February 2025 - cypherpunks - lists.cpunks.org

Tesla Dip Buyers Face a Treacherous Path Amid Bearish Signals
by Gunnar Larson 14 Feb '25

14 Feb '25

Tesla Dip Buyers Face a Treacherous Path Amid Bearish Signals https://assets.bwbx.io/s3/readings/SRJCDST0G1KW1739545690916.mp3

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Japan Perfected 7-Eleven. Why Can’t the US Get It Right?
by Gunnar Larson 14 Feb '25

14 Feb '25

Japan Perfected 7-Eleven. Why Can’t the US Get It Right? https://assets.bwbx.io/s3/readings/SRMBWWDWX2PS1739544189912.mp3

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The Unicorn Boom Is Over, and Startups Are Getting Desperate
by Gunnar Larson 14 Feb '25

14 Feb '25

The Unicorn Boom Is Over, and Startups Are Getting Desperate https://assets.bwbx.io/s3/readings/SRO3SET0G1KW1739541967436.mp3

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Crypto Billionaire Sam Bankman-Fried Is Dangling $1 Billion in Political Donations; But He Wants Dangerous Crypto Derivatives Trading in Return
by Gunnar Larson 14 Feb '25

14 Feb '25

https://wallstreetonparade.com/2022/07/crypto-billionaire-sam-bankman-fried… By Pam Martens and Russ Martens: July 6, 2022 ~ Sam Bankman-Fried Sam Bankman-Fried, Co-Founder and CEO, FTX Sam Bankman-Fried is the co-founder and CEO of crypto firm, FTX. He’s also a man on a mission. The mission is to spend tens of millions of dollars on political campaigns until he gets his desired outcome in Washington: permission for FTX to be able to offer highly leveraged derivative contracts on cryptocurrencies with margin accounts and 24/7 automated liquidation of defaulting customers, effectively being able to sell out customer accounts while they’re asleep in their beds. And, by the way, the pesky detail of a regulated brokerage firm intermediary in the transaction would become history. To bring his dream to fruition, Bankman-Fried has been writing out checks in a wild flurry of activity this year. Between February 4 and April 14 of this year, Bankman-Fried wrote out three checks totaling $23 million to Protect Our Future PAC. According to Federal Election Commission (FEC) records, that PAC spent $10.45 million supporting the candidacy of Carrick Flynn who was running in a Democratic primary in Oregon for a seat in the U.S. House of Representatives. The Protect Our Future PAC also spent $935,705 opposing Andrea Salinas in that same Oregon Democratic Primary according to FEC records. (Hold onto that thought for a moment more.) On April 4, 2022, Bankman-Fried also sluiced the astonishing sum of $6 million to the House Majority PAC – whose slogan is “Fighting to protect and expand the Democratic House Majority.” But instead of working to unite Democrats, according to a group of Democratic candidates in that Oregon primary, the House Majority PAC (enriched with all that money from crypto billionaire Bankman-Fried) inserted itself into the Oregon primary with a $1 million infusion to help Bankman-Fried’s preferred candidate, Carrick Flynn, beat out the other Democratic candidates. Andrea Salinas (who went on to win the Oregon Democratic primary despite all of that crypto money sloshing around) released a joint statement with other Democratic challengers in Oregon, stating this: “We strongly condemn House Majority PAC’s unprecedented and inappropriate decision to spend nearly a million dollars in this Democratic primary…This effort by the political arm of the Democratic establishment to buy this race for one candidate is a slap in the face to every Democratic voter and volunteer in Oregon – and is especially concerning in a year when all resources must go to protecting the Democratic majority.” Why might Bankman-Fried have been so opposed to Andrea Salinas for a House seat? Salinas is a strong supporter of saving the planet from climate change. That’s not a particularly appealing platform for crypto kings since crypto mining relies heavily on fossil fuels and uses more energy than numerous countries. According to FEC records, Protect Our Future PAC spent $250,000 in May on ad production and an advertisement buy for Senator Robert Menendez of New Jersey, who just happens to sit on the powerful Senate Banking Committee which might be inclined to pass crypto regulations to safeguard the U.S. financial system. On January 18 of this year, Bankman-Fried also contributed $2 million to GMI PAC, which says it “supports candidates committed to making way for a more secure, competitive, and innovative digital marketplace.” Nothing, absolutely nothing, is going to make crypto secure. It is the instrument of money launderers, hackers and other assorted criminals. The Federal Trade Commission reported in June that “since the start of 2021, more than 46,000 people have reported losing over $1 billion in crypto to scams. That’s about one out of every four dollars reportedly lost to fraud during that period.” (For more on this crypto nightmare, see our report on how customers on the Coinbase crypto exchange are being victimized.) Since August 2, 2021, Bankman-Fried has also donated $1 million to the Senate Majority PAC (a PAC to help Democrats); $10,000 each to Democratic Committees in New York State, New Hampshire and Michigan; $500,000 on May 5 of this year to the Democratic National Committee; and millions of dollars more to dozens of Congressional candidates from a wide assortment of states. Now Bankman-Fried is attempting to burnish his image as an altruistic do-gooder while simultaneously dangling the allure of being the biggest elephant in the room in the 2024 presidential election. In a podcast released in May, Bankman-Fried said he expects to spend “north of $100 million” with a “soft ceiling” of $1 billion. On May 12, the House Agriculture Committee held a specific hearing on Bankman-Fried’s proposal for FTX to engage in leveraged crypto derivatives using an unprecedented structure for U.S. markets. Testifying at that hearing was Walter Lukken, President and CEO of the Futures Industry Association (FIA). Lukken told House Committee members this: “Specifically, the FTX direct clearing proposal would, for the first time, combine margined futures with near real-time margining, 24/7 auto liquidation of defaulting customers, and a self-funded CCP default fund without the benefit of FCM’s risk management processes. “It is important to point out that FTX’s proposal would permit futures trading in any underlying asset class transacted by any type of customer, including commercial hedgers. This requires us to view this proposal with an eye beyond retail cryptocurrencies. We must also consider the core users of our markets, including farmers, refiners, pension funds, and other main street businesses that use futures to hedge price risk in the real economy.” Terrence Duffy, Chairman and CEO of the CME Group which operates registered futures and commodity exchanges in the U.S., testified at the same hearing, calling the FTX proposal “glaringly deficient” and posing “significant risk to market stability and market participants.” On the subject of counterparty due diligence, Duffy told the Committee members this: “Counterparty due diligence is a linchpin of the modern financial system and a key part of current DCOs’ [Derivatives Clearing Organization] risk management practices, used to confirm that clearing members are well-placed to meet the obligations that arise from their risk-taking. FTX would not be the first party, novice or otherwise, to suggest that financial modeling and algorithm design could eliminate the need for best practices in risk management; however, the eventual fate of Long-Term Capital Management and bespoke financially engineered products, such as mortgage-backed securities and collateralized debt obligations, suggest that it would be folly to unwind core risk management practices based on the assurance that ‘this time it’s different.” Market veterans will well understand the reference to Long-Term Capital Management and CDOs. Despite its illustrious roster of Ph.Ds., Long-Term Capital Management blew itself up in 1998 with insanely leveraged derivative bets. Collateralized Debt Obligations (CDOs) and their related derivatives brought much of Wall Street to the edge of bankruptcy in 2008, resulting in a massive taxpayer bailout and trillions of dollars in secret loans from the Fed. Bankman-Fried also testified at the House Agriculture Committee hearing, focusing heavily in his written remarks on the altruistic nature of FTX and the $100 million in philanthropy it has sprinkled around.

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A Sam Bankman-Fried Company that Was Not in Bankruptcy Has Gone Poof; Regulators Are Drawing a Dark Curtain
by Gunnar Larson 14 Feb '25

14 Feb '25

https://wallstreetonparade.com/2022/12/a-sam-bankman-fried-company-that-was… By Pam Martens and Russ Martens: December 16, 2022 ~ James L Bromley, Partner at Sullivan & Cromwell James Bromley, One of the Partners at Sullivan & Cromwell Overseeing FTX Bankruptcy Over the past week Wall Street On Parade has reached out to a number of individuals connected to FTX Capital Markets, the stock trading platform and SEC-registered brokerage firm that was majority owned by the indicted crypto kingpin, Sam Bankman-Fried. We’ve received two answers to our questions: Either, “I can’t talk about it” or “no comment.” Regulators have been just as tight-lipped. When we emailed one of the lawyers handling the bankruptcy process for FTX, James Bromley of Sullivan & Cromwell, the response came back from a crisis management/public relations firm, Joelle Frank. Their response was “decline to comment.” Bankman-Fried’s ability to enter the regulated world of stock trading in the U.S. while, according to Justice Department prosecutors, he was operating a vast fraud, raises red flags about what other crypto firms may be doing or contemplating. Despite all of the stonewalling, Wall Street On Parade has been able to significantly pull back the curtain at FTX Capital Markets. Here’s what we’ve discovered thus far. The Wall Street self-regulator, FINRA, has documents on file showing that Sam Bankman-Fried is the indirect owner of 50 to 74 percent of FTX Capital Markets, which was purchased outright by an FTX related firm, West Realm Shires. Despite the fact that the bankruptcy handlers for FTX are supposed to be maximizing value for the defrauded customers and investors, this brokerage firm has “ceased doing business” as of November 30 according to FINRA, just 19 days after the bankruptcy filing, and despite the fact that it was not part of the bankruptcy filing. FINRA states that FTX Capital Markets had two primary business lines: “retailing corporate equity securities over-the-counter” and “arranging for transactions in listed securities by exchange member.” Bankman-Fried bought this brokerage firm, previously called RJL Capital, in August of last year. It had been in operation since 2011. The price he paid is unknown at this time. In the declaration that the newly appointed FTX CEO, John Ray, filed with the bankruptcy court on November 17, he stated that “Based on the information that I have reviewed at this time” both FTX Capital Markets and an affiliated company, Embed Clearing LLC, are “solvent.” Neither firm was part of the bankruptcy petition. If FTX Capital Markets was solvent, why wasn’t it sold quickly so that customer accounts could move easily to another SEC-registered brokerage firm, as is typically the case? If FTX Capital Markets was insolvent and Bankman-Fried used it also as his personal piggy bank, why wasn’t this mentioned in the SEC complaint filed against Bankman-Fried or the indictment filed by the Justice Department? According to the FTX Capital Markets customer agreement, Embed Clearing was the entity that would execute the stock trades for customers; clear the trades; and custody the securities for the customers. Embed Clearing and its parent, Embed Financial Technologies, Inc., were also not part of the bankruptcy filing. According to a motion filed just yesterday in bankruptcy court, the court is being asked to authorize a quick sale of Embed Clearing and its parent. Notably, those in charge of the bankruptcy want to offer Embed for sale “free and clear of liens, claims, interests and encumbrances.” A notice has been posted on the Embed Clearing website advising FTX Capital Markets’ customers as to how they can gain access to their account records. It reads in part: “The Account Recovery Portal will let you: “View current stock and cash balances “Enter sell orders during market hours to dispose of current holdings at market prices “Create a funding source to securely disburse funds to your requested bank account “Retrieve account document such as statements, trade confirmations, and tax forms “View transaction history* “We appreciate your prompt action. “The Embed Clearing Team *For FTXCM customers: Your transaction history will include the deposits and withdrawals of cash that were settled automatically between your FTX US fiat balance and your brokerage account. Note that portfolio values are calculated using the prior trading day closing price.” Based on this language, it suggests that only closing “sell” orders are being allowed and continued trading in the account is not being allowed. Embed Clearing is also an SEC-registered broker-dealer and a member of the Securities Investor Protection Corporation (SIPC), the organization that in case of a brokerage firm failure protects securities in the account up to $500,000, including up to $250,000 protection for cash that is held in the account for the purpose of trading securities. If these Embed Clearing/FTX Capital Markets customer accounts are being processed as a SIPC liquidation, no regulator is willing to discuss it. According to the FTX Capital Markets customer agreement, cash in the account was to be held by an unnamed, federally-insured bank. The most recent audited financial statement for the period ending March 31 for FTX Capital Markets states this: “The Company’s cash is held at one financial institution which is insured by the Federal Deposit Insurance Corporation and at times may exceed federally insured limits. The Company has not experienced losses in such accounts and believes it is not subject to any significant credit risk on cash.” FTX Capital Markets does not appear to have employed many licensed brokers or staff. The audited financial statement shows that the lease on its headquarters was only costing “$722 per month.” That will get you the office space the size of a large closet in lower Manhattan. (At the time of the audit the firm was located on Broad Street in the financial district in lower Manhattan.) We called the current phone number listed by FINRA for FTX Capital Markets on multiple occasions this week. No one answers the phone and there is no voice message regarding whom to call to retrieve the assets in your account. Even more bizarre, the phone number that FINRA lists for the firm is the same phone number for a cricket company called DreamCricket. The man FINRA lists as the President of FTX Capital Markets, Venu Palaparthi, has a Twitter page listing himself as “Opening Batsman for DreamCricket.com.” Palaparthi’s LinkedIn profile shows him as Founder of DreamCricket. Palaparthi’s LinkedIn profile indicates that he is a Fellow at the Center for Financial Markets and Policy at Georgetown University McDonough School of Business. We attempted to reach him there via email yesterday. The Center advised he is no longer affiliated with the Center. While Palaparthi’s LinkedIn page does not show him employed at FTX Capital Markets, FINRA shows him registered at FTX Capital Markets since May 18, 2022 through the present. FINRA files are typically kept up-to-date with little more than a few days lag. We attempted to reach Palaparthi through multiple channels but have yet to receive a return email or phone call. Adding to the bizarre nature of this firm, one licensed broker who FINRA lists as currently employed at FTX Capital Markets is Stacey Lynn Lavender (a/k/a Stacey Lynn Lavender-Mayes; a/k/a Stacey Lynn Mayes). FINRA shows Lavender simultaneously working at seven different firms. This includes serving as Chief Compliance Officer simultaneously at two firms: Sequence Financial Specialists LLC in Florence, South Carolina and Level Four Financial LLC in Dallas, Texas. Lavender is also listed as a Director of Compliance at Dalmore in New York City; as the CEO at a firm called SLLM-Inc./CCS in Los Angeles; as a Registered Principal at Cherry Trading in Los Angeles; and as an Options Principal at FTX Capital Markets. FINRA records indicate that both Cherry Trading and FTX Capital Markets show recent requests to have SEC terminate their registration as a broker dealer as well as requests to terminate their state licenses. FINRA also shows that Cherry Trading is majority owned by an individual named Seiji Kawajiri through a company called SK World Group 1. Anyone who has ever held a securities license through a major retail brokerage firm, such as Merrill Lynch, Morgan Stanley or Wells Fargo, knows that one has to get special permission to engage in any employment outside of your brokerage firm. It is highly discouraged because it can lead to conflicts of interest and an inability for your firm to monitor these outside activities. The possibility that someone would be allowed to work in the critical position of Chief Compliance Officer and Director of Compliance simultaneously at three firms while functioning as a CEO of another company, while finding time to be an options principal at a Sam Bankman-Fried operation, is beyond bizarre. Lavender’s LinkedIn profile shows her working “full time” at Level Four Financial. Attempts to reach her by phone, in order to clarify the situation, failed. An email to her superior at Level Four Financial, inquiring if she is still employed there as Chief Compliance Officer, has yet to elicit a response. Stacey Lynn Lavender Current Employment History at FINRA's BrokerCheck Stacey Lynn Lavender’s Present Employers Listed at FINRA Clearly, the American people still have very limited visibility on what Sam Bankman-Fried was up to in U.S. markets. Related Articles: No One Trusts the FTX Bankruptcy Case: News Outlets Intervene; Justice Department Trustee Demands Independent Examiner; SEC Orders Disclosures Big Law Firm, Sullivan & Cromwell, Did Significant Legal Work for Bankrupt Crypto Exchange, FTX

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A Sam Bankman-Fried Company Loaned or Invested More than $1 Billion in Clients of its Law Firm, Sullivan & Cromwell
by Gunnar Larson 14 Feb '25

14 Feb '25

https://wallstreetonparade.com/2023/01/a-sam-bankman-fried-company-loaned-o… By Pam Martens and Russ Martens: January 17, 2023 ~ Sam Bankman-Fried Sam Bankman-Fried In a January 12 Substack column penned by Sam Bankman-Fried, the indicted co-founder and former CEO of collapsed crypto exchange, FTX, he writes that “When I would visit NYC, I would sometimes work out of S&C’s office.” S&C is shorthand for the 144-year old Big Law firm, Sullivan & Cromwell, which has come under withering media attention for attempting to steamroll its way into the position of lead counsel in the FTX bankruptcy proceedings – including investigating its own conduct as outside counsel to Sam Bankman-Fried and his byzantine collection of crypto companies. Wall Street On Parade has been covering the mushrooming conflicts of interest held by Sullivan & Cromwell since two days after FTX (and its herd of more than 100 related companies) filed their Chapter 11 bankruptcy petition on November 11. Today, we will shine an even brighter light on those conflicts. The 8-count criminal indictment against Sam Bankman-Fried by the U.S. Department of Justice makes it clear that pretty much everything Sam Bankman-Fried did involving electronic business communications from 2019 to November 2022 was wire fraud deployed to misappropriate customer deposits and use “those deposits to pay expenses and debts of Alameda Research, Bankman-Fried’s proprietary crypto hedge fund, and to make investments” in other companies, most of which were crypto related. If Bankman-Fried was on the premises of Sullivan & Cromwell during that span of time, which appears highly likely since he came to New York for meetings and speaking engagements, there is also the strong likelihood that he engaged in the alleged wire fraud from their premises. Just being on the premises of Sullivan & Cromwell and using their phones or wi-fi without their knowledge to commit wire fraud might not be a fatal conflict against the law firm, were it not for the fact that Wall Street On Parade has discovered that an inordinate amount of Sullivan & Cromwell’s other current clients appears to have received more than $1 billion of FTX’s misappropriated customer funds. On December 21, Sullivan & Cromwell filed a large document with the FTX bankruptcy court which included (scroll down) a Declaration by S&C partner Andrew Dietderich. Included in that Declaration was a list of current and former S&C clients who had relationships with FTX and its related companies. Dietderich provided no specificity on those relationships other than a one-word or two-word description, such as “vendor,” “contract counterparty,” “investments,” “competitor,” etc. Wall Street On Parade cross-checked those S&C current clients which were designated by the law firm as “contract counterparty” or “investments” with public records and an internal FTX document published by the Financial Times showing investments made by Sam Bankman-Fried’s hedge fund, Alameda Research, or its affiliated units. We discovered seven clients of Sullivan & Cromwell had received loans or investment funds. Sullivan & Cromwell told the bankruptcy court in a filing that it “is not aware of any conflict between its representation of the Debtors and its representations of its Current Clients or Former Clients that would cause S&C not to be a ‘disinterested person.’ ” But if the funds involved were looted from FTX customers, the funds may have to be clawed back and S&C is hardly in a position to be trusted demanding claw backs from its own customers. This is what Wall Street On Parade found: (All current client listings are as of December 21, 2022, according to Sullivan & Cromwell.) BlockFi BlockFi is another crypto exchange that is a current client of Sullivan & Cromwell. It filed for bankruptcy in November and its court filings indicate that it blames FTX for its own bankruptcy. BlockFi revealed to the court that FTX and Alameda Research owe BlockFi more than $1 billion, consisting of $680 million in a loan that Alameda has defaulted on and $355 million in funds frozen on the FTX crypto exchange. Anchorage: Sullivan & Cromwell lists Anchorage as a current client. Anchorage provides infrastructure for institutions to enable crypto custody, exchange, staking and other services. According to the document obtained by the Financial Times, Clifton Bay Investments (formerly known as Alameda Research Ventures) provided $20 million as an equity investment in Anchorage. Public records put the date of that investment in or around December of 2021 – well within the timeframe when federal prosecutors say Sam Bankman-Fried was using customer funds to finance investments by Alameda Research and its venture fund units. Aptos: Aptos, a blockchain startup by former Facebook employees, is also listed as a current client of Sullivan & Cromwell. The internal document published by the Financial Times indicates Aptos received $75 million from Clifton Bay Investments, formerly known as Alameda Research Ventures. News reports put the date of the investment in or around July 2022. ConsenSys: ConsenSys is a blockchain technology company and a current client of Sullivan & Cromwell. According to a press release from the company, it received funding from Alameda Research, along with others, in April 2021. The Financial Times internal document indicates that the funding came in the form of a $750,000 convertible note. (Wall Street mega banks, JPMorgan Chase and UBS, also participated in that funding round. Both are listed as current clients of Sullivan & Cromwell.) Fanatics: Fanatics is a sports merchandising and sports trading card company. Sullivan & Cromwell lists it as a current client. According to the internal document published by the Financial Times, Fanatics received a $10 million equity investment from Alameda Research Ventures (a/k/a Clifton Bay Investments). The date of that investment could not be determined. Polygon Network: Polygon Network is an Ethereum blockchain platform for scaling and infrastructure development. According to TechCrunch, Alameda Research participated in a funding round that occurred in February 2022. The Financial Times’ internal document from FTX characterizes the investment as $50 million invested in a token. The Polygon Network funding round was led by Sequoia Capital, another current client of Sullivan & Cromwell, which had itself invested $210 million in Sam Bankman-Fried’s now collapsed FTX crypto exchange. According to CNBC, Sequoia Capital marked its FTX investment down to zero in November. Rocket: There are a number of companies that carry the name “Rocket.” We were unable to determine which “Rocket” company Sullivan & Cromwell has indicated is its client. The Financial Times internal document indicates that “Rocket” received $150,000 from Alameda Ventures (a/k/a Maclaurin Investments). As Wall Street On Parade previously reported, Sullivan & Cromwell also represents four of FTX’s major competitors: BlockFi, Coinbase, Gemini, and Kraken; a former Sullivan & Cromwell partner, Ryne Miller, was serving as General Counsel of FTX US at the time it imploded into bankruptcy; and at least 16 Sullivan & Cromwell attorneys did legal work for FTX and/or Alameda Research prior to the bankruptcy filing. Four sitting U.S. Senators have filed a letter with the FTX bankruptcy court raising alarms about Sullivan & Cromwell’s conflicts; the Justice Department’s U.S. Trustee overseeing the bankruptcy proceedings has also raised multiple concerns about Sullivan & Cromwell’s conflicts. An FTX customer, Warren Winter, has filed a scathing objection with the court to Sullivan & Cromwell serving as lead counsel. Winter’s attorneys write as follows: “Sullivan & Cromwell was one of the FTX Group’s ‘primary external law firms’ before the FTX Group collapsed. To date, the FTX Group has paid the firm more than $20.5 million in fees and retainers. Now, in the most flagrant attempt by a fox to guard a henhouse in recent memory, Sullivan & Cromwell has applied to be appointed the FTX Group’s bankruptcy counsel with duties that would include ‘investigating all potential estate causes of action.’ But it has revealed almost nothing about its prepetition work for Sam Bankman-Fried’s fraudulent enterprise — and failed to disclose or elided glaring conflicts of interest.” Winter goes on to reveal the following to Judge Dorsey: “Two former Sullivan & Cromwell lawyers are General Counsel to FTX Group entities. Sullivan & Cromwell did not disclose these connections in its Application and therefore violated Federal Rule of Bankruptcy Procedure 2014, which requires a statement ‘all of [the firm’s] connections with the debtor … [and the debtor’s] attorneys.’ What’s more, disclosed or not, these connections create a conflict of interest and are disqualifying. FTX US General Counsel Ryne Miller is a former partner at Sullivan & Cromwell…Miller is alleged to have played a key role— perhaps the key role—in wresting control of the FTX Group from Sam BankmanFried and directing this extremely valuable bankruptcy matter to his former firm. According to Bankman-Fried, and supported by what appears to be genuine evidence, Miller proclaimed to have usurped control of the FTX Group by November 8th. He immediately secured a $12 million retainer for his former firm and allegedly mounted an ‘extreme pressure’ campaign to put the FTX Group into bankruptcy with Sullivan & Cromwell and its hand-picked CEO at the helm. “FTX Ventures General Counsel Tim Wilson is another former Sullivan & Cromwell lawyer. The Securities and Exchange Commission has alleged that FTX Ventures made at least $200 million in venture-capital investments using customer funds that had been misappropriated through Alameda Research….” Thus far, the Judge hearing the FTX bankruptcy case, John Dorsey, has allowed Sullivan & Cromwell to step into the shoes as lead counsel pending a formal order to be taken up at a future hearing. Judge Dorsey dismissed the letter from the four U.S. Senators as “inappropriate,” rather than recognizing it as a siren call that a four-alarm crypto fire is out of control in his courtroom.

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A Document Implicating Powerful People Is Blocked from Public Viewing in Sam Bankman-Fried Criminal Case
by Gunnar Larson 14 Feb '25

14 Feb '25

https://wallstreetonparade.com/2023/02/a-document-implicating-powerful-peop… By Pam Martens and Russ Martens: February 1, 2023 ~ Sam Bankman-Fried Sam Bankman-Fried Five pages of a deeply sensitive document that is both embarrassing and potentially a legal threat to people in positions of power vanished yesterday from public viewing in the criminal case against former crypto-kingpin Sam Bankman-Fried. The document is a letter written by five federal prosecutors in the U.S. Attorney’s Office for the Southern District of New York. The courthouse where the five pages vanished from view is where the case is being heard: the U.S. District Court for the Southern District of New York. According to personnel in the Press Office and Records Management Office of that District Court that we spoke to yesterday, all six pages of the document had been filed electronically on Monday, January 30, and all six pages of the document were able to be viewed in the court’s ECF system (Electronic Case Files) according to those personnel. ECF is the federal judiciary’s system that allows case documents, such as pleadings and motions, to be filed electronically. What’s available for viewing on the ECF system should also be available for attorneys, the press and the general public to view through the Public Access to Court Electronic Records (PACER) system at a cost of ten cents per page. We’ve been using PACER for many years and our experience yesterday was a first. We learned of the situation as follows: On Monday evening, CNN reporter Kara Scannell quoted a portion of one paragraph from this document. We didn’t come across that CNN story until Tuesday morning. When we went to PACER to view and download the full document, only the first page of the six-page document appeared with text. The other five pages were completely blank except for the case number and page number at the top of page six. That is, the five blank pages were not redacted using thick black lines which is the customary technique for redacting court documents; they were simply blank with no text other than the header on page six. We checked the Court Docket to see if a redaction or sealing request had been made for this document. We could find none. After learning from the Press Office and Records Management Office that all six pages had been filed by the federal prosecutors, we were referred to the Courtroom Deputy for the Presiding Judge in the case, Lewis A. Kaplan. We left a voice mail explaining the problem, along with our email address and a request to receive the full document via email. We promptly received via email from the Courtroom Deputy a complete copy of the document and its two exhibits. You can view the six-page document and exhibits here. In a return email, we thanked the Courtroom Deputy for the document and asked that the problem be corrected so that all six pages could be accessed and viewed via PACER. As of this morning, the five pages are still blank on PACER. It was immediately obvious to us that multiple powerful persons might have had an interest in suppressing further press coverage of the material on those five pages. We’ve broken down the most sensitive areas into two parts below, along with essential background information. Information Embarrassing to, and/or a Legal Threat to, Big Law Firm Sullivan & Cromwell, Which Has Already Been Under a Barrage of Negative Publicity for Aggressively Pushing to Become Lead Counsel in the FTX Bankruptcy Case, Despite a Mountain of Conflicts of Interest: Page Six of the document carries this information: “…the defendant [Sam Bankman-Fried] moved to take control of approximately $500 million of Robinhood shares that were purchased using misappropriated FTX customer funds by a special purpose entity owned primarily by the defendant. The Government has since seized the shares after demonstrating probable cause to believe that they are the proceeds of wire fraud and are property involved in money laundering. Since the Government’s seizure, the defendant has claimed that he would direct the majority of these funds toward making customers whole, but the original circumstances of the purchase of these shares, through a foreign special purpose vehicle with no public connection to FTX or Alameda, further indicate the steps the defendant has taken to obscure his criminal misuse of FTX customer property.” (Italics added.) On January 17, Sullivan & Cromwell law partner, Andrew Dietderich, filed a document with the bankruptcy court acknowledging that the law firm had not only done extensive legal work for FTX but personally represented its CEO, Sam Bankman-Fried, from April 14, 2022 through August 5, 2022. The disclosure noted that “This matter was arranged, and paid for, by Alameda.” That’s Bankman-Fried’s hedge fund which prosecutors have charged he used to loot FTX customer funds. The specific nature of the work Sullivan & Cromwell did for Bankman-Fried involved “a position that had been established in the stock of Robinhood Markets, Inc.” according to the Dietderich declaration. So the paragraph above, that has vanished from public viewing, adds the smoking gun that federal prosecutors believe that some lawyer or law firm created “a foreign special purpose vehicle” to hide more than half a billion dollars of looted funds. It also means that it is highly likely that federal prosecutors know who that lawyer or law firm is. This information comes at a delicate time for Sullivan & Cromwell. Next Monday, February 6, the U.S. Trustee in the FTX bankruptcy case, who represents the U.S. Department of Justice, is scheduled to present its case at a hearing as to why an independent examiner should be appointed so that Sullivan & Cromwell is not afforded the ability to investigate its own conduct in its previous legal dealings with FTX and Sam Bankman-Fried. Sullivan & Cromwell has aggressively opposed that intervention. The government’s newly disclosed position that the half billion dollars of Robinhood shares – on which Sullivan & Cromwell provided legal guidance to Sam Bankman-Fried – came from “the proceeds of wire fraud” and “money laundering” isn’t a good look for Sullivan & Cromwell. The Document Is Deeply Embarrassing and a Potential Legal Threat to the Government of the Bahamas: The third paragraph on page three of the document carries this revelation, backed by an explosive email from Bankman-Fried: “Moreover, although the Government has not identified the source of the hack that occurred shortly before the initial conference, the defendant’s misuse of FTX and Alameda assets during November 2022 independently justifies the bail condition. As FTX struggled to meet customer withdrawal requests in early November, Bankman-Fried approved halting customer withdrawals from the exchange. Shortly thereafter, however, he reopened withdrawals only for customers in the Bahamas. In an email to Ryan Pinder, Attorney General of the Bahamas on November 10, 2022, Bankman-Fried wrote in part, ‘We are deeply grateful for what The Bahamas has done for us, and deeply committed to it. We are also deeply sorry about this mess. As part of this: we have segregated funds for all Bahamian customers on FTX. And we would be more than happy to open up withdrawals for all Bahamian customers on FTX, so that they can, tomorrow, fully withdraw all of their assets, making them fully whole. It’s your call whether you want us to do this–but we are more than happy to and would consider it the very least of our duty to the country, and could open it up immediately if you reply saying you want us to. If we don’t hear back from you, we are going to go ahead and do it tomorrow.’ Opening withdrawals exclusively for Bahamians resulted in millions of dollars being withdrawn from the exchange, while other customers of FTX had no ability to access withdrawals.” This is not the first time that something less than transparent has occurred in FTX cases. In fact, a dark curtain has been drawn around much of what is going on in both the FTX bankruptcy case in Delaware and the criminal case in lower Manhattan. For starters, the media has been unable to obtain a list of customer names in the FTX bankruptcy case and had to hire a lawyer to get creditors’ names released. After the creditors names were finally released, and mega banks on Wall Street were included on the list of creditors, a clarifying statement was issued saying that not all of the names on the creditors’ list might actually be creditors. So, almost three months after the FTX bankruptcy petition was filed, the public has no clarity on who the creditors or customers are. In the criminal case against Sam Bankman-Fried, media outlets had to intervene to ask the court to reveal the names of two unnamed persons who guaranteed bonds of $500,000 and $200,000 to secure Bankman-Fried’s release on bail, in addition to his parents who put up their California home as collateral. Judge Kaplan ruled in favor of the media but has put his decision on hold pending an appeal. The criminal court case also suffered an embarrassment when the first judge assigned to the case, Judge Ronnie Abrams, had to later recuse herself because her husband, Greg Andres, is a law partner at Davis Polk & Wardwell LLP, which handled a deal involving crypto exchanges FTX and BlockFi, both of which are now in bankruptcy. See our report: Sam Bankman-Fried’s Criminal Trial Judge Is Married to Law Partner of Firm that Arranged the FTX-BlockFi Deal. The polling organization, Gallup, reported last September that American adults’ trust in the federal judicial branch had fallen from a high of 80 percent in 1999 to a new low of just 47 percent last year. If American democracy is to survive, our federal institutions must do a far better job at providing transparency to the public and policing conflicts of interest.

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FTX Bankruptcy Lawyers Channel their Inner Sam Bankman-Fried – Bill $21,000 for their Meals Over Just 20 Days
by Gunnar Larson 14 Feb '25

14 Feb '25

https://wallstreetonparade.com/2023/02/ftx-bankruptcy-lawyers-channel-their… By Pam Martens and Russ Martens: February 9, 2023 ~ James L Bromley, Partner at Sullivan & Cromwell James L Bromley, Partner at Sullivan & Cromwell The shenanigans going on in Judge John Dorsey’s bankruptcy courtroom, which is overseeing the FTX bankruptcy proceedings of Sam Bankman-Fried’s collapsed crypto empire, are reaching levels that should be attracting the attention of federal prosecutors. The head of the newly-created FTX Task Force, U.S. Attorney for the Southern District of New York, Damian Williams, has called the looted FTX customer accounts “one of the biggest financial frauds in American history.” On Monday, February 6, the lead counsel in the bankruptcy case, Sullivan & Cromwell, and its hand-picked CEO for FTX, John Ray, argued vehemently against the appointment of an independent examiner in the FTX matter. The independent examiner has been requested since December 1 by the U.S. Trustee, who works for the U.S. Department of Justice. Sullivan & Cromwell law partner, James Bromley, and Ray, cited the high cost likely to be charged by the independent examiner as one of their arguments against the appointment. The very next day, Tuesday, February 7, Sullivan & Cromwell submitted a compensation request for $7.6 million in legal fees for 19 days work in November, plus $105,000 in expenses. As part of those expenses, Sullivan & Cromwell included a request to be reimbursed for $7,202.19 for “Conference Room Dining,” and $1,840.00 for “overtime” meals. Accentuating the increasingly tone deaf nature of this law firm, just a few months ago Sam Bankman-Fried was making headlines for spending $2500 on lavish lunches for himself and staff while his customers’ accounts were being looted. Bromley, who was so concerned about the cost that might be incurred if an independent examiner was hired, billed at an hourly rate of $2,165 for a total of $381,689.50 in legal fees for the period of November 11 through November 30, 2022. Another Sullivan & Cromwell law partner, Andrew Dietderich, also billed at an hourly rate of $2,165 for a total of $465,042.00 over the same span of time. (Emails recently surfaced in another crypto bankruptcy case where Dietderich had written in an email to a different law firm on November 7 that FTX was “rock solid.” FTX halted customer withdrawals the next day and filed bankruptcy on November 11. See Bombshell Emails Raise Questions about What Sullivan & Cromwell Knew about Fraud at Sam Bankman-Fried’s Crypto Firms.) As lead counsel in the FTX bankruptcy matter, Sullivan & Cromwell is well aware that the bankruptcy estate is missing $8 billion of looted customer funds. What it bills is highly likely to reduce what the defrauded customers get paid. Sullivan & Cromwell’s $7.6 million in legal fees for 19 calendar days comes out to $400,000 per day. Annualized, that’s $146 million over the course of a year. The bankruptcy proceeding is expected to last as long as two years. Another compensation request filed on Tuesday was from a firm advising FTX on restructuring, Alvarez & Marsal. Its legal fees for 20 days in November came in at $5 million while expenses tallied to more than $180,000. Its FTX team devoured meals worth $12,324.88 for which it requested compensation. Another law firm that has been hired to work on the FTX bankruptcy, ostensibly to handle legal work that Sullivan & Cromwell is too deeply conflicted to handle, is Quinn Emanuel Urquhart & Sullivan. For a span of 51 days ending on December 31, 2022, it requested legal fees of $1.2 million and a little over $4300 in expenses. There was zero request for repayment for meals. Judge Dorsey did not rule on the request for an independent examiner on Monday, as had been expected. Instead, he called the lawyers, including the lawyer for the U.S. Trustee, into his chambers and, according to reports, told the lawyers to try to reach an agreement. Dorsey likely fears being overturned on appeal if he rules against the U.S. Trustee in one of the largest financial frauds in U.S. history. This could cast a decidedly negative light on the numerous times that this Delaware bankruptcy court’s judges (including Judge Dorsey) have ruled from the bench against appointing an independent examiner, despite legal precedent in published decisions and the clear statutory language. Another hearing in the FTX bankruptcy was scheduled for yesterday, when Dorsey was expected to announce how the independent examiner issue had been resolved. Instead, the hearing was abruptly cancelled. One item of business that was to be taken up at that hearing was the appointment of the law firm Young Conaway Stargatt & Taylor to serve as Co-Counsel to the Official Committee of Unsecured Creditors. Judge Dorsey signed that order yesterday appointing the firm, despite the cancellation of the hearing. (See Docket entry 657 at this link.) Judge Dorsey worked as a partner for that law firm for 16 years prior to taking his seat on the bench. Sullivan & Cromwell has come under withering criticism for serving as lead counsel in the bankruptcy despite voluminous conflicts of interest from its prior work for FTX, Sam Bankman-Fried and the hedge fund through which he allegedly looted the FTX customer accounts, Alameda Research. The recently surfaced email by Sullivan & Cromwell partner Andrew Dietderich, in the bankruptcy case of Voyager Digital, means that Dietderich could be called as a witness. Sullivan & Cromwell is also fighting a subpoena from law firms Boies Schiller Flexner and The Moskowitz Law Firm. The law firms want troves of documents and depositions from Sullivan & Cromwell over the work they did for FTX and Alameda in the Voyager Digital case. This is likely to mean that Sullivan & Cromwell will find itself in the problematic position of attempting to be both witness and advocate – which could potentially create unnecessary delays and billings to the FTX bankruptcy estate. It’s not like Judge Dorsey wasn’t warned about this problem. In a letter sent to him on January 9, four sitting U.S. Senators – including bankruptcy law expert Elizabeth Warren – warned as follows: “To name just one challenge: will the firm’s lawyers be able to effectively investigate their current and former partners who were central in FTX’s conduct? Additionally, given their longstanding legal work for FTX, they may well bear a measure of responsibility for the damage wrecked on the company’s victims. Put bluntly, the firm is simply not in a position to uncover the information needed to ensure confidence in any investigation or findings.” An FTX customer, Warren Winter, also filed a formal objection to the appointment of Sullivan & Cromwell, telling the court: “Sullivan & Cromwell was one of the FTX Group’s ‘primary external law firms’ before the FTX Group collapsed. To date, the FTX Group has paid the firm more than $20.5 million in fees and retainers. Now, in the most flagrant attempt by a fox to guard a henhouse in recent memory, Sullivan & Cromwell has applied to be appointed the FTX Group’s bankruptcy counsel with duties that would include ‘investigating all potential estate causes of action’….” Despite the warnings, Judge Dorsey signed an order on January 20 making Sullivan & Cromwell lead counsel in the FTX bankruptcy. It’s time for disinfecting sunshine on what’s going on in this courthouse. We urge our colleagues at mainstream business media to wake from their slumbers and provide it.

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From Jeffrey Epstein to Sam Bankman-Fried to Madoff – JPMorgan Banks the Creepy Crooks
by Gunnar Larson 14 Feb '25

14 Feb '25

https://wallstreetonparade.com/2023/02/from-jeffrey-epstein-to-sam-bankman-… By Pam Martens and Russ Martens: February 16, 2023 ~ Jamie Dimon, Chairman and CEO of JPMorgan Chase Jamie Dimon, Chairman and CEO of JPMorgan Chase Throughout a Period of Five Criminal Felony Counts Brought by the U.S. Department of Justice If yesterday had been National Creepy Crooks Day, JPMorgan Chase would have taken top honors. Bloomberg News reported on the creepy emails that former JPMorgan Chase executive Jes Staley was sending back and forth from his email account at the bank to child sex trafficker Jeffrey Epstein, as the bank was only too happy to handle 55 accounts worth hundreds of millions of dollars for Epstein. One set of emails suggested Staley was having kinky or sexual relationships with individuals dressed up as Disney characters. (Leave it to JPMorgan to take down not only its own brand but taint Disney’s brand as well.) Anyone who has ever worked at a major Wall Street brokerage firm or investment bank knows full well that emails are monitored by the company. This suggests that Staley knew he had nothing to fear from the bank’s email monitors. A 2019 investigation conducted by Wall Street On Parade indicated that Epstein’s ties to JPMorgan Chase date back to at least 2001, when Epstein presided as Chairman over an offshore company incorporated in Bermuda called Liquid Funding Ltd. That company grew to at least $6.7 billion in outstanding liabilities. JPMorgan Chase was one of three banks providing a $250 million liquidity facility to Liquid Funding Ltd. JPMorgan Chase was also listed as its “Security Trustee.” Liquid Funding appeared to be propping up dodgy subprime mortgage dealers by giving them loans. Bear Stearns, where Epstein had worked from 1976 to 1981, owned 40 percent of the equity in the company. If the Bloomberg News article wasn’t enough repulsion for one day, the New York Times reported yesterday that “JPMorgan holds $400 million that FTX’s founder, Sam Bankman-Fried, invested in an obscure hedge fund, Modulo Capital….” Since federal regulators allege that all of Bankman-Fried’s wealth comes from equity investors he defrauded or the looted accounts of his crypto customers, it appears that, once again, JPMorgan Chase has failed miserably in conducting proper due diligence on its customers, or has simply chosen to look the other way as it did during Bernie Madoff’s decades at the bank. (Bankman-Fried has pleaded innocent to an eight-count indictment. Two of his former top executives, however, Caroline Ellison and Gary Wang, have pleaded guilty to similar charges and are cooperating with federal prosecutors.) One would think that the two criminal felony counts that JPMorgan Chase was hit with by the U.S. Department of Justice in 2014 in the Madoff Ponzi scheme matter might have changed its jaded ways. (It didn’t.) The layers of fraud taking place between the bank and Madoff resembled Russian Nesting Dolls – frauds within frauds – as we detailed in our investigation in 2014. The bank even loaned Madoff’s “business” $145 million in 2005 and 2006, which helped to prop up his Ponzi scheme when it was on the verge of collapsing. When the revolting details of the relationship between the bank and Madoff surfaced, the Los Angeles Times made an astute query in a photo caption of a smirking Madoff, asking: “Bernie Madoff: Was he part of the JPMorgan ring, or was JPMorgan part of his ring?” Two trial lawyers literally wrote the book in answering that question. In JPMadoff: The Unholy Alliance Between America’s Biggest Bank and America’s Biggest Crook, Helen Davis Chaitman and Lance Gotthoffer argue that RICO, the Racketeer Influenced and Corrupt Organizations Act, is “the perfect tool” to bring JPMorgan to heel. The lawyers explain: “In enacting RICO, Congress meant business. This powerful law enforcement weapon requires proof that the defendant committed ‘at least two acts of racketeering activity’ within a ten year period, that are related to financial gain. The predicate acts are drawn from a list of 27 federal and eight state law crimes. They include the typical mob crimes like murder, kidnapping, gambling, arson, robbery, extortion, and drug dealing. But the predicate acts also include a lot of the crimes committed by Wall Street banksters in order to enrich themselves at the expense of others, such as bribery, mail and wire fraud, fraud in the sale of securities, embezzlement, financial institution fraud, obstruction of justice, tampering with or retaliating against a witness, victim or informant, and money laundering.” Yesterday’s Bloomberg News article about Jes Staley’s sick emails to Epstein are derived from a lawsuit brought against JPMorgan Chase by the government of the U.S. Virgin Islands, where Epstein owned a secluded island compound. The lawsuit alleges the following: “For two decades, Defendant JPMorgan Chase Bank, N.A. (‘JPMorgan’) facilitated and sustained Jeffrey Epstein’s sex-trafficking by handling and [redacted] his payments to young women and girls who were his victims and recruiters. Sex-trafficking was the principal business of Epstein’s accounts held by JPMorgan, and JPMorgan profited handsomely from the hundreds of millions of dollars in assets in those accounts, in addition to Epstein’s connections and referrals of ultrawealthy and powerful clients.” What’s curious about the above paragraph is that the redacted portion appears to be only a one-word redaction. Let’s face it, those two sentences are absolutely devastating to the largest bank in the United States, so what one word could be so much worse that it needs to be blacked out for public digestion? Try finding a word that fit’s in that phrase: “…by handling and [redacted] his payments to young women and girls who were his victims and recruiters.” The dangerous word can’t be “facilitating” because that word appears unredacted throughout the lawsuit in describing the role JPMorgan Chase played in payments to Epstein’s victims. The unredacted words “handling” and “facilitating” suggest an enabler but not a direct participant in the crime. Words like “making” or “processing” on the other hand, sound like direct participation in the crime. As for those creepy references to Disney characters, the Virgin Islands’ lawsuit shares this: “In July 2010, Staley emailed Epstein saying ‘That was fun. Say hi to Snow White[,]’ to which Epstein responded ‘[W]hat character would you like next?’ and Staley said ‘Beauty and the Beast.’ Epstein also emailed Staley photos of young women in seductive poses. Following the internal reports of additional law enforcement investigations into Epstein’s sex-trafficking in 2010 and 2011, JPMorgan’s response was to send Staley in 2011 to obtain Epstein’s denial, on which the bank hung its hat.” And there is this: “Throughout its relationship with Epstein, JPMorgan’s internal investigation teams identified evidence that he was engaged in criminal sex-trafficking. In 2006, JPMorgan’s Global Corporate Security Division reported that Epstein was indicted in Florida for felony solicitation of minors for prostitution. In 2008, Epstein pled guilty in Florida to solicitation or procurement of a minor for prostitution and became a registered sex offender. JPMorgan’s continued relationship with Epstein after his criminal plea was reviewed and approved at the highest levels of the bank. An August 2008 internal email states, ‘I would count Epstein’s assets as a probable outflow for ’08 ($120mm or so?) as I can’t imagine it will stay (pending Dimon review).’ Yet the assets did stay [redacted text]. In 2010, JPMorgan’s risk management division discussed new allegations of an investigation of Epstein involving child sex-trafficking. Throughout 2010 and 2011, JPMorgan’s compliance and security divisions reported evidence of Epstein’s engagement in sex-trafficking, including his settlement of a dozen civil lawsuits and his payments of $1 million to the MC2 modeling agency engaged with Epstein in child sex-trafficking, ‘luring’ girls on the pretext of providing modeling opportunities and careers.” Given the five criminal felony counts that the U.S. Department of Justice has brought against JPMorgan Chase in the past nine years and its institutional knowledge of the crimes this bank is willing to tolerate in its search for profits, one has to ask this: why is the government of the U.S. Virgin Islands bringing these charges instead of the government of the United States?

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The Same Day Sam Bankman-Fried Is Hit with a New Count of Bank Fraud, Three Regulators Warn About Crypto Bank Runs
by Gunnar Larson 14 Feb '25

14 Feb '25

https://wallstreetonparade.com/2023/02/the-same-day-sam-bankman-fried-is-hi… By Pam Martens and Russ Martens: February 27, 2023 ~ Damian Williams (Photo Source US Attorney's Office, SDNY, via AP) Damian Williams, U.S. Attorney for SDNY, Is Leading the Prosecution of Sam Bankman-Fried On December 13, the U.S. Department of Justice released an 8-count criminal indictment against the former crypto kingpin, Sam Bankman-Fried. He was charged with conspiracy to commit wire fraud, wire fraud, conspiracy to commit commodities fraud, conspiracy to commit securities fraud, conspiracy to commit money laundering, and conspiracy to defraud the Federal Election Commission and commit campaign finance violations. Last Thursday, the Department of Justice added four additional criminal counts against Sam Bankman-Fried in a superseding indictment. These include: bank fraud; conspiracy to operate an unlicensed money transmitting business; and two counts involving the purchase and sale of derivatives. Bankman-Fried’s jury trial is scheduled to start in October. The charge of bank fraud is something that jury members can get their minds around – particularly when the alleged bank fraud is shown to have taken place at federally-insured banks which are backstopped by U.S. taxpayers. And while the new indictment does not name any specific banks, it is well known that Bankman-Fried’s FTX crypto exchange and his hedge fund, Alameda Research, were involved with a number of federally-insured banks. (See, for example, Federally-Insured, Crypto-Focused Silvergate Bank Loses 43 Percent of Its Market Value Yesterday as Depositors Flee. Silvergate was a $160 stock in late April of last year. It closed on Friday at $14.33 following a massive bank run on deposits in the last quarter of 2022 as its ties to FTX became publicized.) Here’s a sampling of what’s in the new indictment regarding Sam Bankman-Fried’s alleged diabolical plan to engage in bank fraud: “SAMUEL BANKMAN-FRIED, a/k/a ‘SBF,’ the defendant, perpetrated this multi-billion-dollar fraud through a series, of systems and schemes that allowed BANKMAN-FRIED, through Alameda, to access and steal FTX customer deposits without detection. For instance, in 2021, FTX began to accept customer fiat deposits into an Alameda-affiliated bank account that itself was established through a fraudulent scheme that BANKMAN-FRIED directed… “In part to obscure the relationship between FTX and Alameda, and in order to overcome Bank-1 ‘s refusal to open a bank account for FTX without extensive due diligence and licensing, in or about August 2020, SAMUEL BANKMAN-FRIED, a/k/a ‘SBF,’ the defendant, directed the incorporation of a new U.S.-based entity, North Dimension. BANKMAN-FRIED was listed as sole owner, CEO, and president of North Dimension, which had no employees or business operations outside of its bank account. BANKMAN-FRIED and others chose the name ‘North Dimension’ in part to conceal that there was a relationship between North Dimension and Alameda from FTX customers and from banks approving transactions with the North Dimension bank account. BANKMAN-FRIED also directed the creation of a website for North Dimension and used a credit card in his name to fund the hosting services for the website… “Once the North Dimension bank account was opened, FTX directed customer dollar deposits to the North Dimension account. Thereafter, when FTX customers deposited or withdrew fiat currency, Alameda personnel, who maintained control over the North Dimension account and acted under the direction and supervision of SAMUEL BANKMAN-FRIED, a/k/a ‘SBF,’ the defendant, and his co-conspirators, manually credited or subtracted the customer’s FTX account with the corresponding amount of fiat currency on an internal ledger system…” Investigative reporter, Gretchen Morgenson, reported for NBC News in December that North Dimension went to the trouble of creating a fake company website that marketed itself like this: “Our vision is to become most popular website for purchasing mobile phones and electronics by offering complete product information and a transparent purchasing procedure.” It is more than a little noteworthy that the same day that the Justice Department released details on how easily Bankman-Fried was allegedly able to commit bank fraud, three federal bank regulators released new warnings to U.S. banks about getting involved in crypto. The federal regulators are the Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC). One paragraph of the various warnings sounds like it is describing the negative impact to all crypto-related banks when a relationship like that between Silvergate and FTX/Alameda makes headlines. It reads: “Deposits placed by a crypto-asset-related entity that are for the benefit of the crypto-asset-related entity’s customers (end customers). The stability of such deposits may be driven by the behavior of the end customer or crypto-asset sector dynamics, and not solely by the crypto-asset-related entity itself, which is the banking organization’s direct counterparty. The stability of the deposits may be influenced by, for example, periods of stress, market volatility, and related vulnerabilities in the crypto-asset sector, which may or may not be specific to the crypto-asset-related entity. Such deposits can be susceptible to large and rapid inflows as well as outflows, when end customers react to crypto-asset-sector-related market events, media reports, and uncertainty. This uncertainty and resulting deposit volatility can be exacerbated by end customer confusion related to inaccurate or misleading representations of deposit insurance by a crypto-asset-related entity.” There is no such thing as federal deposit insurance for crypto assets.

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