REGULATION

SBF's cryptocurrency "House of Cards" is currently a hit, with cameo appearances by the US Department of Justice, CFTC, and SEC.

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House of Cards is a political thriller web television series in the United States, originally referring to a structure built of playing cards that is easily collapsible.

In the SEC's complaint, SBF's FTX and Alameda are described as a house of cards built on fraudulent activities. SBF is currently facing multiple regulatory lawsuits and is seemingly another regulatory tug-of-war house of cards.

Currently, SBF is being sued by three major U.S. law enforcement agencies, including the U.S. Department of Justice (DOJ), SEC, and CFTC, while SBF himself is being detained in a prison in the Bahamas.

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DOJ: FTX Accused of the Largest Financial Fraud in U.S. History

In the indictment released by the DOJ, SBF is charged with eight counts of conspiracy, wire fraud, money laundering, and violating campaign finance laws. The indictment spans 13 pages, and if convicted, SBF could face up to 115 years in prison. U.S. prosecutor Nicholas Biase stated.

FTX's newly appointed CEO, John Ray, appointed by the court, stated during the hearing that the criminal activities were straightforward embezzlement. Senior FTX executives had "free rein" over subsidiary funds, and despite managing billions, FTX only used QuickBooks software for accounting (QuickBooks is accounting software designed for small to medium-sized businesses).

CFTC: SBF Charged with Fraud

According to legal documents, the CFTC accuses SBF and other senior FTX executives of borrowing hundreds of millions from Alameda Research to purchase real estate and make political donations.
This is because in FTX's code, Alameda is treated as "unlimited credit," so these executives borrowed through Alameda, effectively misappropriating funds from FTX users.
On the other hand, the CFTC found that as early as May and June of this year, Alameda did not have enough liquid assets to repay the loans, and SBF was aware of this. So under SBF's guidance and authorization, Alameda significantly increased the proportion of user funds, which amounted to around $8 billion, meaning FTX misappropriated user funds (≤ $8 billion) to Alameda.

This is completely different from SBF's initial media tour claim of being "unaware."

SEC: Civil Fraud Charges Filed

In this thrilling House of Cards drama, the SEC naturally has a role to play.

The SEC has filed a civil lawsuit, stating that SBF orchestrated a carefully planned fraud that began on the day FTX was launched and ended on the day it collapsed.

The SEC alleges that FTX misappropriated user funds for undisclosed venture capital investments, real estate purchases, and significant political donations. The deceived parties include not only users but also globally renowned institutional investors such as BlackRock, Sequoia Capital, and the Canadian Teachers' Retirement Fund.

SEC Chairman Gary Gensler: SBF built a house of cards on deception, while telling crypto investors FTX was one of the safest structures.

Congress Steps In

Prior to bankruptcy, SBF's pride lay in his ability to freely navigate Washington, D.C. (indicating close ties with politicians). Therefore, after bankruptcy, politicians also need to be accountable to their constituents.
SBF was originally scheduled to attend a hearing of the House Financial Services Committee, which of course did not happen after his arrest. In response, Chairwoman of the Financial Services Committee, Maxine Waters, stated that SBF needs to be held accountable, but the American public also has the right to know everything from SBF.

Maxine Waters: SBF has harmed over a million people, taking away their hard-earned savings. The public is eager to get answers from Congress. While disappointed that SBF could not attend, we will still strive to uncover all that has happened.

The Bahamas: Taking Control of Real Estate

Reports indicate that Bahamian authorities are attempting to take control of SBF's real estate, which comprises approximately 35 properties worth around $256 million.

A Bahamian lawyer stated that U.S. judges should reject FTX's bankruptcy proceedings because all of FTX's assets fall under Bahamian jurisdiction. However, the U.S. does not recognize bankruptcy proceedings in other countries, so Bahamian authorities have the right to control FTX's Bahamian assets.

However, the controversy surrounding bankruptcy proceedings does not affect extradition.

Extradition terms are triggered only when U.S. judicial authorities file charges. Bahamian Attorney General Ryan Pinder stated that once the U.S. makes a formal request, extradition obligations will be handled accordingly.

Bankruptcy Narratives

It is estimated that SBF will face multiple lawsuits, including those from the DOJ, CFTC, SEC, international class-action lawsuits, and potentially regulatory and judicial actions from the Bahamas in the future.

Regulatory agencies have observed the issues leading to FTX's bankruptcy from their respective perspectives, highlighting the complex regulatory challenges posed by exchanges (or crypto startups). The collapse of FTX has inadvertently created a house of cards in regulatory struggles.

From the beginning of the house of cards to its end.