Sam Bankman-Fried has been standing with his claims that he never spent user funds at FTX. Billionaire Bill Ackman has hypothesized how Bankman-Fried could be telling the truth. However, the crypto community isn’t buying it.
Bankman-Fried claims about customer funds
Bankman Fried filed for bankruptcy in November 2022 following FTX’s lack of enough liquidity to satisfy customer withdrawal requirements. He went ahead to be arrested in the Bahamas, where he lived, and was extradited to the US. In the US,
Bankman-Fried was imprisoned and appeared before a magistrate judge who listened to his case.
He was later given a record $250 million bail and went to live with his parents under the supervision of his lawyers and the Federal Bureau of Investigation. Bankman-Fried’s case is set to begin trial in the US in October 2023.
Amid all the charges and curses being hurled against Bankman-Fried, he has repeatedly claimed that he did not do any financial foul play at FTX and Alameda Research. He claims that other factors, like the global economic downturn, are to blame for his exchange’s fate.
However, some of his statements have been conflicting with the findings of the solvency and bankruptcy team all along.
Bill Ackman gives his hypothesis
Bill Ackman has given his hypothesis on how Bankman-Fried could have been telling the truth all along. However, he clarified that he has no economic interest in the FTX debacle to keep his stance neutral. In a bombshell, he explained his life experiences to show how it is possible to misinterpret financial ordeals.
Ackman explained that he released a white paper titled ‘Is MBIA Triple-A’ where he questioned the AAA credit rating of the largest bond insurer at the time. He said his firm, Gotham Partners, even held a short position against MBIA.
In the few weeks that followed, NYAG Eliot Spitzer launched an investigation where he accused him of market manipulation. Gotham Partners was on the front page of most news publishers as a high-profile hedge fund manager, and the case against Ackman was his second major initiative after a successful Wall Street Analyst investigation.
The SEC followed suit with a standalone investigation that made Ackman spend the next seven months delivering 170K documents and giving uncountable on-record testimony to the regulators. He explained that his lawyers advised him not to say anything publicly, and many presumed him guilty.
Ackman sees a complex picture
Ackman expressed that he thought the investigators were only out for the truth, but he was mistaken. He found out that the SEC took a somewhat measured approach in their investigation, while some lawyers in the NYAG were only interested in finding him guilty regardless of the facts stated.
According to him, most investigators were only motivated by high-profile targets that turned heads and attracted headlines. He was probably a ticket for the investigators to get partnerships at top white-collar law firms that could pay 30 to 50 X their salaries at the AG’s office.
Ultimately, the SEC and the AG did not find any wrongdoing in the functioning his hedge fund. Finally, MBIA blew up during a financial crisis, making it clear that it was operating wrongly.
He added that he was still clouded by investigations in 2004 when he was launching Pershing Square since the AG and SEC still wouldn’t say publicly that their prior investigations were over. They just maintained radio silence over the matter.
Ackman explained that he could only launch Pershing Square due to $50 million in funding he acquired from Leucadia National. He said that after MBIA blew up, Spitzer publicly apologized to him for doubting him and accusing him of market manipulation.
The SEC also sent a letter to him confirming the withdrawal of the case against him, but only after he sent a strong letter to the SEC chair, commissioners, and its general counsel.
Bill Ackman touches on Bankman-Fried’s case
Bill has explained that he is not interested economically in the FTX case but can only treat allegations against founders as just allegations until proven true. He said that he has learned from his experiences though he understands why investors who lost money want Bankman-Fried to end up in jail.
He explained that he understand’s why victims of financial crimes and their families wish for justice to be served promptly. He also stated that he wrote the Twitter thread, having spent the whole day on jury duty.
The investor asked his audience not to rush to convict Bankman-Fried as it does not do anyone any good. Ackman explained that it does not bring anyone justice faster or return their funds in time. At best, it makes some unhappy investors feel better that someone is suffering the consequences of their loss but does not do anything to heal the situation.
Ackman also highlighted the event where Bankman-Fried’s girlfriend and partner pleaded guilty. He said that it raised eyebrows on how he could have been innocent if his executives were falling into the hands of regulators.
Continuing, Ackman said that the regulators are mostly out for Bankman-Fried’s neck, and the two executives could gladly give him up to save themselves from jail.
Ackman explained that Bankman’s conviction would mean some investigators are gaining career boosts. He asked the jury not to be too fast to convict Bankman-Fried based on what they saw in the press.
He noted that the vast majority of the prosecutors and investigators are highly intelligent, under-compensated individuals and thus determined to climb their career ladders fast.
Later, Ackman added that the accused are owed the presumption of innocence until proven guilty. He asked people not to treat Bankman as a crook from his perspective, claiming that it sucks.
Reactions following Ackman’s thread
Bill Ackman’s thread attracted reactions from people who viewed his post. Crypto Coin Show said that they would only consider innocence if the lost funds were recovered.
Another one criticized that Bankman-Fried has not acknowledged any monetary redirections that he did with the client funds
Another one was fast to conclude that Ackman’s personal experience and Bankman-Fried’s doings and case were nothing alike. He said that these are not allegations against actions that had no evidence of harming investors but actions that led to a loss of billions of dollars.
Lawyer Edwin Dorsey recommended that Ackman stops tweeting about the matter
Another one claimed that Ackman should reconsider his words since FTX even had a whole group named “wire fraud.”
Another Twitter user by the name Richard Raizes claimed to be one of the victims of the FTX collapse. He backed part of Ackman’s deliberations saying that it’s best for people to get off Bankman’s neck for now and allow the law to do its bit without too much noise.
What do we know about allegations against Bankman-Fried?
Sam Bankman Fried is facing eight charges from the US regulators, including the SEC. It is charging him for using customer funds illegally and thus breaking several laws in the US, including defrauding the US.
The bankruptcy and liquidation team has also come up with several findings that make the case against him look solid. They include:
- FTX executives lavished over $40 million on hotels
- FTX loaned Alameda $500 million+, later used to buy Robinhood shares. The shares were also leveraged for a loan at bankrupt crypto lender Blockfi.
- Bankman-fried used customer funds to donate to political parties and aspirants. He reportedly spent over $20 million in these pursuits.
- Bankman-fried used fake electronics retailer North DImension and some OTC desks to move money between Alameda and FTX.
- A $400 million hack was done on FTX, which pointed to an insider job.
- Senior FTX executives had access to funds without security protocols to deter them from misuse.
- Senior executives, including Bankman-Fried, had access to loans in illegal ways
These are just some of the allegations Bankman Fried faces as his case approaches the trials. Though it’s not fair to push him away and sideline him as a criminal before the US regulators table the full arguments during the trial, investors can only hope that justice will be found and the truth shall be upheld.
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