SBF charges beg the question: Who’s Next?

Sam Bankman-Fried made a very fatal error when he went on the record to say “fuck regulators”. Without that cardinal sin, he might have been allowed into the express lanes of “justice” that bypass prison. And since his profane proclamation failed to differentiate which regulators, they are all issuing indictments and lawsuits as fast as they can, now that the full fraudulence of SBF’s “effective altruism” is publicly known.

SBF is his own worst enemy. When it was disclosed that “he never reads”, it became obvious that we were dealing with an ego maniac whose innate larcenous genius was so sophisticated that he designed and targeted crypto clients while, in parallel, he designed and donned the mantle of the selfless philanthropist.

His public disclosures on Good Morning America, Vox, Dealbook, and Forbes provided further unadorned  unhinged criminal thinking that will, I’m sure, be called as evidence in his years of future trials. Saying he “never knowingly co-mingled” client funds, in the mere syntactical construction and delivery, was an admission that he knowingly co-mingled client funds.

The poor lawyers who were trying to advise him to STFU are likely suffering from various high blood pressures and nervous system disorders, thanks to SBF’s inability to take the expensive advice he was paying for.

The legal charges against Sam Bankman-Fried are serious and include Conspiracy to defraud the U.S., wire fraud, securities fraud, and money laundering. The indictment alleges he knowingly devised a scheme to defraud customers of FTX by misappropriating deposits and using their crypto to pay for debts incurred by his hedge fund. With the deal between Bankman-Fried and Binance to acquire the non-U.S. branch of FTX, it is possible that more damaging revelations or criminal charges could be brought against other people involved. People who may be next to face charges include FTX’s new CEO, Binance CEO Zhao, and other FTX executives who may have been aware of Bankman-Fried’s misdeeds.

The normal M.O. for federal agencies at this point will be to approach SBF’s higher level accomplices and attempt to “flip” them by threatening them with federal indictments but promising lenient sentencing for cooperation.

While there was much discussion in social realms expecting SBF’s prodigious donations to both political parties to insulate from the full brunt of the law, that no longer is a supportable argument, considering the broad and open-ended charges against for commodities, securities and wire fraud and conspiracy charges for same. The only question left is, who else will be implicated via federal charges.

Among those who are potentially exposed are of course, Kevin O’Leary for promoting the platform for pay, SBF’s parents for helping launder the proceeds in real estate transactions and political donations (FTX spent $256.3 million on 35 different properties in the Bahamas), Caroline Ellison for felony stupidity,  and the rest of the junior Bahamian penthouse wrecking crew, Changpeng Zhao, for intentionally catalyzing the FTX collapse, and a whole host of less recognizable enablers who all took loans and payments from FTX and/or SBF and/or Alameda Research that were obviously improper just by the sheer disproportionality of their size.

Then there is the additional charges likely to hit this whole roster as it is revealed that they sandbagged clients by lending them crypto to buy shitcoins they were financing, and then conducting large-scale rug-pulls by blowing out their positions, triggering margin calls against the client, and thereby acquiring billions in tokens and coins that were the collateral for the loans.

The idea that SBF paid Kevin O’Leary the mind boggling sum of  $15 million (which he now claims not to have received, in contradiction to previous indications that he had received it) is evidence in and of itself that both O’Leary and SBF knew, or should have known, that their enterprise constituted fraud.

Its going to be an amazing Christmas watching all these stars fall from the sky.

We expect to see charges brought against Changpeng Zhao next in 2023, and the next leg of the crypto universe disintegration to continue then.

James West

Editor and Publisher

James West founded Midas Letter in 2008 and has since been covering the best of Canadian and US small cap companies. He covers global economics, monetary policy, geopolitical evolution, political corruption, commodities, cannabis and cryptocurrencies. As an active market participant, James is not a journalist and is invariably discussing markets...
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