Ex-SEC Lawyer Claims Alameda Research Was Into Money Laundering

The FTX collapse is the biggest scam in the crypto sphere so far. Its impact was so widespread that a lot of companies felt the heat. Many other exchanges and crypto firms had to shut their operations. Currently, the world is witnessing the court proceedings that have been going on for months. Moreover, new statements and facts surface, giving this case new turns every day.

Ex-SEC Lawyer’s Statement and Its Impact

A recent report by a major media house revealed the testimonies of two ex-FTX employees. According to them, FTX shared close financial relations with its sister company, Alameda Research. As per the testimony, SBF founded both the companies. They were meticulously related in terms of finance and their terms were not disclosed to the customers. Alameda had access to FTX’s bank account and enjoyed some other privileges as well.

So much so that the former availed a $65 Billion line of credit from the latter. The defense states that these arrangements empowered Alameda to act as a market maker. As soon as this report came up, another statement surfaced. A former SEC enforcement lawyer said something that highlighted the spurious nature of this relationship. John Reed Stark has been quite vociferous in criticizing SBF’s defense.

He remarked that Alameda Research worked as a market-maker for FTX. Stark also explores the technicalities of being a market-maker. He said that genuine liquidity providers are mostly registered broker-dealers. The Financial Regulatory Authority (FINRA) recognizes and lets them work under the SEC’s purview. However, Alameda Research does not meet these criteria. It worked as a self-proclaimed, illegitimate, and misleading market maker.

Notably, Sam Bankman-Fried’s criminal trial started on October 3. The co-founder of FTX, Gary Wang is the prosecution’s key witness. He testified for six hours and divulged various facts about SBF’s misconduct. Wang said that the ex-CEO deceived investors and misused customer funds with his activities. Under oath, he said that Bankman-Fried was actively involved in these actions. On the other hand, SBF has pleaded not guilty to seven instances of forgery.

He just says that he was overwhelmed by the crypto environment and made mistakes. Nevertheless, Mark Cohen, SBF’s chief attorney is yet to present the case.

More Testimonies to Come

The prosecution has reached some people who have been close to SBF. One of those star witnesses is Caroline Ellison. She is Alameda’s ex-CEO and SBF’s on-and-off girlfriend. Ellison has pleaded guilty to several fraud charges. According to the prosecutor, she can provide some valuable insights into Alameda’s shady deals.

What Does This Mean For The Market?

Besides Alameda’s conduct, Stark also commented crypto market’s lawless and chaotic environment. He even compared it with the dystopian times. Criticizing the crypto industry, he said that the firms misled customers knowingly. He said that the players misuse terms like brokers, exchanges, and market-makers.

Conclusion

According to many experts, SBF is most likely to face severe punishment. But some are also saying he may escape punishment due to lack of evidence. Only time will tell what would happen to the case. The silver lining is that regulators will find out the illicit incidents gradually. The crypto space is going to see legal frameworks in some time.