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110 and 50 years imprisonment for FTX management. Crypto scams don’t pay

Fairness got more people involved in FTX, the failed cryptocurrency exchange.

The fun is over. Former FTX management pleaded guilty

The money laundering company that was the empire of the “golden child of cryptocurrencies” Sam Bankman-Fried has collapsed. Until recently, the third-largest cryptocurrency exchange behind Binance and Coinbase, which was valued at $32 billion in its last funding round in January 2022, went from leader to bankruptcy in just two weeks. FTX went to the bottom, the consequences of which we can now observe.

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Bankman-Fried was recently arrested in the Bahamas at the behest of US investigators and is facing multiple fraud and money laundering charges, and now justice has come for former FTX management to plead guilty.

50 and 110 years in prison – this is what the former management of FTX is facing

Former CEO Caroline Ellison and the cryptocurrency exchange’s former co-founder Zixiao “Gary” Wang pleaded guilty to federal charges and have begun cooperating with prosecutors. Prosecutor Damian Williams, who released the information, did not specify what the charges were, but the whole thing was directly related to having inside knowledge of FTX and its sister company, Alameda Research.

In addition to co-founding FTX, Gary Wang owned 10 percent of Alameda, while Bankman-Fried, of course, owned the rest. Zixiao pleaded guilty to four charges and could face up to 50 years behind bars. The situation is much worse for Ellison, who was Alameda’s CEO and pleaded guilty to seven counts; Caroline faces up to 110 years in prison.

Scams of unimaginable proportions are over

According to the CFTC, at FTX’s peak, the exchange traded up to $20 billion a day (!). However, only a small group of people should have known about all the deceptions and dirty tactics, and the insiders included, among others, the above mentioned people.

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What is it really about? Bankman-Fried reportedly funneled funds from FTX clients into executive loans, risky Alameda Research deals, political donations and lavish spending on luxury indulgences, including buying beachfront real estate and flying private jets.

Using his clients’ money, he provided Alameda with an almost unlimited line of credit, and Gary Wang and Caroline Ellison knew all about it, and Caroline Ellison was free to use the FTX money anyway. Alameda just stuffed a handful into a bottomless pit of money (after all, we are talking about up to 20 billion a day), which all three considered appropriate, but in the eyes of the law and all the customers of the stock exchange. , that is not the case at all.

It wasn’t just Alameda’s unsavory source of money

According to the US Securities and Exchange Commission lawsuit, Ellison, acting at the behest of Bankman-Fried, took out billions of dollars in loans. Most of it was backed by the FTT token, a crypto created by, you guessed it, FTX, then given to Alameda for free. Ellison was tasked with buying FTT tokens on various platforms to drive up the price of the crypto, making the FTT collateral for Alameda’s loans much more valuable. All this meant that Alameda could borrow more.

Therefore, manipulating the price of the token owned by FTX was the perfect tool to generate more money, and it wasn’t just the exchange that benefited, but Alameda as well. The whole game was a big piggy bank for Bankman-Fried, who got a little choked up by it all.

The plan was great, but the whole thing started to fall apart after CoinDesk revealed that Alameda Research’s balance sheet consisted mostly of the FTT token. Then everyone became more and more suspicious, from lenders, through customers, to the CEO of Binance, and step by step it came to the point where the exchange declared bankruptcy.

Source: The Washington Post

Featured Image: Kanchanara / Unsplash

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