Former billionaire Sam Bankman-fried’s fall from grace continued today as a U.S. court in New York granted him bail. Bankman-fried, who had been in the Bahamas ever since the collapse of his exchange that caused billions of losses all over, decided to return to the U.S. to face the charges against him in court. He is being accused of fraud by the Securities and Exchange Commission (SEC) after making a software change to FTX’s trading algorithm that prevented it from automatically selling assets. A crucial piece in the most significant financial scandal of 2022 is his hedge fund Alameda Research, which was allowed to borrow unlimited funds from FTX due to the code change. Bankman-fried’s bail bond is worth a whopping $250 million, and his parents have co-signed the bond and put up equity in their house as collateral.
Bankman-Fried’s Court Hearing Is Set For January As Prosecutors Accuse Him Of Billions of Dollars In Fraud
As part of its function as an exchange, FTX saw its customers place their funds with it, and accusations surrounding the disgraced billionaire allege that he siphoned them off illegally as part of real estate purchases, political donations and other investments. Since the money moving around was not disclosed and kept secret, investors could not determine the extent of FTX’s deposits that were unavailable for clients to withdraw. This house of cards tumbled when Binance decided to sell its FTX tokens, which led to the exchange’s inability to keep up with the proverbial bank run on its liquid assets. At the heart of FTX, and Bankman-Fried diverting the funds to Alameda is FTX’s auto-liquidation software. This is code explicitly written to sell the collateral for any assets that start becoming risky to ensure that large price drops do not wipe out any cash held by the exchange. However, the entire purpose of this software became moot when, according to a Reuters exclusive, Bankman-Fried directed Nishad Singh, FTX’s chief engineer, to ensure that Alameda was exempt from the software’s central feature and allowed it to borrow countless sums of money. The latest bit in the affairs comes as a New York court agreed to let Bankman-Fried out on bail after he posted a $250 million bond - one of the largest in history. This reflects the nature of his crimes and the prosecutors’ conviction of him being a high flight risk. As part of the deal, he will also surrender his passport and remain confined inside his parents’ house. His parents are also the co-signatories of the bail bond and will have to post the equity in their house as an assurance. Additionally, Bankman-Fried will be monitored electronically and will not be able to open any new lines of credit. His return to the U.S. has been rather hurried after he refused to participate in extradition proceedings after his arrest in the Bahamas, which were scheduled to begin in February. The U.S. has an extradition treaty with the Bahamas, and for the government, bringing people back from the Caribbean nation often becomes complicated, as was the case when eight men facing U.S. drug charges managed to avoid extradition for 11 years by delaying the process through measures such as claiming that the judge overseeing the hearing was up for mandatory retirement. Extradition also depends on the Bahamas government, which can speed up the process by allowing individuals to plead guilty to charges that break laws in the country. Bankman-Fried’s next hearing is in January where he will face a district judge as part of the charges brought against him by the SEC.
