SEC Charges Samuel Bankman-Fried with Defrauding Investors in FTX [pdf]

That was fast...

This might just be the 'first arrow' from the SEC with much more to be added down the track, but it's interesting to see that they have gone in heavily on defrauding equity investors in the FTX business -- rather than pulling the rug on customers.

Either that's because it's easier for the SEC to prove, and get it to the point of demonstrating fraud? Or the US customers and the FTX US business were relatively untouched throughout this whole process, so there is less to go on for US customer fraud?

Or, perhaps, this is just the first arrow to smoke out more data, informants, etc, with a strategic view to adding further allegations down the track?

It's sort of curious that this SEC action is to protect the venture capital investors like Sequoia who invested in FTX shares directly.

If I were a retail investor who lost my savings in FTX, I might be feeling upset that the government is rushing to action in defense of billion-dollar funds whose own due diligence failed massively, while seemingly nothing is being done to help those who invested in crypto based on FTX's Super Bowl ads and celebrity endorsements...

At the same time, I fully understand why it's like this. Because the VCs bought actual FTX shares, the SEC has a clear case of securities fraud. The law is pretty clear about what happens when you sell shares in your company and lie about it.

In contrast, it's not really settled whether the little people who sent money to FTX in exchange for a crypto ledger entry were actually buying securities, commodities, custodial services, or something else — maybe nothing at all. (The crypto guys love this ambiguity, of course! They've been lobbying for regulation that keeps crypto in a no-man's-land where tokens that look and work like securities would still be something else.)

This seems to be the reason why the SEC doesn't have a clear-cut case to protect FTX customers, but does have a case to protect rich VC crypto-bro partners.

I'll just quote part of what I said a month ago :)

> And given what's leaked from their balance sheet, I don't see how people avoid jail time.

https://news.ycombinator.com/item?id=33608691

I'll also add that SBF going on tour was the stupidest thing he could have done. Every time he spoke, he was giving the government more evidence. Hubris has often been the downfall of the rich and powerful throughout history. What's changed is now we get to see it in real time with people like Musk and SBF.

I hope that swiftness of these charges will slightly diminish all these voices that keep repeating everywhere that 'the man' is on it with him, that the media defend him etc.