Free on bail, Bankman-Fried faces “epic” legal fight
Sam Bankman-Fried, the fallen crypto mogul who told The Times last month that his personal fortune had dwindled to $100,000, won’t be spending the holidays behind bars. He and his defense team on Thursday negotiated a whopping $250 million bond deal that secured his release from federal custody.
The terms are highly restrictive. Mr. Bankman-Fried, 30, had to turn over his passport and will remain under house arrest at the California home of his parents, the Stanford Law School professors Joe Bankman and Barbara Fried. He’s been fitted with a bracelet that monitors his movements, must undergo a mental health evaluation, and will have to get government or court approval for any expenses above $1,000.
The bail deal was negotiated before Mr. Bankman-Fried boarded a plane on Wednesday night back to the U.S. If he misses a court date, or flees, his parents would be liable for that quarter-billion-dollar bond hit.
The legal case against him is moving swiftly. Mr. Bankman-Fried’s next court appearance is scheduled for Jan. 3. in Manhattan before U.S. District Judge Ronnie Abrams.
Prosecutors allege that Mr. Bankman-Fried masterminded “fraud of epic proportions,” saying he pilfered customer funds to prop up Alameda Research, the firm’s trading arm. FTX lost billions in the fallout of the crypto market collapse, leaving a global list of creditors. Bankman-Fried also faces federal charges of violating campaign finance rules.
Top associates have already turned on him. His former roommates — Caroline Ellison, who ran Alameda Research, and Gary Wang, FTX’s former chief technology officer — pleaded guilty this week and are cooperating with authorities. Prosecutors are urging more insiders to flip.
The S.E.C. pushed back against calls for new laws to protect crypto investors. In an interview with The Times on Thursday, S.E.C. Chair Gary Gensler said existing rules were adequate and that it was up to industry players to come into compliance. “The roadway is getting shorter,” he said, warning that crypto firms needed to register with his agency or could find themselves facing enforcement actions.
In other FTX news:
HERE’S WHAT’S HAPPENING
Donald Trump was the “central cause” of the Capitol riots. The former president carried out “a multipart plan to overturn the 2020 presidential election,” the Jan. 6 House committee said in its final report. The panel also issued a number of recommendations to ensure something similar could not happen again.
Winter storm blasts the middle of the U.S. Airlines canceled flights as white-out conditions and freezing temperatures hit vast parts of the country, upending holiday travel plans, causing power outages and forcing some governors to declare states of emergency. Airline stocks fell sharply Thursday.
What to Know About the Collapse of FTX
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What is FTX? FTX is a now bankrupt company that was one of the world’s largest cryptocurrency exchanges. It enabled customers to trade digital currencies for other digital currencies or traditional money; it also had a native cryptocurrency known as FTT. The company, based in the Bahamas, built its business on risky trading options that are not legal in the United States.
Who is Sam Bankman-Fried? He is the 30-year-old founder of FTX and the former chief executive of FTX. Once a golden boy of the crypto industry, he was a major donor to the Democratic Party and known for his commitment to effective altruism, a charitable movement that urges adherents to give away their wealth in efficient and logical ways.
How did FTX’s troubles begin? Last year, Changpeng Zhao, the chief executive of Binance, the world’s largest crypto exchange, sold the stake he held in FTX back to Mr. Bankman-Fried, receiving a number of FTT tokens in exchange. In November, Mr. Zhao said he would sell the tokens and expressed concerns about FTX’s financial stability. The move, which drove down the price of FTT, spooked investors.
What led to FTX’s collapse? Mr. Zhao’s announcement drove down the price and spooked investors. Traders rushed to withdraw from FTX, causing the company to have a $8 billion shortfall. Binance, FTX’s main rival, offered a loan to save the company but later pulled out, forcing FTX to file for bankruptcy on Nov. 11.
Why was Mr. Bankman-Fried arrested? FTX’s collapse kicked off investigations by the Justice Department and the Securities and Exchange Commission focused on whether FTX improperly used customer funds to prop up Alameda Research, a crypto trading platform that Mr. Bankman-Fried had helped start. On Dec. 12, Mr. Bankman-Fried was arrested in the Bahamas for lying to investors and committing fraud. The day after, the S.E.C. also filed civil fraud charges.
The U.S. urges China to share information about its Covid outbreak. Secretary of State Antony Blinken called for “transparency for the international community” in a call with his Chinese counterpart amid concerns that Beijing may be playing down the number of deaths. China’s top health authority reportedly estimated that 37 million people were infected on a single day this week, which would make the outbreak the world’s largest by far.
TikTok’s owner admits to inappropriately obtaining data on U.S. users. The popular video app’s parent, ByteDance, said that an internal investigation found that employees had gained access to the I.P. addresses and other information of users, including two journalists. The revelation comes as more than two dozen states have banned TikTok from government-issued devices.
Microsoft hits back at the F.T.C.’s bid to block its $69 billion bid for Activision Blizzard. The tech giant said the deal, the largest in video-game history, wouldn’t harm competition. It pointed to concessions it had made, including keeping games accessible to rivals. British and European Union antitrust regulators are also scrutinizing the deal.
Musk to shareholders: No more selling, for now
Tesla bulls, consider this a kind of Christmas gift and New Year’s resolution rolled into one: Elon Musk has vowed (again) not to sell any more Tesla shares, this time for at least two years.
Tesla shares plunged nearly 9 percent on Thursday, one of the worst performing stocks on the S&P 500. The electric carmaker’s stock is on track for its worst month ever, according to Reuters, as the company faces a whirlwind of challenges — from increasing competition to production woes — that go well beyond Musk’s preoccupation with Twitter.
Investors are restless with Mr. Musk. Shares have fallen 60 percent in the past year, wiping out roughly $600 billion from Tesla’s market cap. Adding to their grumbles: Mr. Musk has sold nearly $40 billion worth of Tesla shares, primarily to pay for his acquisition of Twitter.
Ross Gerber, the head of Gerber Kawasaki Wealth and Investment Management, and a large Tesla shareholder, has been pleading publicly with Mr. Musk to quit Twitter and return to Tesla full time. Mr. Musk himself blames the economy and the Fed’s policy of raising interest rates for Tesla’s share slump. Mr. Musk also said on Thursday that his personal Twitter account is “critical” to the performance of Tesla’s share price and was adamant that he wasn’t neglecting his responsibilities at the car company.
Investors this morning seem to be cheering his pronouncement. At 6:30 a.m. Eastern, Tesla was nearly 1.4 percent higher in premarket trading. Musk also said the company might buy back shares once the economy stabilizes.
Elsewhere in Mr. Musk news:
The Aftermath of FTX’s Downfall
The sudden collapse of the crypto exchange has left the industry stunned.
Not the most wonderful time of the year for bankers
Business at Wall Street banks is down, and looking worse for next year. Companies are pulling back from deal-making, lending, and initial public offerings amid rising interest rates and fears of a recession. Investment banking revenue in the United States is expected to have fallen by more than half, to nearly $35 billion as of mid-December. And that will take a toll on banker bonuses, The Times reports.
The bonus pool at top banks has shrunk sharply. At Goldman Sachs, JPMorgan Chase, Citigroup, Bank of America, Morgan Stanley and Barclays, it is expected to be 30 percent to 50 percent less than last year. “This is going to be a more difficult compensation season at Jefferies, just like it will be for every firm in our industry,” the bank’s chief executive, Richard Handler, and president, Brian Friedman, wrote in a memo to employees.
Top performers may see only a small dip in their bonuses, while a majority of employees may see cuts of 80 percent or more. Some bankers will receive no bonus. Banks expect some workers who receive the Wall Street equivalent of coal in their stocking to leave their jobs, which could reduce downsizing next year.
“Journey is not, and should not be, political.”
— A lawyer for Neal Schon, the founding guitarist of the rock band Journey, wrote in a cease-and-desist letter to the band’s keyboard player, Jonathan Kane, insisting he stop performing at events for former President Donald Trump “as Journey,” and performing Journey songs at those functions.
Scott Minerd, longtime market guru, dies at 63
Scott Minerd, the chief investment officer at Guggenheim Partners and a widely followed commentator on markets and the economy, died on Wednesday of a heart attack during his regular workout, the asset-management firm announced. He was 63.
Mr. Minerd was a towering presence at Guggenheim, both literally — he was a former competitive bodybuilder who frequented Gold’s Gym in Venice, Calif. — and intellectually, as an architect of the firm’s investing strategy. He joined what became Guggenheim in 1998 as a managing partner soon after its founding, having previously worked at Credit Suisse First Boston, Merrill Lynch and Morgan Stanley.
Mr. Minerd helped build Guggenheim into a major asset manager. Thanks in large part to his unconventional investing approach, the firm’s assets under management have grown to about $285 billion. He also became a frequent presence on CNBC and Bloomberg TV, commenting on bonds, markets, Bitcoin and more. Many of his responsibilities will be assumed on an interim basis by Anne Walsh, the chief investment officer of Guggenheim Partners Investment Management.
Mr. Minerd is survived by his husband, Eloy Mendez.
Here’s how he is being remembered on Wall Street:
“Scott was a key innovator and thought leader who was instrumental in building Guggenheim Investments into the global business it is today,” said Mark Walter, Guggenheim’s C.E.O.
“He was a brilliant man whom I got to know in the last five or so years. He was an old fashioned handshake businessman whose word was his bond,” tweeted Bill Ackman, the hedge fund mogul.
“Scott was a fixed-income master — brilliant at deciphering intermediate and long-term changes in interest rates. He was a dear friend and supporter. I will miss him,” tweeted Bill Gross, a co-founder of Pimco and Wall Street’s longtime “Bond King.”
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