SBF and CZ Get X'd
SBF and CZ have both been sued, with SBF going to prison and CZ paying massive fines. They were leaders of promoting crypto currencies through FTX and Binance, respectively. FTX is finished and Binance may be on its last legs. Will crypto survive the hype?
Sam Bankman Fried (SBF) was sued in October for a myriad of crimes, but basically for stealing money from people who had deposited them in his cryptocurrency trading platform, FTX. On November 1, he was convicted of 7 crimes. The author wrote about the fall of FTX on November 21, 2022. It is too bad that his parents, both law professors at Stanford University with expertise in tax law, didn’t know that he was breaking the law…[1]
Per MacKenzie Sigalos, writing for CNBC on November 2, 2023,[2]
“A jury has found Sam Bankman-Fried guilty of all seven criminal counts against him. The FTX founder faces a maximum sentence of 115 years in prison.
Bankman-Fried, the 31-year old son of two Stanford legal scholars and graduate of the Massachusetts Institute of Technology, was convicted of wire fraud and conspiracy to commit wire fraud against FTX customers and against Alameda Research lenders, conspiracy to commit securities fraud and conspiracy to commit commodities fraud against FTX investors, and conspiracy to commit money laundering.
[…]
Assistant U.S. Attorney Nicolas Roos told the court in his closing argument Wednesday, there was ‘no serious dispute’ that $10 billion in customer money that was sitting in FTX’s crypto exchange went missing. The issue, he said, is whether Bankman-Fried knew that taking the money was wrong.”
Yesterday, November 21, 2023, Binance’s CEO, Changpeng Zhao (CZ), pleaded guilty to a few felonies.
Per the US Department of Justice Attorney General Merrick Garland,[3]
“Binance has agreed to plead guilty to willfully violating the Bank Secrecy Act, knowingly failing to register as a money transmitting business, and willfully violating the International Emergency Economic Powers Act.
These laws ensure that our financial institutions are not available to designated terrorist organizations, drug traffickers, and sanctioned nation-states that threaten public safety and our national security.”
It was a shakedown in defense of the dollar, as cryptos are one way that people are replacing the dollar for use as money.
Per Eric Tucker, Linday Whitehurst, Gene Johnson, and Fatima Hussein, writing for the Associate Press, yesterday,[4]
“WASHINGTON (AP) — The U.S. government dealt a massive blow to Binance, the world’s largest cryptocurrency exchange, which agreed to pay a roughly $4 billion settlement Tuesday as its founder and CEO Changpeng Zhao pleaded guilty to a felony related to his failure to prevent money laundering on the platform.
Zhao stepped down as the company’s chief executive and Binance admitted to violations of the Bank Secrecy Act and apparent violations of sanctions programs, including its failure to implement reporting programs for suspicious transactions.”
Following the announcement, almost $1 billion was withdrawn from Binance.
Per Lyllah Ledesma and Omkar Godbole, writing for CoinDesk, today,[5]
“Following the news, Binance saw over $950 million in net outflows over the past 24 hours. ‘There are constant hourly net outflows of bitcoin and stablecoins after the CZ's resignation announcement,’ Hochan Chung, head of marketing at CryptoQuant, told CoinDesk. ‘However, compared to the total reserves of Binance, the current volume is not yet significant at all.’ Binance is set to continue operating as usual and make a ‘complete exit’ from the U.S market. The withdrawals are above average, but not unusually large on a weekly basis, an analysis of net hourly flows from CryptoQuant shows. Data from a Dune Analytics dashboard shows over $2.37 billion in various tokens left the exchange and some $1.78 billion in tokens were deposited.”
The connection between the collapse of FTX in November 2022, the bailout of the banks in March and later, and the collapse of Binance have all been discussed by the author. For more readings on the ongoing bank bailouts, read these articles, Silicon Valley Bank and Signature Bank Go Bust (March 13, 2023), Bank Bailouts (March 19), Well, This Won’t Stop Bank Bailouts (March 20), First Republic Goes Bust (May 1), What Do Banks Own (July 26), and Chinese Shaw Banks (August 17), [6-11]
In, Binance: Fast Money Loses Swift, the author summarized,[12]
“Signature Bank is cutting off Binance and any of its crypto exchange customers from trading cryptos priced under $100,000 on the SWIFT and Signet trading systems. Having crypto speculators lose money and lose access to these networks could cut off crypto from much of its demand, further suppressing the dollar price of the cryptos and the exchanges which trade them. The FTX dominoes are falling.”
In, The SEC Goes After Binance and Coinbase, the author noted,[13]
“The United States’ Securities and Exchange Commission (SEC) is suing Binance and Coinbase for fraud. Both companies are crypto trading websites, which means that cryptos may lose customers.
[…]
This will make cryptos harder to buy and sell. Without a place to buy and sell cryptos, it is hard to connect with individuals trading them. If the places that you do use can be shut down overnight, it could affect demand for cryptos.”
Will crypto survive the hype?
Cryptos are additional brands of unbacked credit: $¥€£₿ƉΞ. Using bitcoin (₿) as a reference, billions of people own gold and silver. Only few million own ₿, and mostly to sell for more $, based on how they say ₿ will be worth millions of $. ₿ can go to $1,00,000. ₿ is as good as the $. When people lose faith in the $, ₿ won't be as good as gold. ₿ is worth its weight in gold.
Once people lose faith in the $, people with gold coins won’t trade them for imaginary gold coins because women like jewelry, men want sex with women, and people use electronics. People hold gold hardware (computer chips) in their hands when they use their phone to trade cryptos. However, cryptos are a good way for Chinese citizens to avoid restrictions while their money out of China and into dollars and/or gold.
SBF and CZ have both been sued, with SBF going to prison and CZ paying massive fines. They were leaders of promoting crypto currencies through FTX and Binance, respectively. FTX is finished and Binance may be on its last legs. Will crypto survive the hype?
[1]https://www.hamiltonmobley.com/blog/confidence-games-ii
[5]https://www.coindesk.com/markets/2023/11/22/first-mover-americas-binance-binance-binance/
[6]https://www.hamiltonmobley.com/blog/silicon-valley-bank
[7]https://www.hamiltonmobley.com/blog/bank-bailouts
[8]https://www.hamiltonmobley.com/blog/well-this-wont-stop-bank-runs
[9]https://www.hamiltonmobley.com/blog/first-republic-goes-bust
[10]https://www.hamiltonmobley.com/blog/z52xy5bo0on7h93qzai1i449bk8h3v
[11]https://www.hamiltonmobley.com/blog/chinese-shadow-banks
[12]https://www.hamiltonmobley.com/blog/binance-fast-money-loses-swift
[13]https://www.hamiltonmobley.com/blog/the-sec-goes-after-binance-and-coinbase
