FTX’s Sam Bankman-Fried (SBF) Faces the Threat of a Subpoena From the US Senate if He Fails To Respond Within the Next Few Hours

Rohail Saleem
FTX Sam Bankman-Fried Alameda Terra

This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.

Our current inertia-ridden system is gradually but surely coalescing at a point where FTX's disgraced former CEO, Sam Bankman-Fried (SBF), can finally be held accountable for the alleged depravity and utter callousness with which he systematically defrauded thousands of clients, resulting in one of the biggest bankruptcies in corporate America's history.

To wit, the US Senate's Committee on Banking, Housing, and Urban Affairs sent a letter to Sam Bankman-Fried on the 07th of December, demanding the presence of the disgraced FTX CEO at a hearing scheduled for the 14th of December.

Related StoryRohail Saleem
Here Is How FTX’s Sam Bankman-Fried (SBF) Is Trying to Wriggle His Way Out of a Possible Conviction in the US

In the letter, the committee's chairman, Sherrod Brown, urged Sam Bankman-Fried to contact his staff by 05:00 p.m. on the 08th of December or face a subpoena:

"Please respond to my staff by 5:00 p.m. on Thursday, December 8, to discuss your participation at the hearing. If you chose not to appear, I am prepared, along with Ranking Member Pat Toomey, to issue a subpoena to compel your testimony."

On a similar note, the US House Committee on Financial Services is also scheduled to conduct a separate hearing on FTX's collapse on the 13th of December. Committee member, Maxine Waters, has already tweeted her willingness to push for a formal subpoena should Sam Bankman-Fried continue with his publicly expressed hesitation in attending the hearing.

As we have noted in a number of our previous posts, the core problem at FTX was a hidden symbiotic relationship with the trading arm of Sam Bankman-Fried's crypto empire, Alameda Research. FTX apparently held its client funds in a comingled bank account with Alameda Research, allowing the cryptocurrency trading firm the opportunity to "borrow" – more likely siphon off – around $10 billion directly from FTX's client deposits to place leveraged bets using illiquid collateral, mostly consisting of coins such as FTT, Serum, etc. FTX also allowed Alameda to assume the positions of its clients that were subjected to a margin call, resulting in lucrative profits for the trading firm during the bull market heydays of 2021 but accelerating losses in the current market.

This house of cards, however, came crashing down when Alameda's balance sheet was leaked, showing outsized exposure to FTX's in-house FTT token. This prompted Binance to start dumping its own FTT stash, collapsing the token's price in the process. Amid this fracas, the then-CEO of Alameda Research, Caroline Ellison, gave away the trading firm's floor price on the FTT token, inviting a veritable onslaught of speculative attacks. With Alameda's ability to pay off its liabilities impaired as its collateral of illiquid tokens quickly lost their inflated values, and with surging client withdrawals resulting in a bank run, FTX had no choice, in the end, to declare bankruptcy.

Meanwhile, as we stated earlier, the proverbial noose around Sam Bankman-Fried is getting tighter now. As per the reporting by New York Times, the US federal prosecutors are examining whether Sam Bankman-Fried (SBF), FTX, and Alameda had any role in precipitating Terra's crash earlier this summer. The prosecutors are specifically looking into a surge of sell orders that caused Terra's UST stablecoin to de-peg from the US dollar. The magnitude of these initial sell orders was such that it overwhelmed Terra's algorithmic stablecoin, precluding any opportunity to match the incoming sell orders with the inherent UST burn mechanism to mint additional LUNA coins, which should have theoretically restored stability. New York Times' internal source has revealed that Alameda had placed a huge bet on the fall in the price of the LUNA coin.

Terra's Do Kwon has also leveled similar allegations against Sam Bankman-Fried and FTX/Alameda. Meanwhile, the saga continues.

Share this story

Comments