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Keep Talking: The Risky Strategy of the Disgraced Crypto King and Ex-FTX Chief

NEW YORK: Disgraced cryptocurrency tycoon Sam Bankman-Fried, ubiquitous on talk shows and conference panels, defies the advice of the legal profession and remains in the public eye despite the real threat of prosecution and even jail time.

As an architect and former CEO of a bankrupt company unable to account for billions of dollars in missing customer assets, Bankman-Fried is under scrutiny from regulators, prosecutors and politicians.

Bankman-Fried’s media blitz heads to Washington on Tuesday, where the 30-year-old has agreed to testify before the House Financial Services Committee at a hearing on the crypto exchange’s collapse.

The testimony in the U.S. capital marks a throwback to the heady period before FTX’s sudden implosion last month, when the mop-haired Washington computer whiz was hailed as a respectable face for cryptocurrency who dished out tens of millions of dollars in political donations.

“By speaking out, Mr. Bankman-Fried is putting himself in greater danger and acting contrary to what competent counsel would advise a client to do,” said Jacob Frenkel, a former Justice Department prosecutor at Dickinson Wright.

Like everyone else, Bankman-Fried had embodied the apparent advent of cryptocurrency as a major financial market and no longer a frowned upon get-rich-quick scheme shunned by the establishment.

The Massachusetts Institute of Technology graduate, the son of two Stanford Law School professors, fit the profile of the tech prodigy as he posed for magazine spreads and pushed Super Bowl TV spots and other splashy marketing campaigns to attract investors. to pull.

But after reaching a US$32 billion valuation, FTX’s implosion came swiftly after a November 2 report on cryptocurrency news site CoinDesk about ties between FTX and Alameda, a trading company also controlled by Bankman-Fried.

The report revealed that Alameda’s balance sheet was built heavily on the FTT currency – a token created by FTX and with no independent value.

The price of FTT plummeted in early November, confusing both Alameda and FTX, where Alameda held large trading positions.

Reeling from customer withdrawals and a shortfall of about US$8 billion, FTX and some 100 related entities filed for bankruptcy protection on Nov. 11, inviting scrutiny from regulators, prosecutors and outraged customers who have rejected the cryptocurrency hype. had believed.

Among the revelations, FTX backed Alameda with billions of dollars in client funds that are now likely lost forever. Such use of investor money would constitute fraud if it violated the terms of the agreement between clients and FTX, legal analysts said.

Questions also linger over whether Bankman-Fried engaged in market manipulation or unlawfully provided inside information to Alameda.