Key FTX Question: "Is it Possible to Lose Track of $8 Billion Through an Honest Mistake?"

Can Someone Lose Track of Billions of Dollars? Sam Bankman-Fried’s Jury Will Decide

Sam Bankman-Fried’s bid to beat federal fraud charges could boil down to one question: Is it possible to lose track of $8 billion through an honest mistake?

Bankman-Fried has said that his trading firm, Alameda Research, failed to realize that it owed a giant debt to FTX until it was too late, according to his interviews and writings after the exchange’s collapse. He attributed the failure to sloppy accounting and blamed underlings, describing himself as an aloof chief executive too removed from daily operations to know what was going on.

Prosecutors have a simpler story: He stole the money.

SEC Files Subpoena Enforcement Action Against Elon R. Musk Seeking an Order Compelling his Attendance for Investigative Testimony

The Securities and Exchange Commission (“SEC”) announced that it has filed an application seeking an order directing Elon Musk (“Musk”) to comply with an investigative subpoena calling for his appearance for testimony, with which Musk failed to comply.

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According to the SEC staff’s filing in the U.S. District Court for the Northern District of California, the testimony subpoena to Musk relates to an ongoing investigation by the SEC regarding, among other things, potential violations of various provisions of the federal securities laws in connection with (a) Musk’s 2022 purchases of Twitter, Inc. (“Twitter”) stock, and (b) Musk’s 2022 statements and SEC filings relating to Twitter. According to the filing, the SEC seeks Musk’s testimony to obtain information not already in the SEC’s possession that is relevant to its legitimate and lawful investigation.

According to the filing, Musk failed to appear for testimony as required by the investigative subpoena served by the SEC, despite: (1) agreeing to appear for testimony on a mutually agreed upon date in September 2023; (2) having been served with a subpoena in May 2023 requiring his appearance for testimony in the SEC’s San Francisco Regional Office on that mutually agreed upon date; and (3) raising no objection to the subpoena from May 2023 until two days before his scheduled testimony date in September 2023, when Musk notified the SEC that he would not appear. According to the filing, Musk attempted to justify his refusal to comply with the subpoena by raising, for the first time, several spurious objections. The SEC staff’s application seeks an order from the court directing Musk to comply with the subpoena.

FTX co-founder admits he and Sam Bankman-Fried committed fraud

Gary Wang, who co-founded FTX with Bankman-Fried, told jurors — in compliance with an earlier plea deal — that he was guilty of wire fraud, securities fraud and commodities fraud, and that he committed those crimes under the direction of Bankman-Fried.

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Unlike regular customers of FTX — a platform for individual investors and institutions to trade crypto — Alameda was allowed to run a negative balance and make “unlimited withdrawals” from FTX customers, Wang said.

Alameda had a $65 billion line of credit to use as collateral when placing bets — a figure that is orders of magnitude larger than the credit that FTX would give to other large investors.

Asked by Assistant US Attorney Nicolas Roos whether those advantages were ever disclosed to customers or investors, Wang replied: “No.”

Wang also said that he personally wrote the computer code for some of the features, and did so at Bankman-Fried’s direction.

It’s Their Job to Put Sam Bankman-Fried in Prison

Much less is known about the SDNY prosecutors overseeing SBF’s case from start to finish. He’s famous. They’re faceless. But nobody will play a more influential role in his trial than the government’s lawyers, the people representing The People, even if everybody is paying attention to the defendant sitting behind them.

The team is led by Nicolas Roos and Danielle Sassoon, both talented assistant U.S. attorneys with experience on high-profile investigations.

Why No One’s Going Into Accounting

An accounting career, once a launchpad into the upper middle class for hundreds of thousands of Americans, is no longer paying off.

Salaries have risen for young people in finance, marketing, logistics and consulting in recent years. Even young teachers have seen a slight uptick. At the same time, the median, inflation-adjusted pay for young accountants has stagnated, according to a Wall Street Journal analysis of salary data compiled by the Census Bureau.

This pay disparity is a major reason why fewer people are choosing accounting careers, threatening to worsen an already dire shortage of accountants. Some of the nation’s largest college accounting programs, such as Florida Atlantic University and the University of Maryland, have seen their enrollment or number of undergraduate majors decline by double-digit percentages in recent years. That has led to even greater workloads for existing accountants, and more than 300,000 have left the profession between 2019 and 2022, according to the Bureau of Labor Statistics.

Magic Internet Money

It’s like crypto is having its own ’08 housing crisis, except the mortgaged homes were built in Minecraft instead of Miami.

Crypto came with a lot of promises.

It was supposed to eliminate the need for middlemen like banks.

It was supposed to hedge against inflation.

It was supposed to do a lot of things.

Instead, it failed at pretty much everything except enriching those who bought in early and sold near the top.

Everybody’s Talking About the Wrong Sam Bankman-Fried Book

WHAT’S WORSE, Going Infinite suffers immensely by comparison to another new book covering the SBF saga. Bloomberg reporter Zeke Faux’s rollicking Number Go Up: Inside Crypto’s Wild Rise and Staggering Fall, which came out in September, is the far superior guide to understanding the FTX debacle and Bankman-Fried himself.

It is worth noting that both Faux’s and Lewis’ books open with the writers confessing that they’d been initially taken in by SBF and describe conversations they’d had with him before his downfall, but there is a key distinction. Lewis recounts how impressed he’d been without hinting that he no longer feels that way. Faux takes a different approach. The opening line is a quote from Bankman-Fried: “I’m not going to lie,” SBF promises Faux. “This was a lie,” Faux writes. This accomplishes two things: First, it signals immediately to the reader that Faux now gets it, that he knows Bankman-Fried was full of it. Second, it’s funny.

White Collar Docket Check: US Supreme Court to Decide Key Administrative, Whistleblower, and Due Process Cases This Term

The U.S. Supreme Court began its new term this week and is taking cases government enforcement practitioners will want to follow. Specifically, the Court will address issues concerning: the interplay between SEC administrative proceedings and the right to a jury trial; the amount of authority Congress can permissibly delegate to the SEC; who bears the burden of proof on the issue of retaliatory intent in adverse employment actions concerning whistleblowers; and the scope of due process for post-seizure probable cause hearings.

Because so much modern enforcement occurs within administrative agencies, as opposed to Article III courts, the decisions from this term could have major implications for individuals and entities facing current and future enforcement actions.

SBF, mom debated about what he should wear for FTX arrest

Bahamian officials arrived at Bankman-Fried’s penthouse in the Bahamas, where FTX was headquartered, while he was on the phone with his mom.

“Is Mister Sam Bankman-Fried here?” one officer asked once inside the $40 million pad that Bankman-Fried shared with 10 of his top staffers.

He was, though he was holed up in a bathroom furiously texting his mother what he should wear and what he should say in his testimony, Lewis wrote.

Bankman-Fried told his mother he planned to open with: “I f–ked up.”

You cannot say ‘f–k’ to a US congressional committee,” Fried responded.