CoinMarketCap News, Dec 14: SBF Faces the Music, as Prosecutors Warn 'We're Not Done'

It's been a whirlwind 24 hours. Sam Bankman-Fried appeared in court in The Bahamas — and was denied bail. His legal team had proposed to post $250,000, with SBF wearing an electronic tag. But a judge concluded he was too much of a flight risk. All this means that he'll be behind bars until February at the earliest, which is when an extradition hearing will take place. SBF told the court he will fight any effort to send him to the U.S. — meaning this may be a long process. He's been taken to the Bahamas Department of Correctional Services facility, otherwise known as Fox Hill. In 2020, a U.S. report claimed this prison suffered from "overcrowding, poor nutrition, inadequate sanitation, poor ventilation and inadequate medical care."

The U.S. Securities and Exchange Commission was first to set out its allegations against SBF. FTX's founder has been accused of "orchestrating a massive, years-long fraud" — diverting billions of dollars in customer funds for his own personal benefit. It's claimed Alameda Research was used "as his personal piggy bank to buy luxury condominiums, support political campaigns and make private investments, among other uses" — with the crypto hedge fund allegedly having an "virtually unlimited line of credit" at FTX. The SEC said Bankman-Fried's "house of cards began to crumble" in May 2022 when the crypto markets crashed — a downturn linked to the demise of Terraform Labs.

SBF is facing eight criminal counts, including wire fraud and money laundering. Prosecutors say this covers four areas of misconduct — defrauding customers and investors of FTX, defrauding Alameda's lenders, and violating campaign finance laws. The Southern District of New York alleges billions of dollars were stolen from FTX customers — and that the 30-year-old made illegal campaign contributions to Democrats and Republicans. U.S. Attorney Damian Williams claims "dirty money" was used to buy influence. He's urged politicians who received donations to "return that money to innocent victims." Joe Biden received over $5 million during his presidential campaign, but the White House won't say if it'll be given back.

U.S. prosecutors have defended the timing of Sam Bankman-Fried's arrest, amid criticism that it stopped FTX's founder from testifying before Congress. At a news conference, U.S. Attorney Damian Williams confirmed that he had authorized the charges last Wednesday, and this led to a grand jury indictment last Friday. All of this meant that the wheels were in motion before SBF had actually confirmed that he would appear before Congress. Williams confirmed that the Southern District of New York has been working "around the clock" to determine what happened. And the U.S. attorney strongly suggested that charges against other individuals may follow, telling reporters: "We're not done."

FTX's financial troubles began months and possibly years ago, the bankrupt exchange's new CEO has told Congress. John Ray said $8 billion of customer money has been lost — and "by definition, I don't trust a single piece of paper in this company." He told U.S. politicians that there was virtually no distinction between FTX and Alameda Research. Ray also confirmed that, in some cases, Sam Bankman-Fried was both the lender and recipient of loans given to him personally — and it's unclear what these funds were used for. He said over $1 billion in funds has been recovered so far, and they're being securely stored in cold wallets. However, he stressed this is an ongoing process that will take weeks and perhaps months.

Some of the most enlightening parts of the hearing came when committee members were asking their questions. Rep. Brad Sherman, a long-time critic of crypto, likened Sam Bankman-Fried to a snake. Congressman Al Green said that he found it hard to believe that investigators were dealing with "conscientious stupidity." It's emerged that SBF provided written testimony before his arrest — and planned to tell Congress he "f***** up." Emanuel Cleaver described this as "disrespectful" and "absolutely insulting." In a particularly eyebrow-raising moment, Cleaver went on to ask Ray whether he would support proposals to change the name of crypto to "creepydoe."