"Hilariously" Unauditable: Bankman-Fried Jokes About Alameda Losing Track of $50M in Assets

Sam Bankman-Fried ‘joked’ about losing $50M in assets: report

Sam Bankman-Fried allegedly joked about his doomed hedge fund Alameda Research losing track of as much as $50 million in assets, telling another executive: “Such is life.”

“Alameda is unauditable” and “hilariously beyond any threshold of any auditor being able to even get partially through an audit,” Bankman-Fried wrote in an email about the now-defunct Alameda that was cited in court papers by FTX.

EY gets banned from new audit business in Germany

EY just can’t get a break. The accounting-and-consulting giant is being sued for $2.7bn by the administrators of nmc, a London-listed hospital operator it had audited and which went into administration after understating debts by $4bn. ey is being investigated by the Financial Reporting Council (frc), a British regulator; the firm denies the administrators’ claims of negligence. Its plan to unshackle an advisory business constrained by its inability to work with audit clients, codenamed “Project Everest”, is in doubt amid a rebellion by a group of American partners. And on March 31st its German arm received the harshest penalty ever meted out by apas, Germany’s accounting watchdog, which includes a €500,000 ($548,000) fine and, worse, two-year ban on auditing new publicly listed clients in the country. This is a financial blow to the firm—and an even bigger reputational one.

SEC Obtains Judgment After Executives Settle Case Alleging an Inflated Truck Pricing Scheme

The SEC’s complaint alleged that Meek, the former president and chief operating officer of Celadon Group, Inc., and Peavler, the former chief financial officer of Celadon Group Inc., participated in a scheme to buy and sell trucks at inflated prices, in some cases double or triple the trucks’ fair market value. The complaint alleged these transactions were intended to conceal Celadon’s failure to write down the trucks’ net book values and take impairment charges. The complaint further alleged that as a result, Celadon overstated its pre-tax income, net income, and earnings per share in its annual report for the period ending June 30, 2016, and in its subsequent filings through the period ending December 31, 2016. Additionally, the complaint alleged Meek and Peavler lied to auditors about the true nature of these transactions.

Are Event-Driven Cases More Often “Frivolous” or “Successful”?Long-time readers know that I have frequently commented on this site on the phenomenon of “event-driven” litigation (for example, here). These are securities lawsuits filed in the wake of a significant operational event or development that disrupts a company and tanks its share price, as opposed to securities suits that are premised on accounting or financial misrepresentations. I am far from the only observer that has commented on this phenomenon. Among others, the Bloomberg columnist Matt Levine, in an article provocatively entitled, “Everything Everywhere is Securities Fraud” (here) also weighed in on the event-driven litigation trend.

There are, of course, usually two sides to every story, and in a April 5, 2023 Law360 article entitled “Why Event-Driven Securities Class Actions Often Succeed” (here, subscription required), David Barenbaum and Michael Dark of the Berman Tobacco firm provide a plaintiffs’ side view of event-driven securities litigation, and make out their case that these cases are not only not frivolous but provide securities investors important remedies and protections.

Twitter Inc. has been merged with X Corp. and “no longer exists,” Elon Musk’s company says in a court filing.

In a court filing on Tuesday, April 4, Twitter Inc. quietly revealed a major development: It no longer exists. The company is currently being sued by right-wing provocateur Laura Loomer, who accused it of violating federal racketeering laws when it banned her account in 2019. Loomer has a Twitter account again, and her absurd lawsuit is bound to fail—but until it does, Twitter, as a defendant, must continue to submit corporate disclosure statements to the court. And so, in its most recent filing, the company provided notice that “Twitter, Inc. has been merged into X Corp. and no longer exists.” As the “successor in interest” to Twitter Inc.—that is, the survivor of the merger—X Corp. is now the defendant in Loomer’s suit. Its parent corporation is identified as X Holdings Corp.

It’s hard to know what to make of Musk’s transformation of Twitter into X Corp. (When asked for comment, Twitter responded with a poop emoji, as is its recent custom.)….

The deepening predicament of Samuel Bankman-Fried

As if to further advertise the strength of its claims at trial, the government has also gone out of its way to highlight that the sources for many of its allegations are Bankman-Fried’s own associates and co-conspirators, known or believed to be prosecution witnesses. Prominent among them is Caroline Ellison, whom Bankman-Fried installed as a co-CEO of Alameda, and who helped to misappropriate deposits and give false and misleading information to Alameda creditors.

The second indictment even summarizes a discussion Bankman-Fried supposedly had with an FTX “in-house attorney” regarding a bogus explanation concocted for Alameda’s astronomical borrowings. Even though the attorney allegedly dismissed the explanation as incorrect, Bankman-Fried went on to embrace it publicly. Reading this conversation in the pages of the indictment may have been calculated to send a chill up the defense’s spine.

At trial, Bankman-Fried and his attorneys will have an opportunity to challenge the government’s apparently extensive proof. The new indictments are meant in part to dissuade them from doing so, and they could well succeed.

Infinity Q founder sentenced to 15 years for lying about asset values

The founder of Infinity Q Management, which once claimed to manage $3 billion, was sentenced to 15 years in prison for misleading investors about the value of assets the New York firm managed, U.S. Attorney Damian Williams said on Monday.

U.S. District Judge Denise Cote sentenced James Velissaris, 38, on Friday after rejecting his recent request to withdraw his guilty plea, which he entered in November.

Lawmakers Trade Bank Stocks While Working on U.S. Bank-Failure Fallout

Two lawmakers reported trades in bank stocks last month as they worked on government efforts to address fallout from two of the largest bank failures in American history.

The disclosures, by a New York Republican and an Oregon Democrat, mark the latest instance of congressional stock trading intersecting with official business.

Rep. Nicole Malliotakis (R., N.Y.) bought stock in a regional bank before a subsidiary agreed to take over Signature Bank’s deposits following its closure. Days before she bought the stock, she said she met with financial regulators to discuss the bank’s closure.

Rep. Earl Blumenauer (D., Ore.) reported three trades in bank stocks as he co-sponsored legislation seeking to strengthen restrictions on financial firms in the wake of the bank failures.

FTX Customers Seek to Serve Shaq With Fraud Suit Via InstagramFTX account holders say they should be able to serve their lawsuit on Shaquille O’Neal via social media after multiple failed attempts to serve the former NBA star in person failed.

O’Neal is the only defendant targeted in the proposed class action against FTX celebrity endorsers and insiders who hasn’t acknowledged receipt of the complaint despite multiple service attempts at known residences in Georgia and Texas over the last five months, the plaintiffs said in a filing Friday with the US District Court for the Southern District of Florida.