Okay, the Summary First | TLDR | Centralized Exchanges

For long it was known that the weakest link of the cryptoverse is the crypto exchange because of its centralized nature and exposure to hackers. SBF and FTX took this one step further when the world witnessed that the people running an exchange were no saints and they could be the willful culprits in the scheme of things. Not that SBF was the first, nor will he be the last in a verse devoid of regulation.

SBF played a dirty game, which in hindsight, appears to have been the plan anyway. There seem to be enough and more instances of the crypto funds being moved to holding companies, political patrons, personal accounts, and even parents’ accounts. The trial which has already started plans to bring out these anomalies which seems to have been a trend with SBF and FTX.

The trial will witness SBF being charged on seven counts that include securities fraud, wire fraud, and money laundering. SBF’s side is not taking this lightly either. They are planning to annul the presentation of former aides and associates as witnesses. In other words, they want no witness to the wrongdoings to testify against the wrongdoer.

This trial will be watched closely and certainly will set some standards for crypto exchanges to operate in the real world. Let’s hope that customers end up being the winners.

Now Everything Other Than TLDR | The No-Regrets SBF and FTX Mismanagement

Since the time the wrongdoings at FTX came to the fore, the founder and CEO, Sam Bankman-Fried (SBF) appears to have no regrets for his actions. Such blatant has been his defiant behavior that it makes him border on being a psycho. Bullying potential witnesses, calling names, asking the court to grant him five free days a week from jail time, and no-regrets demeanor are just a few of the episodes that the world witnessed before the trial.

One other thing that came to the fore is that a centralized exchange is not just the weakest link for easy attacks from scammers and hackers, but also from the exchange operators. While we thought all was fine with FTX (exchange), the owners/operators had figured out a way to access customer funds from the backend and use it for their benefit.

SBF and FTX were not the first to be caught in such a bad act but certainly one of the most defiant ones. FTX instantly caused investors and traders to remove all their holdings from centralized exchanges and move them to their wallets. The call for using Decentralized Exchanges (DEX) also grew louder during this period. And both wallets and DEXs seemed to be the real solution for Centralized Exchange (CEX. Like FTX) and SBF kind of scenario.

But the solution is not where it ends. All that was lost has to be recovered and the customers have to be paid back. This trial will be closely watched and the outcome will be awaited with bated breath.

What about SBF?

SBF, FTX, and Mockery of Law and Customer Trust

The trial has had some serious work done by lawyers, professionals, and crypto experts over the past few months. We already know that the lawyers' fee alone stands at $300 million and is only set to increase. Sadly, this goes from the money recovered for paying back to customers. In other words, customers are paying for the lawsuit; the one they never intended to be in.

A closer look reveals how FTX managed to divert funds to holding companies like Alameda Research, political patrons, celebrities (probably the only legit transactions), personal accounts, and even Bankman and Fried’s (father and mother) accounts. This led to the implosion of FTX and Alameda Research nearly a year ago and cut off the customers from being able to get their funds.

It was estimated that $8 billion in customer funds were frozen and the exchange later attempted to file for bankruptcy. The impunity with which the exchange and its owners expected taxpayers to carry the burden of clear mismanagement is appalling.

If that was not all, SBF and his behavior only angered the world.

SBF and His Threats | Requesting 5 Days Free Time Every Week From Jail

Some of SBF's actions seemed right out of Hollywood and others from a mental asylum. Trying to browbeat potential witnesses (because of which SBF was eventually jailed) to requesting five days of free time from jail, the world saw it all.

FTX, much like any exchange, held customers’ funds from many nationalities. For many, the funds would have been their life savings while for others a good portion of their planned retirement. FTX and SBF trampled upon all those dreams without any regrets. Not surprisingly, the world wants to see him in jail and get the strictest punishment that can be meted out.

How Does It Go From Here? | The Six Weeks Trial

While many things were spoken about the mismanagement of funds, the political patrons were surprisingly spoken the least about. It’s left to our imagination why that happened, but it seems one class of culprits will go scot-free after all.

What should we do now? Right now, wait and watch because this time it’s the real deal. The trial should set an example of what should not happen and hopefully get the wrongdoers to pay.

Will this happen? Only time will tell.

Image Courtesy: The Economic Times, India dated 4th October 2023

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