DOJ asks for independent probe of FTX, to gather evidence of fraud

[Hydrogen]

• FTX’s bankruptcy case demands an independent review, the Department of Justice said, because of allegations of fraud and dishonesty which could damage the entire crypto industry.
• Andrew Vara, the U.S. bankruptcy trustee for FTX’s case, said Sam Bankman-Fried and his team mismanaged the company or potentially engaged in fraudulent conduct.
• The DOJ is seeking an independent examiner to investigate what happened leading up to FTX’s spectacular implosion

The Department of Justice has requested that an independent examiner be appointed to review “substantial and serious allegations of fraud, dishonesty” and “incompetence” after the implosion of Sam Bankman-Fried’s crypto empire. It could be one way for the DOJ to gather evidence of alleged fraud.

In a filing in Delaware federal bankruptcy court, Andrew Vara, a U.S. bankruptcy trustee, told the court that the allegations of corporate misconduct and complete failure merited an immediate and speedy examination of the events leading up to FTX’s stunning collapse three weeks ago.

Vara said there’s a substantial basis to believe that Bankman-Fried and other managers mismanaged FTX or engaged in fraudulent conduct.

“It seems to me that the DOJ is trying to use the bankruptcy process as a way of getting evidence,” former federal prosecutor Renato Mariotti told CNBC.

“Many times, the Department of Justice and bankruptcy estates in fraud cases work together in compiling potential restitution or other types of actions to make victims whole,” he said. The DOJ “will likely be part of the asset recovery and potentially having a Victims Fund with money going to those that lost money and what the Department of Justice potentially will view as a fraud.”

“It just shows a level of interest and attention that they’re paying to this that should be troubling to Mr. Bankman-Fried.”

Vara said an examination is preferable to an internal investigation because of the wider implications the company’s collapse may have on the crypto industry.

Another legal expert said that there could be other factors at play, too, including the extensive political donations that FTX executives were involved in with both major political parties.

There have been “campaign donations on both sides of the aisle from FTX and there have been political overtones and undertones in this case,” said Braden Perry, former senior trial attorney at the Commodities Futures Trading Commission and a Kennyhertz Perry partner.

“I think that this is just out of prudence and out of caution to make sure that whatever is happening is done at an independent level,” Perry said.

It’s not unusual to appoint a bankruptcy examiner. There was one to oversee the crypto bankruptcy process of Celsius Network, for example.

Bankruptcies above a certain size require an examiner. In this case, the U.S. trustee said that an examiner is mandatory because FTX’s fixed, liquidated and unsecured debts to customers exceed the $5 million threshold.

FTX’s November collapse left creditors reeling over the loss of hundreds of millions of dollars, in some cases, and has rocked the wider crypto world. BlockFi, a crypto lender, filed for bankruptcy protection in New Jersey last month.

Bankman-Fried did not immediately respond to a request for comment.

https://www.cnbc.com/2022/12/02/ftx-doj-watchdog-calls-for-review-over-crypto-fraud-allegations.html

....


Not certain if this will make a difference. While the title calls it an independent probe, as if it were unusual. The article mentions it being something like standard procedure of past cases involving celsius network and other major crypto bankruptcies in excess of $5 million.

This FTX case marks the 1st time wallstreet has come out and made certain aspects of its business dealings so blatantly obvious to the public. While events like this have occurred for many years. I can think of a few cases which might be considered even worse than FTX, that were covered by credible news sources. Sources on them have typically been published without much attention or fanfare. Which was crucial for keeping the public oblivious to certain aspects of how civilization functions.

FTX however, is on a completely different scale. Its receiving media attention everywhere. Events like this one have never quite blown up to these proportions. I wonder if it will make a difference? Henry Ford was famous for saying if the public knew how the economy really functioned, that there would be a revolution by tomorrow morning. Was his prediction correct? I'm not quite seeing it.

[so98nn]

Henry Ford was famous for saying if the public knew how the economy really functioned, that there would be a revolution by tomorrow morning. Was his prediction correct? I'm not quite seeing it.

I think he is partially right. The problem is not with the peeps neither with their understanding of the economy. The problem is with the system itself. There is always difference between how earning for every individual differs based on their jobs/skills and on larger picture their location (country to country for that matter).

However, coming back to what happened with FTX is fault of either their accounting and management team who screwed up the math, projections and they were not capable to handle it when crypto went more and more bearish with the time.

I see it as failed management of FTX and if not then it’s something related to internal conspiracy!

[franky1]

the US investigations only stretch to FTX.us

where by for he customers of FTX.us. SBF has said that assets hav been recently put into the [dot]us company to make them whole. and such if customers can get their value back. then there is not much the courts can do..

the big controversies of FTX are not so much about the 1.2m of minnow traders of ftx.us..  but in the 10k-100k whale investors of FTX global

investors of the global business are subject to the bahama or japanese jurisdictions which is where the "debt" is held for the investors that lost funds in the global group of FTX

[EarnOnVictor]

Not certain if this will make a difference. While the title calls it an independent probe, as if it were unusual.

I support a full-scale independent probe in this regard and the matter should be taken totally out of the Bahamas for this to be thorough and unbiased. Even in the US and other reliable countries, the political inclination of BSF might want to fight back, but with an independent investigation, such would be nailed completely.

Henry Ford was famous for saying if the public knew how the economy really functioned, that there would be a revolution by tomorrow morning. Was his prediction correct? I'm not quite seeing it.

This is total nonsense, the economy is working as it should work, but frankly, some sectors of the economy are shady/improperly managed, crypto industry is one of them, but we should not because of that totally condemn how the whole economy works.

[stompix]

the US investigations only stretch to FTX.us

The US investigations stretch to a range of 1000km from where a nuclear carrier can sail so that's wherever the US wants.
Bitmex was based in Seychelles, and nothing stopped U.S. courts to issue a want and then have them sentenced, FTX Trading has filled for a bankruptcy case in Delaware, and by law, the court can order any investigation they want into the miss appropriation of funds, so US authorities can do whatever they want.

investors of the global business are subject to the bahama or japanese jurisdictions which is where the "debt" is held for the investors that lost funds in the global group of FTX

And if the bankrupted companies in this case the parent company FTX DM file for chapter 15 in the US, the Bahamas government will have nothing else to do but quietly agree to cooperate in the case as all have done and will do.

Henry Ford was famous for saying if the public knew how the economy really functioned, that there would be a revolution by tomorrow morning.

And if everyone getting ready for surgery would have to see the previous patient getting one probably you're going to have a 66% last-minute run out of the hospital without underwear in all the cases.

[hyudien]

The FTX case seems to be getting more and more complicated and as time goes on, it can't find an endpoint. In my opinion, there are many parties involved, even from the government. Maybe that's the part that will extend the FTX case. Even though the case is quite clear, until now the user's assets cannot be returned and the victim has still not received his rights. SBF is still roaming free and currently under house arrest but is still able to hold press events.

Does that sound like a ridiculous case?

[Gyfts]

DoJ can choose to take the evidence they have, present it to a grand jury, and SBF faces indictment.

However, it is completely up to the DoJ if they choose to present that evidence to the grand jury, and the amount of evidence they present. They could either choose not to gather a grand jury and present them with the evidence which would absolve SBF of any criminal liability, or they could present limited evidence that would incline the grand jury to not indict.

There's plenty of ways for this probe to result in nothing if the lawyers in the DoJ don't want SBF to face any repercussion. Charging someone is a political decision, regardless of what evidence comes up in the probe.

[franky1]

the US investigations only stretch to FTX.us

The US investigations stretch to a range of 1000km from where a nuclear carrier can sail so that's wherever the US wants.
Bitmex was based in Seychelles, and nothing stopped U.S. courts to issue a want and then have them sentenced, FTX Trading has filled for a bankruptcy case in Delaware, and by law, the court can order any investigation they want into the miss appropriation of funds, so US authorities can do whatever they want.

the delaware bankruptcy is about FTX.us
SBF shuffled money to make FTX.us liquid and have funds to hand to repay ftx.us customers. so SBF can escape penalty of that bankruptcy filing in delaware because he said he can make those customers whole

so dont expect the delaware bankruptcy leading to hand cuffs about ftx.us

now SEPARATELY (different court case)

usually those investors(different group of people) of the 'FTX global' bankruptcy are under  a jurisdiction for a bankruptcy claim in the bahamas, which they have to go to the bahama courts to be awarded creditor status and wait for it all to work itself out.

now SEPARATELY (different FUTURE court case)

the US agencies want to file a class action suit for US customers& investors hurt by any FTX businesses that sit inside or outside of the US business registration.

BUT first. they need to investigate and gather evidence..

this investigation is neither the bahama bankruptcy court nor the delaware bankruptcy court cases

this investigation of fraud is separate from delaware and the bahama court of bankruptcies

the investigation is not even a court case .. YET
thats why they want to investigate to see if they can make a case.
and its not a "just do it" thing. which is why the DOJ is seeking to do a international investigation which usually means teaming up with interpol and international court of justice other agencies that have jurisdiction
(hint: which is the "independent" request. meaning it wont be the DOJ investigating)

[kryptqnick]

I don't know if it was fraud or not, to be honest. People who lost money would say it's a fraud because of their loss and feeling emotional about it. FTX will maintain nothing illegal happened, as this is a better position for them. Technically, since banks can use the money of their customers and aren't obliged to always have enough money for everyone with withdraw (which is why bankruptcies are possible), I don't see why the same wouldn't be legal for crypto exchanges. Investing the money of customers into political parties isn't legal, though, so if such allegations about FTX get confirmed, they will probably face prosecution. I am happy that an investigation will be launched and that the bankruptcy version will be questioned this way. I hope that if it's considered fraud, the assets will still be liquidated to give compensation to customers.

[stompix]

usually those investors(different group of people) of the 'FTX global' bankruptcy are under  a jurisdiction for a bankruptcy claim in the bahamas, which they have to go to the bahama courts to be awarded creditor status and wait for it all to work itself out.

Oh god, Franky, why don't you at least check with google before posting, it's one month old news aleady:

FTX Digital Markets, the Bahamas-based unit of the recently collapsed cryptocurrency trading platform, has filed for bankruptcy protection in the US.

Which part do I need to explain to you?
That the claim is filled by FTX Digital Markets, which owned the international branch?
That New York is in the US not in the Bahamas?

[el kaka22]

To be fair justice department is not really great at investigations, and that's a bit of trouble. If there is someone they dislike, they will go overboard, if there is someone they like, they will give a leeway, they are not to be trusted.

This is American justice system we are talking about, so it is clear to me that we are not going to see a fair trial about him or the company. One of the biggest reasons why I am glad I am not American, we have seen them mistreat blacks for centuries, and for some reason they still think we should trust their justice system for some reason, we all know everyone gets an unfair trial there at all times, depending on who they are.

[franky1]

To be fair justice department is not really great at investigations, and that's a bit of trouble. If there is someone they dislike, they will go overboard, if there is someone they like, they will give a leeway, they are not to be trusted.

the DOJ do not do investigations themselves. they hire attorneys and private investigators for that. the DOJ is simply there to have been given evidence to meet a threshold which they can then pursue a case on

the problem of "justice" mainly resolves around
defence and prosecution attorneys can spin a story/evidence to mean 2 things. and its then the jury that have to decide which story sounds best. where usually its more about who is the better story teller, wins

in many cases those on the defence cannot hire their own attorney or private eye to collect evidence for defence. and sometimes a public court cant afford to give police time to gather enough evidence to convict

even when say a rape case, there may be evidence of a sexual encounter, but then the attorneys can spin that either way as hearsay and consensual. or that the victim consented and the regretted it after.

with the FTX fiasco. the defence narrative is that funds that shouldnt move, did move. but not due to malice but instead incompetence(smart guy plays dumb to escape theft conviction)
he is already finding a fall-gal for his crimes.. his ex..
yes she took the funds into her sister business to FTX but SBF gave it to her. he wants to pretend the vault was open for her to just take. but its obvious he was telling to take it and make profit out of it for the both of them