintain negative balances in various Fiat currencies and cryptocurrencies. In Practical terms this, Arrangement permitted Al Meta access to unlimited lines 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 Dcom liquidation protocols I understood that FTX would need to use customer funds to finance its loans to Alam I Also understood that many FTX customers invested in crypto derivatives and that most FTX customers did not expect that FTX would lend out their digital asset Holdings and Fiat currency deposits to Alam.

In this fashion, I agreed with Mr Bankman Freed and others not to publicly disclose the true nature of the relationship between Alam and FTX. I Also understood that Mr Bankman Freed and others funded certain investments in amounts more than $10,000 with customer funds that FDX had lent to Alam The Investments were done in the name of Alam instead of FDX in order to conceal the source and nature of those funds. I am truly sorry for what I did I knew that it was wrong and I want to apologize for my actions to the affected customers of FTX unquote this. This is clearly disastrous for S SPF as Caroline's confession directly implicates him, the only way he can get off is to convince a jury that Caroline is lying.

While he was out on bail, he had numerous Communications with reporters from The New York Times He sent them Google Documents which he claimed were diary entries written by Caroline Ellison It's unclear how he had access to these documents. This culminated in an article published by the New York Times in July of 2023, which paints Caroline Ellison in a less than favorable light in the diary. Caroline talked about her painful breakup withf which made her feel like she wasn't good enough. Ellison said at one point that she cut off communication with SBF In 2022 s SPF started a second trading firm called Mulo Caroline Ellison was jealous that SPF was giving more attention to Mulo instead of Alam.

It's clear what SPF was trying to do. he wanted to paint Caroline as a jealous ex-girlfriend desperate for his attention. Maybe this motivated her to steal the customer funds from FTX to make leveraged bets in an attempt to regain Spf's recognition. It's important to note that the alleged diary entries thatf provided to the New York Times would be nearly impossible to independently verify SP SPF could easily have written them himself.

Attempting to manipulate public opinion of a witness is a big no no when you're out on bail in August a federal judge revoked Spf's bail so he will now reside in a New York jails hell until his trial begins in October According to his lawyers, SPF isn't having a good time in jail. The jail is unable to accommodate his vegan diet, so he's been reduced to consuming only bread and water. The lack of access to League of Legends may also be taking a toll on his mental health. Just a few days after his bail was revoked, the government released a 70-page document which gives some key insights into their prosecution strategy.

The Crux of the prosecution's case revolves around the three former FTX and Alama Executives who agreed to testify against their former boss Gary Wang and Nashad. Singh Will testify that they at the direction of SPF created features an FTX code which allowed him to secretly funnel customer funds to Alam as well as other accounts. A lot of the prosecution's efforts are to establish S. Spf's Criminal Intent going back well before November of 2022.

It wasn't just a few bad decisions that ended badly. instead. from the very beginning, FTX was built on a foundation of deception and criminality, with its eventual collapse being inevitable. FTX Is fraudulent activities date all the way back to its founding in 2019.

FDX Tried to open a bank account, but no Bank wanted to hold C customer funds for an unregulated crypto exchange because the risks would be too high. but Alam already had a bank account. So in 2019 and 20120 FTX told customers to wire money directly to Alam's bank account. The money they sent to Alama was credited to their FTX account in August of 2020 FTX created a shell company called North Dimension.

They claimed North Dimension was a trading company that helped to execute trades on behalf of Alam. Thus, North dimmension was able to open an account with an undisclosed Bank likely Silvergate. In reality, the north Dimension bank account served as Ftxs deao bank account. Customer funds that were originally sent to Alam were transferred to North Dimension because the bank didn't know North Dimension was holding customer funds.

The unusual money withdrawals didn't raise red flags. The whole thing was a House of Cards. If a customer deposited money into their FDX account, they could look at the app and see their balance, but the money never even made it to FDX It instead went to a Shell company which SPF could use as his personal piggy bank. This shows that even as early as 2020, S SPF was defrauding the bank and was developing a sophisticated infrastructure that allowed him to essentially steal customer deposits.

The flow of funds was intentionally convoluted to obscure the fact that he was stealing the money. So now SPF had access to billions of dollars of customer funds which he could spend with impunity. All of his public statements about effective altruism can be completely discounted because he spared no expense to fund a lavish lifestyle for himself in his cronies. This included an estimated $300 million worth of luxury real estate across the Bahamas where both he and other FTX employees resided.

Included was a $16 million mansion that he gave to his parents, along with a $10 million cash gift. Another thing that he spent on was political campaign contributions in public interviews and statements SP SPF Claimed that the goal of his donations was to promote pandemic prevention. According to the prosecution, this was a complete lie. The real reason was to burnish his own image and improve Ftxs regulatory.

Prospect In an attempt to skirt campaign Finance Laws SPF Arranged for many of the donations to be made in the names of Nashad, Singh and Ryan Salam two high ranking Executives at FTX money from Al or FTX would be wired to these individuals who would then make the campaign contributions in their own names. Not only did SPF defraud FTX as customers, he also defrauded Alam's creditors. Alam Borrowed billions of dollars from crypto companies including Voyager Digital and Blockfi, both of which are now bankrupt Alam Owned various cryptocurrencies and use these crypto Holdings as collateral to borrow the money. It's no different than if you have a stock brokerage account and you use the value of your existing shares as collateral to access a margin loan from your broker.

The difference is that Alam was so big that they could single-handedly influence the market prices of the cryptocurrencies they owned. In particular, they bought large quantities of FTX as native Ft token as well as another cryptocurrency called serum. Alam Single-handedly pumped up the prices of these coins so they could access greater amounts of margin loans. This, this ultimately caused massive losses for their creditors as the value of these coins quickly collapsed when Alam imploded and had to fire sell its massive positions as FTX was collapsing in November of 2022.

Instead of coming clean, s SPF continued to lie on November 10th. He tweeted that his number one priority by far is doing right by users. We now know that this wasn't true. His number one goal was saving his own skin at the time he was physically located in the Bahamas.

Some people in the Bahamas used FTX although this this made up a tiny percentage of total customer deposits, even with a massive hole in its balance sheet. FTX had enough money to honor all withdrawals from the Bahamas customers even though withdrawals were frozen for all other jurisdictions. FTX Inexplicably reopened withdrawals for customers within the Bahamas in December of 2022. Shortly before his arrest, SPF agreed to a telephone interview with a citizen journalist named Tiffany Fong which she uploaded to her YouTube channel.

Lawyers generally advise their clients to avoid talking to the media while they're waiting trial as everything they say can and will be used against them, but in Spf's delusional narcissism, his desire to remain the center of attention Trump's legal considerations. He told Tiffany Fong that he selectively reopened withdrawals for the Bahamas because that's where he was living and he didn't want to be in a country with a lot of people angry with him. He was concerned about his own safety and he possibly thought that if he made all Bahamas customers whole, the Bahamas police wouldn't arrest him. Of course, he was wrong.

He was arrested by the Bahamas police and extradited to the US and short order. But this shows that even until the very end, he was lying. If doing right by customers was really his top priority, he wouldn't have selectively opened up withdrawals in the Bahamas at the expense of customers in all other jurisdictions SPF cares about SPF and nobody else. Even after he was arrested and released on bail.

SP SPF continued to lie. One of his biggest lies was that FTX Us was solvent. He claimed that the issues were only at FTX docomond US exchange. all FTX Us customers could supposedly be made whole.

He developed an elaborate conspiracy theory that Ftxs Liquidators halted withdrawals at FTX Us purely to prolong the bankruptcy process and accumulate more fees for themselves. According to prosecutors, this was a lie. FTX Us had a 45 million doll hole in his balance sheet SPF directed Alam to transfer money to FTX Us to make FTX Us solvent. He apparently thought that this would help him avoid prosecution in the US even if FTX Us technically was solvent.

at least some of this money was from FTX Dcom. customers. money from both FTX Dcom and FTX Us were all commingled in the same slush fund. It'd be like if you robbed two banks for $1 million each.

So you have $2 million of stolen money. in total, you squander half of the money so you only have $1 million left. You return the remaining $1 million to Bank A. You claim that Bank A has been made whole, so it should reopen and operate business as usual.

But this is not true. The $1 million that you return to bank A was stolen money. You had no right to return that money to Bank A. Some of that money originally belonged to bank B Bank B may try to claw back some of these funds.

Thus, you can't say that Bank A was made whole, but that's what SPF is trying to claim. He stole money from both FTX Decom and FTX Us. It doesn't matter if FDX Us has enough cash to operate, because at least some of that money was allegedly stolen from Fx.com It is thus necessary to freeze all the assets of both FTX Us and Fx.com until the courts can decide how to compensate the victims. And this is exactly what the Liquidators did.

The most damaging part of the prosecution's case will likely be the testimony from Caroline Ellison. Remember thatf got his bail revoked by sharing what he claimed to be Ellison's diary with the New York Times. But Ellison herself gave her diary to the prosecutors and it paints a very different picture in her diary. She had a section labeled things Sam is freaking out about entries in this section related to Alam's trading Hedges and bad press about the relationship between Alam and FTX.

This paints a picture that SPF was very involved in Alam to the extent that he was even keeping tabs on their trading Hedges This completely contradicts his public statements that he did not know what was going on on November 9th, 2022 right as FTX was collapsing Caroline Called a meeting of all Alam employees. the government obtained a recording of the meeting which was likely taken by one of the employees in the recording Ellison explained quote starting last year Alam was kind of borrowing a bunch of money via open term loans and used that to make various illiquid. Investments Then with crypto being down the crash the like credit crunch this year most of Al's loans got called and in order to like meet these loan recalls we ended up borrowing a bunch of funds on FTX which led to FTX having a shortfall in user funds. unquote.

It seems that only a few members of S. Spf's Inner Circle knew about the fraud. The Alam employees were shocked to hear that Alam was borrowing FTX customer money. An Alam employee asked Allison who else was aware of the short fall in FTX customer funds Ellison responded quote yeah I mean I guess I talked about it with like Sam nishad and Gary unquote.

An employee then asked who made the decision to use FTX customer deposits to cover the shortfalls at Alam Ellison replied quote: um Sam I guess unquote obviously referring to SBF s. Spf's only possible defense would be that Caroline Ellison was lying. Maybe she borrowed the customer funds without his knowledge and was just blaming him after the fact. The problem is Immediately prior to Els All Hands meeting, she sent a message to SPF asking him what to say.

This shows a level of coordination between SPF and Ellison which makes it almost impossible to believe that he wasn't involved. From a legal perspective, Spf's biggest mistake was giving so many public interviews and statements trying to explain himself. The prosecution was salivating as they watched these. They can see all of his arguments and they have months before the trial to preemptively debunk all of his likely defenses.

In many cases, the prosecution doesn't even need to craft counterarguments. All they have to do is show the court that Spf's arguments are irrelevant and unfairly prejudicial. If so, the court won't even allow the jury to hear them. SPF has been digging his own grave before the trial even begins.

In Spf's post arrest substack post, he points out that many other crypto companies including OK X, Coinflex, Voyager, Digital Blockfi, Celsius and others have also failed. He likely hopes that he can trick the jury into thinking the collapse of FTX was the result of uncontrollable crypto forces as opposed to to his own criminality. The prosecution is urging the court to exclude any references to alleged misconduct at other crypto companies because these are irrelevant and would only act to confuse the jury. Another one of Spf's arguments is a conspiracy theory that FDX is law firm Suvin and Cromwell pressured FDX to declare bankruptcy so that they could earn more legal fees even while FDX could still have been saved even if this were true, which it's not, this is completely irrelevant to the fraud charges against S.

SPF This is again an attempt to obfuscate and confuse the jury. Finally, SPF claims that he is a believer in effective altruism and his primary goal has never been personal enrichment. This is clearly a BS argument meant to gain sympathy and encourage jury nullification. Jury nullification means that the jury believes that you are guilty, but finds you innocent because they believe your crimes were somehow.

Justified When you steal money, it doesn't matter what you do with it. We also now know that FTX only ended up donating $30 million to Charities a tiny fraction of the hundreds of millions of dollars worth of luxury Bahamas Real Estate that he bought for himself, his family, and his cronies in addition to his former Inner Circle testifying against him SPF inadvertently gave a near confession in the days following the collapse on November 16th, a journalist at Vox published text messages that she had with SPF. This gives us a rare glimpse into what he probably intended to be a private conversation. The journalist references a previous conversation that they had where he said it's not worth it to do unethical things to make money.

She then asked if all of his statements about being ethical was just a front. s SPF responded quote: Yeah I mean that's not all of it, but it's a lot unquote. He's effectively admitting that he has no ethical consideration. His effective altruism was all just a facade.

SPF Tweeted that FTX never invests customer deposits. The journalist asked him if this was just Bsbf. admits that he was playing word games technically FDX did not invest customer funds they just lent it to Alam which in turn gambled the money. This shows malice of forethought.

He knew exactly what was going on and intentionally misled FTX customers with his tweets. He then gives some interesting commentary about his two co-conspirators Gary Wang and Nishad. Singh. He said Gary is scared, presumably about his own legal liability.

Nishad is ashamed and feels guilty about stealing customer funds. They all knew what was going on. It was no accident, whether they were trying to save their own skins or truly felt remorse. All three co-conspirators have pleaded guilty.

They undoubtedly negotiated lenient sentences in exchange for agreeing to testify against their former boss. They will have a chance to rebuild their lives upon their release. s SPF on the other hand, continued to lie, violated his bail terms in the most egregious way, and has never taking responsibility for his actions. These are all things that the judge will consider when deciding a sentence with a maximum prison term of 115 years.

SBF Will regret his arrogance and stupidity for the rest of his life. All right guys, that wraps it up for this video. What do you think about? S SPF Let us know in the comments section below. As always, thank you so much for watching and we'll see.

See you in the next one! Wall Street Millennial Signing out.