After weeks of speculation, the United States Department of Justice (DoJ) has officially filed criminal charges against Sam Bankman-Fried (SBF), the former CEO and founder of FTX. This has sparked slight volatility in crypto prices as major coins flashed green on Tuesday morning.
The since-shamed billionaire entrepreneur was arrested on Monday in the Bahamas after the U.S. attorney for the Southern District of New York shared a sealed indictment with the Bahamian government. In a Twitter post by U.S. Attorney Damian Williams, Sam Bankman-Fried’s indictment would be unsealed Tuesday morning.
USA Damian Williams: Earlier this evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the U.S. Government, based on a sealed indictment filed by the SDNY. We expect to move to unseal the indictment in the morning and will have more to say at that time.
— US Attorney SDNY (@SDNYnews) December 12, 2022
Several agencies have opened investigations into FTX and its former CEO, including the Justice Department, SEC, CFTC, and several U.S. state regulatory agencies. The arrest marks the first concrete move by regulators to hold individuals accountable for the multibillion-dollar implosion of FTX last month.
Notably, however, SBF is the only member of the FTX inner circle (constituting Caroline Ellison, the former CEO of Alameda Research and SBF’s former girlfriend, and FTX co-founder Gary Wang) that has been named in the indictment.
SBF Charged On Several Counts
A person close to the matter has also revealed that the New York Times says the prosecutors for the Southern District of New York have charged SBF with wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering.
Other than the Justice Department charges, the U.S. Securities and Exchange Commission (SEC) is also preparing to file its case against Bankman-Fried tomorrow. Accordingly, the SEC has come out to commend fellow law enforcement agency for securing the arrest of Sam Bankman-Fried on federal criminal charges.
Gurbir Grewal: We commend our law enforcement partners for securing the arrest of Sam Bankman-Fried on federal criminal charges. The SEC has authorized separate charges relating to his violations of securities laws, to be filed publicly tomorrow in SDNY. https://t.co/ON0LgY4mf4
— U.S. Securities and Exchange Commission (@SECGov) December 13, 2022
The SEC enforcement director Gurbir Grewal also disclosed that the agency has initiated a separate set of charges against SBF, citing “violations of our securities laws.”
Noteworthy, Sam Bankman-Fried had been under “supervision” in the Bahamas following the collapse of FTX in November, while the legal battle ensued between the Bahamian and American governments over who had jurisdiction in the case.
Bahamas Attorney General Ryan Pinder also said that the U.S. was “likely to request SBF’s extradition” following a confirmation by the Royal Bahamas police force that SBF had been taken into custody and was slated to appear at the magistrate court in Nassau on Tuesday.
Bahamian Prime Minister Philip Davis also weighed in on SBF’s arrest saying:
“The Bahamas and the United States have a shared interest in holding accountable all individuals associated with FTX who may have betrayed the public trust and broken the law.”
Prime Minister Philip also made an assurance that while the U.S. continues to pursue criminal charges against Sam Bankman-Fried individually, the Bahamas would proceed with its own regulatory and criminal investigations into the collapse of crypto exchange FTX. This hints at a continued collaboration between law enforcement and regulatory partners across borders.
Against the counsel of his legal representatives, SBF has been on an extensive media apology tour, including an interview with New York Times columnist Andrew Ross Sorkin at the annual DealBook Summit and numerous Twitter Spaces sessions.
— Huu Le Do (@HuuLeDo) November 11, 2022
No-Go! SBF To Miss Congress Hearing
Sam Bankman-fried had been invited to testify before the U.S. House of Representatives Committee on Financial Services on December 13 and to attend a hearing before the U.S. Senate Banking Committee on Wednesday, December 14. He turned down the latter.
However, with his arrest, both hearings are likely to proceed without him. In a statement, Rep Maxine, who oversees that committee, has expressed disappointment with this development and the expected non-attendance of SBF at the hearing. She said, “I am surprised to hear that Sam Bankman-Fried was arrested in the Bahamas at the direction of the United States Attorney for the Southern District of New York.”
The sentiment comes as Maxine hoped SBF would help bring closure and settle the minds of Congress and the American people at large.
As you know, the collapse of FTX has harmed over one million people. Your testimony would not only be meaningful to Members of Congress, but is also critical to the American people. (2/3)
— Maxine Waters (@RepMaxineWaters) December 5, 2022
According to Rep. Maxine, the public is eager to get SBF’s answers under oath before Congress, adding that “the timing of this arrest denies the public this opportunity.”
New FTX CEO John Ray III was also invited to attend the hearings. On this note, Rep Maxine said:
“While I am disappointed that we will not be able to hear from Mr. Bankman-Fried tomorrow, we remain committed to getting to the bottom of what happened, and the Committee looks forward to beginning our investigation by hearing from Mr. John Ray III tomorrow.”
Impact of SBF Arrest on Crypto Prices
The collapse of FTX caused a ripple effect in the crypto sphere. In the aftermath, exchanges and lenders, most notably BlockFi, have collapsed. The contagion shook not only the books of the affected firms but uprooted investor faith in cryptocurrencies in the process.
The SBF arrest is positive, beginning the process of accountability. While today’s charges and consequent arrest may have sparked hope, it has sparked yet another conversation in crypto Twitter on the impact of FTX arrest on crypto prices and its potential to level the digital market and perhaps put an end to the prolonged winter.
With Sam Bankman-Fried’s arrest, investors are now wondering whether crypto prices will start to recover as the ‘public enemy number one’ may be going to jail. A crypto influencer @bitbitcrypto hinted at his over 127,000 Twitter followers that the current bullish outlook following news of Sam Bankman-Fried going to jail. This was also featured on Bybit WSOT leaderboard.
Imagine people are turning bullish because you’re about to go to Jail. How can you fuck things up so hard?
— Bitbit (@bitbitcrypto) December 8, 2022
Some market strategists have also opined that SBF’s arrest saves SBF from public humiliation, with his lawyers less likely to agree with a senate hearing following the arrest. Renown economist Peter Schiff expressed his disappointment with SBF arrest in a December 13 Twitter post saying that the DoJ should have waited for SBF to testify “under oath before Congress tomorrow before charging him with a crime. Prosecutors actually did SBF a favor by saving him from himself.”
For starters, following the news of SBF’s arrest, on-chain data in the last day shows that the crypto market flashed green- an indication that a new wave of undercurrent contagion may be spreading. According to recent data from blockchain analytics platform Nansen, there is a rise in withdrawals of ETH and ERC20 tokens from Binance in the last day or so.
There’s a spike in withdrawals from Binance in the last 24H with -$1.6B* netflow
Its 7-day netflow is now at -$1.9B, currently this is less than the -$2.3B weekly netflow Binance has processed in the wake of FTX collapse
*ETH & ERC20 tokens only pic.twitter.com/pwbeQXtDxK
— Nansen ? (@nansen_ai) December 13, 2022
The big crypto, Bitcoin, responded positively to the news of the arrest, with BTC price climbing by a significant margin. As of writing, BTC’s price stands at $17,443, up 2.7% in the last 24 hours, according to price tracking platform CoinGecko. Nonetheless, Bitcoin’s price remains $3,000 lower than its value before FTX and Alameda’s implosion.
Analysts predict that selling pressure on crypto prices will continue through Q1 of 2023 as miners try to restore healthy cash flow. Moreover, giant Bitcoin mining facility Argo Blockchain has said it is at the brink of filing for Chapter 11 Bankruptcy protection.
On the other hand, market strategists are closely monitoring the flagship crypto’s weekly close as well as on-chain data with hopes to identify the possible next breakout. Technically speaking, the crypto prices are at major crossroads; BTC included, and could conform to a further decline or usher in the holidays with a notable Christmas rally.
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