FTX Inquiry Expands as Prosecutors Reach Out to Former Executives
Much of the criminal case against Mr. Bankman-Fried could hinge on testimony from his former colleagues. Two of his closest advisers, Caroline Ellison and Gary Wang, pleaded guilty to fraud in December and have been cooperating with prosecutors for months. Now, the investigators are focusing their attention on other former FTX executives.
What is FTX? FTX is a now bankrupt company that was one of the world’s largest cryptocurrency exchanges. It enabled customers to trade digital currencies for other digital currencies or traditional money; it also had a native cryptocurrency known as FTT. The company, based in the Bahamas, built its business on risky trading options that are not legal in the United States.
Who is Sam Bankman-Fried? He is the 30-year-old founder of FTXÂ and the former chief executive of FTX. Once a golden boy of the crypto industry, he was a major donor to the Democratic Party and known for his commitment to effective altruism, a charitable movement that urges adherents to give away their wealth in efficient and logical ways.
How did FTX’s troubles begin? Last year, Changpeng Zhao, the chief executive of Binance, the world’s largest crypto exchange, sold the stake he held in FTX back to Mr. Bankman-Fried, receiving a number of FTT tokens in exchange. In November, Mr. Zhao said he would sell the tokens and expressed concerns about FTX’s financial stability. The move, which drove down the price of FTT, spooked investors.
What led to FTX’s collapse? Mr. Zhao’s announcement drove down the price and spooked investors. Traders rushed to withdraw from FTX, causing the company to have a $8 billion shortfall. Binance, FTX’s main rival, offered a loan to save the company but later pulled out, forcing FTX to file for bankruptcy on Nov. 11.
Prosecutors have had conversations with a lawyer for Sam Trabucco, a former co-chief executive of Alameda Research, according to three people with knowledge with the matter. They have also met in person with Daniel Friedberg, who was a top in-house lawyer at FTX, two people said.
And in court filings, prosecutors have said they are in contact with Ryne Miller, the general counsel of FTX’s U.S. subsidiary who helped manage the crisis in the frantic final days before FTX’s bankruptcy.
The authorities have also had discussions with a lawyer for Nishad Singh, a former top engineer at FTX who had a minority stake in the exchange, about whether he would cooperate as part of a potential plea agreement, according to three people with knowledge of the conversations. Mr. Singh, a major donor to Democratic politicians, has not been charged with any wrongdoing, but government documents claim that he had been aware that FTX misused customer money and that he had received a $543 million loan from Alameda.
The talks between prosecutors and Mr. Singh were first reported by Bloomberg, and Mr. Friedberg’s contact with prosecutors was earlier reported by Reuters.
Article source: https://www.nytimes.com/2023/02/04/business/ftx-sbf-inquiry-executives.html