[Asia Economy New York=Special Correspondent Joselgina] Reports have emerged that Sam Bankman-Fried, the founder of FTX, one of the world's top three cryptocurrency exchanges currently undergoing bankruptcy protection, may face several years in prison. If found guilty of fraud charges, he could face a maximum sentence of life imprisonment.
On the 5th (local time), U.S. economic media CNBC reported that the U.S. Department of Justice, Securities and Exchange Commission (SEC), and Commodity Futures Trading Commission (CFTC) are investigating the collapse of FTX.
The collapse of FTX is currently attributed to unauthorized use of billions of dollars of customer funds to cover losses at its subsidiary hedge fund Alameda Research. The amount of customer funds that disappeared is estimated to exceed $8 billion. Accordingly, if Bankman-Fried is indicted by U.S. authorities, key charges are expected to focus on whether he deceived customers and lent or supported customer funds to subsidiaries or others.
CNBC stated, "Just a few weeks ago, FTX was valued at $32 billion (approximately 41.6 trillion KRW)," adding, "New narratives are emerging that Bankman-Fried, who rose as a business magnate by building his own cryptocurrency empire, was simply an inexperienced novice entrepreneur who did not even know what he was doing."
Bankman-Fried has been unable to explain how billions of dollars of FTX customer funds were transferred to affiliated company Alameda Research. The legal team handling FTX's bankruptcy criticized that a significant amount of corporate assets were taken out without authorization and disappeared, and that FTX was operated like Bankman-Fried's personal domain. John J. Ray III, the new CEO of FTX who is overseeing restructuring, also criticized, "In my 40 years of restructuring experience, I have never seen such a complete failure of corporate control."
After the FTX bankruptcy incident, Bankman-Fried appeared in public and emphasized that he did not fully understand how the situation was unfolding, that this was a mistake, and that he never intended to commit fraud. He has also denied criminal responsibility. However, if he promised FTX customers that their funds would not be used as loan collateral or for other purposes, there is an analysis that fraud charges could be sufficiently applied.
Renato Mariotti, a former federal prosecutor turned attorney, said, "It certainly seems like there are fraud charges," and added, "If I were his lawyer, I would tell him to be very worried about prison time." Braden Perry, once a senior attorney at the U.S. Commodity Futures Trading Commission, said, "If Bankman-Fried is convicted of fraud or other charges, he could spend the rest of his life in prison."
In addition, Bankman-Fried may face civil and criminal lawsuits, as well as personal lawsuits, from millions of FTX creditors. CNBC warned that "Bankman-Fried has not yet been charged or tried for crimes," but he could face various legal controversies.
First, Richard Levin, a partner at the law firm Nelson Mullins Riley & Scarborough, predicted that Bankman-Fried could be indicted on three charges within the United States. It is analyzed that he could be criminally charged by the Department of Justice for violations of securities laws, bank fraud laws, and wire fraud laws.
Experts also foresee that charges could be applied for breach of fiduciary duty by using customer funds to artificially stabilize the price of FTX's own coin, FTT. Contrary to Bankman-Fried's denial of intent, fraud charges could also be applied. Furthermore, civil lawsuits and related class actions from regulatory authorities such as the SEC and CFTC are expected to follow.
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