FTX's Sam Bankman-Fried will go to Jail, according to Cryptocurrency Billionaire Mike Novogratz
Mike Novogratz, the CEO of Galaxy Digital Holdings and a Bitcoin maximalist, has been hit hard by the crypto winter; the bankruptcy of FTX is just the most recent setback.
According to the Bloomberg wealth index, Novogratz has lost 64% of his net worth this year, which is currently down to $1.8 billion. Last month, Novogratz's crypto financial services firm declared $76.8 million exposure to FTX.
In response to Bankman-admission Fried's at last week's New York Times DealBook Summit that "I didn't ever try to commit fraud," Novogratz spoke with Bloomberg TV on Thursday, and he had enough information to draw a conclusion.
Sam and his accomplices "perpetuated a scam," claimed Novogratz. They placed bets that the customer later admitted were "poorly risk managed" using the money from the customer. Even if Bankman-remarks Fried's increasingly have a lawyerly ring to them, Jacob Carpenter of Fortune commented that it was "sort of shocking that his lawyers are letting him talk." "After watching two interviews, I kept thinking of the word 'delusional'. He is experiencing an unreal reality. There was a lot of grandiosity and narcissism.
"The issue was that he stole our money. As a result, Novogratz argued that "people will go to jail, and should go to jail," and that "he has to be prosecuted."
Last month, FTX imploded spectacularly, startling many both inside and beyond the crypto community. The $32 billion exchange had made a name for itself in the industry and built its brand by working with famous athletes and other personalities. Its demise caused the bitcoin industry to lose trust and rekindled calls for stricter regulation.
On November 11, the same day that the company and its linked trading arm Alameda Research filed for bankruptcy, Bankman-Fried announced his resignation as CEO of FTX. Following a liquidity crisis brought on by either a cryptocurrency counterpart of a bank run or the sudden discovery of significant fraud, desperate FTX users made $6 billion in withdrawal requests in a matter of days while there were doubts about the exchange's viability.
One of the main charges against Bankman-Fried is that he funded dangerous bets at Alameda Research using customer monies from his cryptocurrency exchange.
Bankman-Fried stated (notice the use of the word "tried") at the DealBook conference, "I didn't ever try to perpetrate a fraud on anyone." Just one month prior, he said he was enthusiastic about the future of FTX, which he perceived as a successful and expanding company. "What happened this month astounded me. And after recreating it, there are some things I regret doing. I obviously made a lot of errors.
This week, some well-known investors supported Bankman-Fried and his justification of apparent incompetence. "Call me crazy, but I think @sbf is telling the truth," wrote Pershing Square Capital Management's billionaire founder Bill Ackman on Twitter on Wednesday.
I lost millions as an investor in @FTX and received criticism for serving as a paid spokesperson for the company, but after listening to that interview, I'm in @billAckman's camp concerning the kid, tweeted Kevin O'Leary, a Shark Tank star and investor.
The Bankman-Fried case will be prosecuted "slowly"
However, Bankman-Fried "will be probed, he will be charged, and if the facts turn out the way I expect them to, he will spend time in jail," according to Novogratz.
He said that it might take some time:
"I do believe that if the man committed a crime, people will ask why he is not being held in handcuffs. The regulatory response and [prosecution] will proceed more slowly than most people would like since white-collar crime takes a long time to prosecute, Novogratz continued.
Bankman-Fried should be concerned about going to prison, according to Mark Cuban, the Dallas Mavericks' billionaire owner, who said as much to TMZ last week.
I don't know everything, but if I were him, I'd be worried about spending a lot of time in jail, he said. It certainly sounds horrible. I really spoke with the man and found him to be intelligent, but gosh, I had no clue he would, you know, steal other people's money and use it for his own purposes. Yes, it certainly appears to be what transpired.
Bankman-Fried, whose net worth reached $26 billion during FTX's meteoric rise, said this week that he is having financial difficulties. He revealed to Axios on Monday that he only had $100,000 in his bank account. He declared that he had "near to nothing" remaining at the DealBook summit. And he said, "That's something I'm trying to sort out right now," when Mario Nawfal asked him how he was paying his attorneys during a Twitter Space.
Although Novogratz referred to the FTX scandal as a "setback for crypto," he is still optimistic about the industry and said, "This too shall pass." Due in part to the collapse of the associated cryptocurrencies luna and the stablecoin Terra, his company suffered a $555 million loss in the second quarter. It made the announcement to reduce its global workforce by up to 20% last month and reported a third-quarter deficit of $68.1 million.
However, Galaxy, which is now listed in Canada, is still dedicated to eventually going public on the Nasdaq, and Novogratz sees some potential in the current crypto market slump. He predicted that there will be lots of distressed assets. "We're considering a few little purchases."
FTX, Bankman-Fried, and Galaxy Digital were contacted by Fortune for comments, but no responses were received right away.
Source: Fortune
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