Not only did he confess, saying it's "basically a giant Ponzi scheme," he also said that he planned to distribute the remaining $200-$300M in funds to family, friends, and employees in the next week.
Edit: The treaty itself: https://www.state.gov/wp-content/uploads/2019/05/94-922-Baha...
Which may also be why we aren't seeing a warrant. Maybe SBF is playing for sympathy. But maybe he's just delusional. If the latter is the case, there is no need to tip him off with a performative warrant.
I’ve seen a lot of stupid conspiracy theories on HN, but the SBF political influence meme has to be one of the funniest.
Morality aside, that's probably his best move, assuming he has enough of that $3B loan left to grease the exit.
At least he's not (yet) borrowing Do Kwon's argument about being the victim of an unjustified witch hunt.
Not in any way that would matter. If it was an honest mistake, fleeing to Dubai (or anywhere) is still the right thing to do. Which means doing so doesn't undermine the idea that it was an honest mistake.
If all the data is spread to the winds, if everyone hits ground, can they even file charges? I suppose so, but if there is no evidence pointing to wrongdoing...
To be honest, I'm not even sure what he supposedly did wrong. He took investments, in an unregulated sector, and backed those investments and lost?
If he were a bank, that's 100% legit. No bank I know of, has 100% of investor funds backed by anything. Even in Canada, land of give-a-fuck-sorta, there used to be a requirement for banks to have hard currency (gold, cash) in a vault somewhere, 5% worth of account holder's value, which was inspected annually by the government. Yet the last time I read the bank act, it was removed as a requirement.
If banks don't need any sort of banking for account holders in CAD, why would an unregulated exchange need that?
(Again, I can imagine there are all sorts of things I'm missing... but?!)
He transferred customer funds to an unrelated hedge fund company (fraud).
He created fake accounting systems to hide the fraud (fraud).
He claimed to be making lots of money just to help others (morally reprehensible and a huge red flag).
That people are still making excuses for him tells you how rotten this entire ecosystem is.
When does it become criminal to skip the step of establishing an accounting system....prior employees say they didn't even know their cash, liability, or trading positions.
FTX customer deposits went into Alameda bank account. Could be that they stayed there and somebody just kept a spreadsheet of deposits?
My point is that the astounding lack of records and systems may make it very difficult to prosecute him. For example, trades and payments were executed just on verbal orders so it will be hard to pin specifics on SBF.
Probably testimony of insiders will be the most compelling evidence against him.
He stole money and enriched himself and his family at the expense of others. He and everyone else involved including his parents, higher up employees and investors should feel deep shame.
For non-capital federal crimes, the basic rule is 5 years, but there are exceptions.
For example, he can easily be contacted for interviews, with an email or phone call, or even by visiting te Bahamas. Thus he is not fleeing, or hiding from contact, and I even presume he has a lawyer, whom the police can contact.
So nothing is suspended here.
Also, isn't FTX a Bahamian company? Why wouldn't he be there?
And what US crime did he commit, as all the accounting stuff didn't happen in the US, but the Bahamas?
The FTX network of companies (see the consolidated bankruptcy filings) includes more than 100 companies, some of which are American, all of which were ultimately controlled by SBF, most of which had what records they had commingled, and most of which seem to have been tools in the same set of international frauds.
Just tracking down them all, the board of directors, etc...
Although rerouting the massive amounts of money + human capital in non-violent crimes (drugs) to white collar would help... and probably pay for itself in recovered money (via tax revenue and reduced government corruption).
That probably still wouldn't result in SBF-type criminals being arrested right away though.
Occupying territory is expensive.
There’s far more waste in other federal agencies if you need to find one, NYPD is probably not a good one to point fingers at.
Raphael Bostic insider trading as president of the Atlanta Fed was practically a non-story.
Most people just don't care.
Even finding a lawyer capable of writing a warrant application for fraud like FTX is difficult, partly because the evidence is hard to find and hard to understand and frankly just because financial criminal law is a mess. Add to that that if you mess that part up you jeopardize the whole case (because any evidence that you collect with a bad warrant becomes subject to being thrown out, obviously).
No one wants to get that wrong just to get a perp walk. Remember that what people are demanding here isn't punishment, it's just "an arrest". People who are arrested spend a few hours (maybe a day or two) being held before arraignment and then walk right back out of the jail.
And, more to the point:
(1) its easy to convict on that kind of assault (delays are more often due to prosecutors not starting a case they dob’t feel adequate confidence they can win than prosecutors being unable to meet the much lower bar of probable cause),
(2) prosecuting on such a case early is much less likely to foreclose other charges or obstruct attempts to identify and action on other crimes or recoverable property tied to them.
Please go into this more.
Lets say an omniscient person can come up with 40 charges that could be brought against SBF. You the prosecutor only know of 3 of them right now. Why can't you charge SBF for the 3 you have, convict them, and while SBF is in prison figure out the other 37? While SBFs in prison I bet its 1000% times harder for him to hide stuff from you too.
With programming, it's commit early and commit often. Why is the prosector trying to make a giant pull request over 3 years to shove through in a year? Target the low hanging fruit for a quick commit and get the restitution process going.
Prosecutors are conservative because our justice system is (for very good reasons) tilted strongly against the state, in favor of the accused. We've collectively decided that it's better on the whole to have some criminals go without punishment than to tolerate innocent people in jail. (Pause while everyone points out that innocent people get locked up all the time, which is true, but it's still something the constitution is trying to prevent)
If any of the 3 would be lesser included offenses of any of the 37, those of the 37 for which that would be true could not later be charged, because the application of the federal Constitutional prohibition against double jeopardy forecloses this.
For state charges, this is may be even more restrictive, as many states exclude not only conviction in the same or separate prosecutions for “nested” offenses, but also preclude separate prosecutions after a conviction for the same conduct, or in some jurisdictions even for distinct conduct that forms part of the same transaction.
> With programming, it’s commit early and commit often
Criminal justice is very much not programming, and even to the extent they are loosely analogous, initiating a criminal prosecution isn’t analogous to a commit.
EDIT: To make the reasoning more explicit, since even initiating such a prosecution impacts liberty interests, there a very significant reasons for rules against repeated add-on prosecution that states have, and there are even stronger reasons (because criminal penalties for greater offenses necessarily encompass any lesser included offenses) for the federal rule (also applicable to the states) preventing cumulative punishment for both a lesser included offense and an offense within which it is included.
It is interesting to think about the effect that coalitions of criminals have had on the criminal justice system.
Impulsive face-punchers don't tend to have sophisticated attorneys, and at least many of them probably agree that face-punching should be illegal in general, even if they had their reasons in this case.
Contrast with finance criminals. Many of them probably convince themselves they're in the right, and they have access to the best justice money can buy. So over time they've managed to raise the costs of prosecution so high that we see this - it takes multiple years to nail down a solid prosecution.
There are other aspects of course - some financial crime really is difficult to prove. But what I mean is that if all the accounting frauds before Ken Lay had depended on overworked public defenders, prosecuting him would have been much simpler.
No, you're completely on topic : the phenomenon you describe of privatised systematic perpetrator defensive hurdles is called self regulation, which is precisely what SBF was most avidly lobbying for.
SBF was a large contributor to the DNC...so it sounds like he has some political favors to exploit. The best we hope for is an indictment with a Presidential pardon after this whole matter is memory-holed by the media.
Billy raised $20m with fake financials. SBF raised close to a $1B, and I’m sure he didn’t disclose the fact that customer deposits flowed to a hedge fund he controlled exclusively.
Harm caused to consumers and investors is just as obvious, if not more obvious in SBF’s case, when compared to Billy’s festival.
Just skimming the Wikipedia entry, so maybe I'm missing something, but wasn't McFarland arrested 2 months after Fyre? This May 2017 [0] article, about a month after, describes McFarland still running his company as the first civil lawsuits are filed. This June 30 article [1] is about his arrest. It sounded like the civil suits against McFarland helped push along the wire fraud charge; AFAIK, SBF is named in a couple of investor suits so far, so it'll be interesting what things look like next month.
[0] https://www.nytimes.com/2017/05/21/arts/music/fyre-festival-...
[1] https://www.nytimes.com/2017/06/30/arts/music/billy-mcfarlan...
Why or why not? Should the amount of publicity matter for the justice system? What distinguishes a "humanitarian disaster" from a bunch of rich kids having to sleep rough on a beach near a resort town for a few days?
Putting human beings at actual risk is an order of magnitude worse and I don't know why that's even debatable.
Who was at actual risk during Fyre Festival? I watched one of the docs. It was an absolute shit show and people were super uncomfortable for a while. Actual risk that's an order of magnitude worse seems like an overreach.
It’s likely this affects tens or hundreds of thousands of people around the world. It’s a different sort of crisis, but it’s still a crisis.
No one reasonably expected Fyre Festival to turn out the way it did.
Just saying that if you invest money in a stock you should expect that you may lose that money.
That said, the SEC, which AFAIU would normally take the lead, is poorly staffed. The SEC leans heavily on automation, intimidation, and rapid plea deals in order to avoid resource intensive investigations and prosecutions; much more so than run-of-the-mill criminal cases that more immediately can benefit from the huge staffs at the FBI, ATF, DoJ, etc. So when prosecution and a prerequisite comprehensive investigation is clearly warranted and necessary, there seems to be considerable inconsistency in process and outcome. And that's before accounting for the fact that financial crimes can be very difficult to prove at trial, both factually and legally--just ask Donald Trump or the Church of Scientology, white whales renowned for beating countless financial related prosecutions and civil suits.
While some actions (like a minor player doing thousands of dollars in insider trading) may be paint-by-numbers, my impression is that substantial resources go into the types of investigations that can lead to massive settlements.
Although, in a case like FTX, it’s hard to get blood from a stone.
I suspect something similar is going on with the quadriga bankruptcy in Canada. CRA (Canadian IRS) did an audit and shared its results with the creditors’ lawyers months ago but nobody has heard anything about it yet: they probably didn’t like the penalties they’re being asked to pay.
The SEC only has civil enforcement authority, ie lawsuits. Criminal complaints must be referred to DOJ. They also tend to be much less creative than Justice at finding jurisdiction over non-US entities.
The entire reason crypto companies incorporate outside the US is to avoid SEC jurisdiction. But crimes against US persons are crimes wherever the company is located.
Perhaps the DoJ has already starting formally looking at FTX, et al, on their own. OTOH, I actually had never heard of FTX or Bankman-Fried before recently, and honestly still don't get what the hubbub is about. I'm skeptical how impactful the collapse truly is, beyond the rarified world of crypto enthusiasts, wealthy tech investors, etc. And given that its overseas, I really wouldn't expect (either pragmatically or idealistically) the SEC or DoJ to rapidly shift significant resources and attention to FTX; certainly not on the order of days or weeks.
https://www.vice.com/en/article/nza8yq/that-photo-of-the-fyr...
Another point: $10bn+ is a lot of money and probably caused lots of damage (ie: suicide). But if someone pulled a knife in Time Square, the police will be quick to apprehend him and the prosecution very willing to charge him. There was no harm done and yet resources will be deployed. But SBF might be even more dangerous yet no one is panicking yet (except some people here who might appreciate how dangerous he is)
People don’t get arrested when they’ve done something bad. People get arrested (for federal crimes) when a prosecutor gets a grand jury to believe there’s probable cause they’ve committed a crime.
Only the DOJ knows the answer to that.
I find indictments fascinating, in part, because they pull back the curtain on what is frequently an impressive investigation and body of evidence.
I tell my gambling friends that if they bet the farm and win big, their wives will be horrified at the risk they tool even though it worked out. It's a moral loss regardless of the outcome.
I'd wager that most businesses that start as a single person doing something (be it investing money or detailing cars) start as off the books, under the table, zero regard for regulatory compliance type businesses. It's only when they've made enough on that initial investment outside the rules that they turn around and incur the cost of compliance.
Whenever we participated in auctions for housing sites, my wife would stop me at a certain number. The number of times we were the second highest bidder ...
Including stating his imminent intent to surrender to authorities, he also admitted to massive fraud when interviewed by the FBI immediately after that, and before the arrest.
SBF ain't in the same place as Madoff.
He was convicted on a technically by telling early investors that he already had investors. When at that point his start up had none.
It doesn’t matter that an endeavor he followed through later paid back his initial investors, the act itself is literally fraud. Period.
All you’re doing is petty-fogging the issue.
If you look hard enough through anyone's phone and online history you will find something to put them away for - no exception.
I say he should not belong on the list because his company was not scam company its still alive to this day - the ethics aside of hiking drug prices.
- September 25, 2010: Swartz begins using MIT network to pull JSTOR articles.
- Throughout September through December, a cat-and-mouse game ensues where JSTOR blocks access to certain MIT IPs, and then downloading starts again from a different range.
- January 5, 2011: MIT locates the laptop in a closet that Swartz had been using.
- January 6, 2011: Aaron Swartz is arrested.
- July 11, 2011: Swartz is indicted by a federal grand jury.
Additional indictments followed in November 2011 and September 2012. In Swartz's case, the judicial apparatus moved swiftly. As far as I understand, law enforcement became involved in late December 2010 or early January 2011. The timeline to arrest and indictment was short.
I would expect to see a reasonably quick (i.e. on the order of months) indictment of SBF. While other posters are correct to point out that there's a huge morass of complexity and murkiness around FTX/Alameda, my view is that this creates not one, but several cases -- some of them very straightforward and where I'd surely expect the DOJ to put a preliminary case together in a few months.
I agree with the final comment; I think the DOJ would be well-served by filing something (and that should be pretty tractable, seeing the staggering scope of apparent misdeeds) to extradite SBF as quickly as possible, and then to file amended/superseded charges in the following 12-24 months.
That's likely true.
However, it may also be a more savvy move to let SBF and other execs think little is pending in order to gather more information. Other than reputation of the justice system (which already has a justified slow reputation; "The wheels of justice turn slowly, but they grind exceedingly fine."), this might be the greater consideration...
If they don't rapidly indict, it'll be interesting to see if SBF ever voluntarily returns to US territory before an indictment.
I'm not sure what you mean with your second half though, are you suggesting detaining people during this period and pro-rating their sentence and/or paying them? Or are you saying that they should wait outside of jail, but still have it counted towards their sentence? I don't quite follow exactly. Edit: seems the latter. I'm not sure my opinion, having a case looming over you seems potentially difficult, especially if you're later found innocent, but should the government (/citizens) foot the bill for that?
- consider the actual effects on someone to be involved in a legal process; for lawyers it's just a workday but for people it's heavy to be accused of a crime and to wait for something awful (jail) to happen.
- define some time reasonable time constraints for everything, in order to give some incentives for the process to speed up. Prosecutors could be measured by how efficient cases go, and paying out some money could be an option.
Or steam rolling cases and imprisoning defendants who are innocent.
The latter isn’t rare already, wait until some prosecutor has to get a few fast cases done so their bosses don’t cut their pay check.
He was on the same event with Janet Yellen whose signature will be on all US currencies.
Interesting, I'd never heard of Lehman firing a whistle blower. Can you provide a link?
It seems like it would be tough to fire them given that Lehman went bankrupt. Also not sure how Lehman would blackball someone given that, again, they went bankrupt.
Are you maybe talking bout a different company?
> all the times they ignored anyone who pointed out flaws in their models
This isnt' a crime.
> all the ways they ignored the conflict of interest for ratings agencies being paid to rate garbage securities as AAA, etc etc etc.
Again, not a crime committed by Lehman.
I get that you are angry, but you really don't have any point here by the looks of things.
That a crime occurred seems very certain, but which exact crime is a lot less clear, and until a lot of digging and cross referencing of records happens, that’s likely to continue to be the case. To arrest, they need to be able to identify a specific crime with identified specific elements in a specific jurisdiction.
It seems like they have had an equivalent of a dump truck load of legos dropped in their lap, and it won’t be hard to assemble a Lego airplane out of it (probably), but yikes.
As I said, dump truck of legos.
This is the whole thing with "what if a bank but without the regulations?"
This doesn't seem like a good example. The way I understood the story, Shkreli ran an effort that collapsed. Then, he ran another effort that was very successful. Then, he took money from the successful effort and used it to pay back everyone who invested in the flop.
By that accounting, it doesn't really matter when the flop collapsed, because at that point he hadn't done anything wrong.
- Enron blew up in Dec. 2001. It wasn't until mid-July 2004 that Jeffrey Skilling and Kenneth Lay were finally arrested.
- The WSJ expose on Theranos was in 2015, Holmes wasn't indicted until 2018.
- Martin Shkreli's MSBM collapsed by 2012; he wasn't indicted until 2015.
Bernie Madoff is a notable exception: he was arrested 3 days after his Ponzi was revealed. But it's not comparable at all to SBF's situation: Madoff was arrested after he confessed privately to his own family; his sons immediately went to the police.
Whether SBF is getting exceptionally soft treatment will be easier to discern in retrospect, but it might be many months or even years before he's indicted.