IS FTX THE BIGGEST THEFT IN HISTORY & WILL SBF GO TO JAIL?

 

As I sat down to blog about FTX and Sam Bankman-Fried (SBF), the first couple of lines of a Robert Louis Stevenson poem floated across my mind -- "The moon has a face like the clock in the hall; She shines on thieves on the garden wall."  There's a rustic imagery of a bright moon over a burglar on a wall I once saw in a kiddy story book that's etched in my mind from childhood days. It's one of those things which never goes away. Today, petty thefts are not news. And we are no longer shocked by the audacity and the astronomical sums of money involved. 

I collated a list of the biggest financial fraud, scam and theft in modern history to have a sense of how SBF lines up. To have a comparative sense, the sums are adjusted for inflation.

Bernie Madoff still holds the record, but his is an investment scam. We don't know how much Madoff made off, excuse the pun. For the investment frauds, there are still substantial asset recoveries for distribution to investors. In the case of accounting frauds where the companies inflated profits, some investors probably lost much, but it's certainly not the sums indicated here. Similarly, for insider trading, we know how much Milken milked the investors, excuse the pun again. But that's not to say investors lost that much. In the case of embezzlement and theft, that's the real money gone.

So looking at those highlighted in yellow, FTX is the 3rd biggest theft in history.  Pardon the pun yet again, but how much did customers get fried by Sam Bankman-Fried is not yet known. It is estimated about US$10b of customers' deposits have disappeared. How much of investors money, including Temasek's $275m, did he burn in FTX operation or frittered away is still anybody's guess.

It is interesting to note the 2 biggest theft in world history involved sovereign wealth funds. Prince Bolkiah has pride of place as the top thief, taking  US$27.4b of the country's oil wealth for himself. Kuwait has 2 SWF - Kuwait Investment Authority and Kuwait Investment Office. The mismanagement is in the KIA which involves several families, including from the ruling Royal Family itself. Some family assets have been seized.

By the way, the last guy Charles Ponzi, he was the gentleman after whom ponzi scams are named. A ponzi scheme relies on a high payout system to continuously attract the unwary, and old investors receive payoffs from the money of new investors. Such schemes existed long before Ponzi, but he had the honour of lending his name to this type of con.

SBF was arrested by authorities in Bahamas where FTX is domiciled. He has been extradited to US and currently out on bail under house arrest at his parents' residence. Will SBF go to jail with the severity of charges piling up against him?

According to Judge Jeanine Pirro, a popular FOX News commentator, she thinks SBF will certainly go to jail, but that a trial is most unlikely. The reason being the CEO of Alameda M/s Caroline Ellison, SBF's ex-girlfriend, and FTX co-founder and Chief Technology Officer, Gary Wang, have both been charged and they have pleaded guilty. They have certainly concluded a plea bargain and will testify and throw SBF under the bus. The DOJ will press the same charges against SBF similar to Ellison and Wang. By doing so, according to Judge Pirro, there is no way that SBF will plead Not Guilty and have a court case. That is the reason why the DOJ has been slow in extracting SBF from Bahamas. They needed to have plea bargains with Ellison and Wang finalised first.

So it is very likely SBF will plead guilty, go to jail, no trial and case closed. Nobody will ever find out the truth of whether FTX and SBF are actually a front that was set up to benefit the Democrats as the money trail seems to suggest. The tell-tale sign of fishy business is the low bond for Ellison and Wang, and while bond for SBF is US$250m, his parents home worth only US$4m is pledged. Who really put up the bond is a secret. One needs substantial assets before a bank will issue US$250m bond. The fix is in.

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