Former FTX CEO Accused of Misusing Client Funds and Financial Deception

The former CEO of FTX, Sam Bankman-Fried (SBF), is facing accusations of directing team members to inappropriately use FTX client assets and conceal financial weak points from multiple creditors, according to Caroline Ellison, the previous CEO of Alameda Research. Ellison delivered this revelation during a hearing on Wednesday, part of the ongoing fraud case against SBF.

Caroline Ellison's Continued Testimony

The unfolding case entered its sixth day, with former Alameda Research head, Caroline Ellison, offering her perspective for the second day in a row. On the previous day, Ellison detailed how SBF allegedly encouraged her and other team members to engage in fraudulent activities, which involved the misuse of FTX's client resources. She further claimed that Alameda Research wrongfully used "billions of dollars from FTX clients."

Allegations of Misusing Client Funds

Matthew Russell Lee, a correspondent for Inner City Press who provided live coverage of the court proceedings, reported on Ellison's testimony on Wednesday. Ellison alleged that SBF instructed his team to use FTX client funds to settle Alameda's liabilities, particularly during the downward trend of the cryptocurrency market in 2022. She suggested that this practice left FTX struggling to reconcile $13 billion in client deposits against a scant $3 billion balance.

Ellison expressed concern about this strategy, fearing a large-scale withdrawal from FTX that could destabilize the exchange. She was quoted by Lee as saying, "I didn't feel good. If people found out, they would all try to withdraw from FTX."

The Impact of Market Downturn

However, the market's decline did more than just strain assets; it exacerbated Alameda's difficulties, according to Ellison. Spooked by the market's volatility, lenders began to recall loans, pushing the company to the edge. These loans, as described by Ellison, were "open-ended" and demanded repayment.

Charges of Deceptive Financial Statements

During the hearing, the prosecution investigated claims of misleading financial statements sent to Genesis Capital and other Alameda financiers. They asserted that SBF chose the most deceptive version from seven drafts that Ellison had created in June 2022. When asked if she thought the documents were dishonest, Ellison responded, "Yes I did."

Digital Communication in Trading

Ellison's account highlighted the critical role that digital communication has in modern trading. Platforms like Slack and Telegram have grown beyond mere convenience, providing immediate alerts crucial to multimillion-dollar decisions and demonstrating the importance of digital communication in exchange interactions.

Ignoring Staff Recommendations

Ellison further accused SBF of dismissing staff recommendations to safeguard Alameda's investments during the crypto market downturn. Instead, she claimed, he took on more risk and later unfairly placed the blame on her for not implementing safeguards. She also alleged that SBF sought an investment for FTX from Saudi Crown Prince Mohammed bin Salman and allegedly had plans to acquire Snapchat.

FTX's Financial Situation

According to Ellison, FTX had only $1-2 billion in liquid assets left as client withdrawals increased on November 7, 2022. She admitted to being "terrified" and pondering whether to disclose that FTX could not fulfill all withdrawal requests.

Misleading Public Reassurances

Despite this, Ellison claimed that Bankman-Fried still instructed staff to publicly reassure clients, even though these reassurances were misleading. She acknowledged that she complied by falsely tweeting that FTX had "hedges that aren't listed on the balance sheet."

SBF's Defense and Further Allegations

Earlier in her testimony, Ellison said that Bankman-Fried invested in the Semafor media startup and had complimented The Block as an excellent crypto news site. She suggested that SBF intentionally fostered relationships with journalists to improve his image.

In response to these allegations, SBF denies charges of investor fraud and misappropriation of FTX client funds to alleviate Alameda's financial issues. Alongside Gary Wang and several others, Ellison has sided with the prosecution, confessing to fraud. The motivations behind these testimonies, in favor of the U.S. government, remain unclear.

Frequently Asked Questions

What is the tax on gold in Roth IRAs?

An investment account's tax rate is determined based upon its current value, rather than what you originally paid. Any gains made by you after investing $1,000 in a stock or mutual fund are subject to tax.

But if you put the money into a traditional IRA or 401(k), there's no tax when you withdraw the money. You pay taxes only on earnings from dividends and capital gains — which apply only to investments held longer than one year.

These accounts are subject to different rules depending on where you live. Maryland is an example of this. You must withdraw your funds within 60 calendar days of turning 59 1/2. Massachusetts allows you to wait until April 1. And in New York, you have until age 70 1/2 . To avoid penalties, plan ahead so you can take distributions at the right time.

Should You Buy Gold?

Gold was considered a safety net for investors during times of economic turmoil in the past. Many people today are moving away from stocks and bonds to look at precious metals, such as gold, as a way to diversify their investments.

While gold prices have been rising in recent years they are still low relative to other commodities, such as silver and oil.

This could be changing, according to some experts. They believe gold prices could increase dramatically if there is another global financial crises.

They also mention that gold is becoming more popular due to its perceived worth and potential return.

These are some things you should consider when considering gold investing.

Consider whether you will actually need the money that you are saving for retirement. It's possible to save for retirement without putting your savings into gold. However, when you retire at age 65, gold can provide additional protection.
Second, you need to be clear about what you are buying before you decide to buy gold. Each one offers different levels security and flexibility.
Don't forget that gold does not offer the same safety level as a bank accounts. Your gold coins may be lost and you might never get them back.

You should do your research before buying gold. Make sure to protect any gold you already own.

What precious metals can you invest in for retirement?

Silver and gold are two of the most valuable precious metals. Both are easy to sell and can be bought easily. You should add them to your portfolio if you are looking to diversify.

Gold: Gold is one the oldest forms currency known to man. It is very stable and secure. Because of this, it is considered a great way of preserving wealth during times when there are uncertainties.

Silver: Silver is a popular investment choice. It is an excellent choice for investors who wish to avoid volatility. Silver tends instead to go up than down, which is unlike gold.

Platinium is another precious metal that is becoming increasingly popular. It's durable and resists corrosion, just like gold and silver. It is however more expensive than its counterparts.

Rhodium: Rhodium can be used in catalytic convertors. It is also used to make jewelry. It is also very affordable in comparison to other types.

Palladium (or Palladium): Palladium can be compared to platinum, but is much more common. It's also much more affordable. This is why it has become a favourite among investors looking for precious metals.

Is physical gold allowed in an IRA.

Gold is money and not just paper currency. It's an asset that people have used for thousands of years as a store of value, a way to keep wealth safe from inflation and economic uncertainty. Gold is a part of a diversified portfolio that investors can use to protect their wealth from financial uncertainty.

Many Americans now invest in precious metals. Although owning gold does not guarantee that you will make money investing in it, there are many reasons to consider adding gold into your retirement portfolio.

One reason is that gold has historically performed better than other assets during periods of financial panic. The S&P 500 dropped 21 percent in the same time period, while gold prices rose by nearly 100 percent between August 2011-early 2013. During these turbulent market times, gold was among few assets that outperformed the stocks.

The best thing about gold investing is the fact that there's virtually no counterparty risk. If your stock portfolio goes down, you still own your shares. Gold can be worth more than its investment in a company that defaults on its obligations.

Gold provides liquidity. You can sell your gold at any time without worrying about finding a buyer, which is a major advantage over other investments. It makes sense to buy small quantities of gold, as it is more liquid than other investments. This allows you take advantage of the short-term fluctuations that occur in the gold markets.

What are the fees associated with an IRA for gold?

$6 per month is the Individual Retirement Account Fee (IRA). This fee covers account maintenance fees, as well any investment costs that may be associated with your investments.

Diversifying your portfolio may require you to pay additional fees. These fees can vary depending on which type of IRA account you choose. Some companies offer checking accounts for free, while others charge monthly fees for IRA account.

In addition, most providers charge annual management fees. These fees range from 0% to 1%. The average rate for a year is.25%. These rates are often waived if a broker like TD Ameritrade is used.

Who is entitled to the gold in a IRA that holds gold?

The IRS considers gold owned by an individual to be “a type of money” and is subject taxation.

You must have gold at least $10,000 and it must be stored for at the least five years in order to take advantage of this tax-free status.

Although gold can help to prevent inflation and price volatility, it's not sensible to have it if it's not going to be used.

If you plan to eventually sell the gold, you'll need a report on its value. This could impact the amount of capital gains taxes your owe if you cash in your investments.

It is a good idea to consult an accountant or financial planner to learn more about your options.

Statistics

If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)
This is a 15% margin that has shown no stable direction of growth but fluctuates seemingly at random. (smartasset.com)
(Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
The price of gold jumped 131 percent from late 2007 to September 2011, when it hit a high of $1,921 an ounce, according to the World Gold Council. (aarp.org)
If you accidentally make an improper transaction, the IRS will disallow it and count it as a withdrawal, so you would owe income tax on the item's value and, if you are younger than 59 ½, an additional 10% early withdrawal penalty. (forbes.com)

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How To

Investing in gold vs. investing in stocks

Gold investing as an investment vehicle can seem extremely risky these days. Many people believe that investing in gold is not profitable. This belief is based on the fact that gold prices are being driven down by global economic conditions. They feel that gold investment would cause them to lose money. However, investing in gold can still provide significant benefits. Below we'll look at some of them.

The oldest form of currency known to mankind is gold. It has been in use for thousands of year. It is a valuable store of value that has been used by many people throughout the world. It continues to be used in South Africa, as a way of paying their citizens.

You must first decide how much you are willing and able to pay per gram to decide whether or not gold should be your investment. When looking into buying gold bullion, you must decide how much you are willing to spend per gram. You can always ask a local jeweler what the current market rate is if you don't have it.

It is also worth noting that although gold prices have declined recently, the cost of producing gold has increased. Although gold's price has fallen, its production costs have not.

Another thing to remember when thinking about whether or not you should buy gold is the amount of gold you plan on purchasing. It is sensible to avoid buying gold if you are only looking to cover the wedding rings. However, if you are planning on doing so for long-term investments, then it is worth considering. Profitable gold can be sold at a lower price than it was when you bought it.

We hope this article has given you an improved understanding of gold investment tools. It is important to research all options before you make any decision. Only after doing so can you make an informed decision.

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By: Jamie Redman
Title: Former FTX CEO Accused of Misusing Client Funds and Financial Deception
Sourced From: news.bitcoin.com/soliciting-the-saudi-crown-prince-and-buying-snapchat-ex-alameda-chief-reveals-covert-dealings-in-sbfs-fraud-hearing/
Published Date: Wed, 11 Oct 2023 19:30:04 +0000