Key Takeaways
- Sam Bankman-Fried has been arrested in the Bahamas and faces extradition to US
- Alameda CEO Caroline Ellison was reportedly spotted in New York
- Former CEO Sam Trabucco resigned in August and has largely avoided the same levels of scrutiny as the other two
Oh, Sam.
Disgraced FTX founder Sam Bankman-Fried was arrested Monday by the Bahamas Police Force, after the US filed criminal charges against him. The Bahamas have stated that it expects US also to request extradition imminently.
“As a result of the notification received and the material provided therewith, it was deemed appropriate for the Attorney General to seek SBF’s arrest and hold him in custody pursuant to our nation’s Extradition Act,” the statement, attributed to Attorney General Ryan Pinder, said.
Charges against Bankman-Fried reportedly include wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering. The charges could land Bankman-Fried decades in jail. Whoops.
What happens next?
That’s a funky selection of charges, revealing Bankman-Fried really did do it all.
He was meant to testify before the House Financial Services Committee at 10AM EST today on hearing about the FTX crash. That is no longer the case, instead, Bankman-Fried will appear in Magistrate Court in Nassau, Bahamas.
Once Bankman-Fried gets back on American soil, a trial won’t happen anytime soon. This is a crime of historic scale across myriad jurisdictions, and the case will take a lot of time.
The SEC also made separate charges that Bankman-Freid defrauded investors.
We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto,” said SEC Chair Gary Gensler. “The alleged fraud committed by Mr. Bankman-Fried is a clarion call to crypto platforms that they need to come into compliance with our laws.”
What happens Caroline Ellison?
The elephant in the room is what happens to Alameda CEO Caroline Ellison. Alameda is the trading firm also founded by Bankman-Fried, and where customer funds on FTX were sent to in order to shore up large trading losses.
Ellison was thought to have been in Hong Kong at the time of the arrest, but she may have been spotted at a café in Manhattan, meaning she is already on US soil.
PLEASE CONFIRM: A user claims that they spotted Caroline Ellison at Ground Support Coffee on West Broad in SoHo Manhattan at 8:15 AM. This would mean she is not in Hong Kong and is in NY not in custody. pic.twitter.com/QUduYO9GfZ
— Autism Capital 🧩 (@AutismCapital) December 4, 2022
This sparked speculation that a plea deal may have been reached, although that is all speculation.
Bankman-Fried has repeatedly denied that he had full oversight over all operations, contesting that he “wasn’t running Alameda” and “he didn’t know the size of their position”.
This suggests that Bankman-Fried is throwing Ellison, his former girlfriend, under the bus. Ellison has not tweeted since November 9th, with radio silence since the bankruptcy.
She had previously tweeted on November 6th to Binance CEO Zhao, attempting to buy the collapsing FTT tokens – the low liquidity native token of the FTX exchange that was artificially propping up the whole ecosystem – from Zhao at $22 per share (Zhao himself is also facing criminal charges relating to a separate case).
Time will tell what happens to Ellison, but it seems almost impossible to believe that both Bankman-Fried and Ellison were not aware of what was happening at both their companies, given the size of the damage – $8 billion. That and the fact that that, you know, they were both CEOs of the respective entities.
What about Sam Trabucco?
Then there is the case of Sam Trabucco.
Trabucco is the former co-CEO of Alameda, alongside Ellison. His timing was, how should I say this, interesting. He announced his retirement less than three months before the house of cards collapsed, when Ellison became the sole CEO.
In an infamous tweet thread, he cited increasing work hours and a change of priorities for stepping down.
“I’ve reached a point in my life where I want other things. What other things? I’m not really sure, exactly. Lately I’ve been really happy, spending a lot of time travelling, visiting friends and family, working on ‘myself’ and whatnot. Also I bought a boat, that’s been cool”.
I’m not sure why Trabucco is not facing scrutiny. The LUNA death spiral of May is supposedly what triggered a lot of the losses for Alameda that led to the commingling of funds from FTX. It was three months after this collapse, in August, that Trabucco resigned. As CEO, he must have known what was going on, yet is largely escaping scrutiny.
He also has gone silent since the bankruptcy, his final tweet from November 8th wishing that the “road ahead is brighter”.
Much love to everyone — I'm sure the past few days have been dark for many and I hope the road ahead is brighter.
— Sam Trabucco (@AlamedaTrabucco) November 8, 2022
He was also revealed to have purchased two properties worth $8.7 million in all cash last year. This is in addition to the yacht purchase mentioned above, which he reportedly hired a freelancer on Fiverr to design the logo for (he named it “Soak my Deck” apparently).
So let us not forget that he is a key figure in all this.
Final thoughts
There will likely be more twists in the tale, but now that one of the three top execs are arrested, I am curious to see what will happen the other two.
Bankman-Fried’s trial likely won’t start for quite a while, and the whole thing won’t be resolved for years. As for the other two, all bets are off, but I would be surprised if they don’t receive a knock on their doors anytime soon.
What a complete mess, and a sad story for the entire industry.