A visibly changed Sam Bankman-Fried appeared in court this week. The former billionaire, once known for his defiant and laid-back demeanor, has given way to the seriousness of a man facing serious charges related to the demise of FTX. The SBF, as it is known, now finds itself on a six-week legal tightrope, dragged on one side by stories of monumental fraud and on the other by claims of innocence. We return to it in Cryptic Analysis after the week’s major news.
Block 1: Essential news
- UBS is coming to Ethereum
UBS Asset Management, a branch of the Swiss bank UBS, started a pilot project for a tokenized investment fund on the blockchain Ethereum, as part of its Guardian project, in collaboration with the Monetary Authority of Singapore (MAS). This initiative aims to explore and understand fund tokenization using UBS’s expertise in bond tokenization and structured products. Thomas Kaegi, head of asset management at UBS, emphasizes that the project will work with financial institutions and technology providers to improve liquidity and market access for clients.
- Do Kwon played with the Terra volumes
Do Kwon, the former CEO of Terra (LUNA), pleaded guilty to falsifying Terra’s trading volume, according to US SEC documents. The message exchanges reveal a conversation between Kwon and Daniel Shin, founder of payment app Chai (and co-founder of Terra), about creating undetectable fake transactions. Shin, who left Terra in 2020, is currently indicted in South Korea for illegal trading and breach of trust, while Kwon, detained in Montenegro, will be extradited and tried in several countries.
- Brazil: ID cards on the blockchain
Brazil is starting to use blockchain technology for its new ID cards, based on a decree published at the beginning of the year. From November 6, the new cards, equipped with QR codes and digital duplicates, will use blockchain to secure data. The states of Goiás, Paraná and Rio de Janeiro initiated the deployment, which will be extended to the entire country. Technology from Serpro, a national technology solutions provider, facilitates this shift with the b-Cadastros private blockchain platform built with Hyperledger Fabric.
- Hackers exploded in September
September 2023 was the worst month of the year for cryptocurrency hackers with more than $332 million in losses, mainly due to the attack on the Mixin Network protocol. Despite this high number, total annual losses of around $1.34 billion remain lower than those recorded in 2022 and 2021. 2023 was relatively quiet until September. The Lazarus group, linked to North Korea, has often been identified as responsible for numerous cryptocurrency hacks.
Combining all incidents in September, we confirmed a loss of approximately $332 million due to exploits, hacks and fraud.
Exit fraud was ~$1.9 million
Flash loans were ~$0.4 million
Usage was ~$329.8 million
More details can be found below 👇 pic.twitter.com/DMFN9LWU8V
— CertiK Alert (@CertiKAlert) September 30, 2023
Block 2: Cryptic analysis of the week
This week, Sam Bankman-Fried, a 31-year-old former cryptocurrency mogul, appeared in court for a highly anticipated trial facing a litany of fraud related to the FTX collapse. Dressed in a gray suit, white shirt and striped tie, the former ‘wonder man’ had short hair and carefully tied shoelaces like a recruit fresh into the army on the first day of boot camp.
Courtroom sketch of the Sam Bankman-Fried trial.
Cameras are not allowed inside the courtroom, meaning Bankman-Fried’s appearance can only be gleaned from courtroom sketches.
Gone are the days when Bankman-Fried, often referred to as SBF, set the crypto community and Washington DC social lounges alight with his signature tousled hair and gaudy Bermuda shorts, once symbols of his provocative affluence. This brutal transformation seems to foreshadow a sobering reality: he now faces the prospect of spending much of his life behind bars.
The legal documentation surrounding FTX is indeed controversial. However, the prevailing sentiment among legal experts suggests a damning scenario for SBF and a conviction is on the horizon.
At the start of the trial on Wednesday, US prosecutors portrayed Mr Bankman-Fried as a master fraud mastermind, orchestrating “fraud on an epic scale”. Prosecutors accuse him of systematically lying to a trio of stakeholders: investors, lenders and FTX’s customer base. “An instant heist that stole billions from thousands of people,” said Deputy Prosecutor Thane Rehn.
The prosecutor then explained that Bankman-Fried used client funds, amassed through a mountain of lies, to finance an extravagant lifestyle. Notably, he bought opulent residences and attracted the favor of high-profile figures such as sports icon Tom Brady and political stalwarts such as former Democratic President Bill Clinton.
But Mark Cohen, Bankman-Fried’s defense attorney, presented a contrasting account in a quiet opening statement. He portrayed “Sama” as a victim of judicial review and emphasized that his client’s actions were based on good faith.
The opening salvos from both legal camps set the stage for a grueling six-week legal battle over the fate of the former billionaire, who until recently was a luminary in the cryptosphere. The defense should argue that SBF was simply a naive young man, trapped and misled by more experienced and devious advisers. The defense team should therefore invoke the “advice” of the defense, suggesting that SBF’s impugned actions were primarily in response to the ill-advised advice of others.
The prosecution’s case is expected to rely heavily on testimony from former key witnesses, including former associates of Bankman-Fried, most of whom agreed to cooperate with government officials. Today begins the testimony of Gary Wang, co-founder of FTX and a close acquaintance of Bankman-Fried.
In initial exchanges, prosecutors described SBF’s enterprise as a fragile “house of cards built on fraud,” while the defense worked to highlight its seemingly sincere intentions. The trial is expected to include testimony from disgruntled FTX investors and customers affected by the company’s insolvency, promising a gripping legal drama in the coming weeks.
Block 3: Tops & Flops
(Click to enlarge)
Block 4: Reading of the week
Sam Bankman-Fried made sound business decisions, lawyers say (Wired, in English)
Are NFTs really dead and buried? all characters indicate “yes” (Interview, in English)
Personal Connection – The Real Power of Bitcoin (Bitcoin Magazine, in English)