Federal Prosecutors Were Investigating FTX Months before Collapse but Dropped Case

Federal prosecutors in New York were investigating the recently-imploded cryptocurrency exchange FTX months before it filed for bankruptcy on November 11, according to reports.

Slay News has been extensively reporting on the FTX scandal and highlighted the money laundering operation the company and its founder and CEO, Sam Bankman-Fried, were running in Ukraine to pump money back to Democrats in America.

Bankman-Fried has also admitted that his company effectively acted as a laundromat for the Ukraine government.

However, despite spending months investigating FTX for money laundering, the U.S. Attorney’s Office in the Southern District of New York reportedly found no evidence of financial crimes and dropped the case.

According to a report from Bloomberg, the U.S. Attorney’s Office famous for prosecuting financial crimes spent months examining FTX and other cryptocurrency companies with both domestic and foreign branches.

Lawyers had begun examining FTX, which is based in the Bahamas and incorporated in Antigua and Barbuda, for compliance with the Bank Secrecy Act.

The Bank Secrecy Act of 1970, also known as the Currency and Foreign Transactions Reporting Act, is a U.S. law that demands financial institutions work to detect money laundering and terrorism financing.

FTX filed for bankruptcy just under two weeks ago.

The move came after users discovered that trading firm Alameda Research, a company run by Bankman-Fried love interest Caroline Ellison, had allegedly been using consumer holdings from FTX to make investments.

The lawyer who represented plaintiffs after the collapse of Enron, John Ray III, noted that the crypto empire was the worst failure he has ever witnessed.

Ray succeeded Bankman-Fried as FTX’s chief executive to manage the company’s bankruptcy.

“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” Ray said in court documents.

“From compromised systems integrity and faulty regulatory oversight abroad to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.”

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In a more recent statement, however, Ray said that “many regulated or licensed subsidiaries” of FTX have solvent balance sheets and responsible management.

“It will be a priority of ours in the coming weeks to explore sales, recapitalizations or other strategic transactions with respect to these subsidiaries, and others that we identify as our work continues,” he remarked.

Bankman-Fried, whose considerable fortune disappeared overnight when the company filed for bankruptcy, sought $8 billion from investors to cover withdrawal requests made by customers after the bankruptcy filing.

A number of institutional investors were forced to mark down their shares in the company to zero over the past several days.

Sequoia Capital, a leading venture capital firm in Silicon Valley, defended the company’s vetting process and announced a $150 million loss from the collapse in a letter to shareholders.

“We are in the business of taking risk,” the message said.

“Some investments will surprise to the upside, and some will surprise to the downside.

“We do not take this responsibility lightly and do extensive research and thorough diligence on every investment we make.”

The House Financial Services Committee, led by FTX-linked Democrat Rep. Maxine Waters (D-CA), is preparing to hold hearings regarding the collapse of FTX as the Justice Department and the Securities and Exchange Commission continue their own investigations.

Officials in the Biden administration, including Treasury Secretary Janet Yellen, have expressed a willingness to implement more regulations on the nascent sector.

Meanwhile, the Federal Reserve announced the beginning of a simulated digital currency initiative alongside multiple financial institutions just days after the cryptocurrency sector collapsed.

Central bankers are weighing the possibility of launching a central bank digital currency, which would preserve the international role of the dollar while mitigating pitfalls intrinsic to cryptocurrencies such as liquidity risk, according to a paper from the Federal Reserve.

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By Frank Bergman

Frank Bergman is a political/economic journalist living on the east coast. Aside from news reporting, Bergman also conducts interviews with researchers and material experts and investigates influential individuals and organizations in the sociopolitical world.

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