HODL, we’re just getting started

While the music hasn’t quite stopped for Sam Bankman-Fried, yesterday may have marked the beginning of the last verse. Federal prosecutors officially unsealed criminal charges against the FTX founder and former CEO in the morning, around the same time the crypto exchange’s newly-appointed CEO John Ray III was testifying in front of Congress.

📝⚖️ What SBF is being charged with: While none of these should come as a surprise if you read last Tuesday’s newsletter, the list of unsealed criminal charges against SBF is quite long. Eight counts long, to be exact, covering wire fraud, securities fraud, and campaign finance violations related to FTX customer funds being allegedly used to illegally donate to both Democratic and Republican groups.

These charges also come quite swiftly considering the type of case, Bloomberg reports. It took more than two years after Enron’s collapse for its CEO – who was ultimately convicted of fraud and other counts – to be charged.

The paper, citing legal experts, attributes the speed in this case to two potential things: 1) an “avalanche of evidence,” or 2) prosecutors feeling pressure to act quickly, since the 14-page criminal indictment was relatively barebones compared to what’s normal in a major fraud prosecution. This wouldn’t be without precedent either; convicted fraudster Bernie Madoff was charged within days of the SEC being told he was perpetuating a Ponzi scheme.

Though there is a third option: there’s no “avalanche of evidence” yet, but the case is fairly open and shut. And that’s also a real possibility, per new FTX CEO John Ray III’s testimony before the House Financial Services Committee yesterday.

Quick reminder: Ray also oversaw Enron through its fraud and bankruptcy proceedings. And while that fraud was highly sophisticated, per his testimony, the FTX situation appears to be “really just old-fashioned embezzlement” and not all that complicated.

• He described FTX as a company that kept few records, using the small business accounting software QuickBooks, a quite unusual move for a multibillion-dollar company, and tracking invoices in the messaging app Slack (on the disappearing messages plan, no less).
• And speaking of messaging apps – The Australian Financial Review published a report yesterday detailing how SBF and at least three other FTX insiders were part of a Signal group chat named “Wirefraud,” which was used to send end-to-end encrypted information about FTX and its hedge fund, Alameda Research, leading up to its collapse (you can’t make this stuff up).

🇧🇸 Meanwhile, in the Bahamas: SBF was denied bail by a judge yesterday. He’s currently sitting in Bahamian jail awaiting potential US extradition.