(NEW YORK) — A devastating year for the stock market is hurtling toward its end, but not before December delivers a final verdict for investors.
After rallying in October and November, the S&P 500 fell for five consecutive days earlier this month. Each of the major indexes has dropped at least 1.5% in December, but an end-of-year surge known as the Santa Claus rally could end the year on a positive note.
The uncertain near-term outlook for the U.S. economy has amplified market volatility, as recession fears weigh on expectations for company earnings, analysts told ABC News. However, reason for long-term market optimism has emerged after a monthslong streak of declining inflation and an anticipated slowing of rate increases at the Federal Reserve, some analysts said.
“December for many is the hardest month to trade,” Ed Moya, a senior market analyst at broker OANDA, told ABC News. “This year, a lot of investors are unsure about the fate of the U.S. economy.”
Still, next year offers hope that a possible downturn will give way to a bounce back for stocks, Adam Turnquist, chief technical strategist at LPL Financial, told ABC News.
“While there is downside risk, overall things are looking more constructive for equities as we look ahead to 2023,” he said.
Here’s what you need to know about stock market performance in December, and what it says about the stock market going forward:
How stocks perform in December
In recent decades, the stock market has typically ended the year on the rise.
Since 1950, the S&P 500 has generated average returns of more than 1.5% in December, LPL Financial said in a report on Monday.
The losses so far this month shouldn’t necessarily deter investors, since the returns usually arrive in the second half of the month, the report said.
The Santa Clause Rally, a seven-day period at the end of December and beginning of January, has historically delivered stock market gains comparable to a strong month, the report added.
This time around, market performance will depend on investors’ reaction to the latest inflation data and the policy response from the Federal Reserve, analysts said.
A government report on Tuesday revealed that inflation stood at 7.1% last month compared with a year prior, continuing a months-long decline from a 40-year record reached over the summer.
However, inflation remains at a level more than triple the Fed’s target rate of 2%.
The inflation news nevertheless bolstered hopes among some investors that the U.S. could achieve a “soft landing,” in which inflation returns to normal levels while the economy averts a recession.
A day later, the Federal Reserve said it was raising its short-term borrowing rate another 0.5%, slowing an aggressive series of rate increases while continuing an effort to cool the economy and dial back inflation.
Borrowing cost increases usually weigh on stocks, since the moves aim to slash inflation by slowing the economy and choking demand. But the latest rate hike pulled the Fed back from three consecutive 0.75% increases, signaling confidence that the central bank can bring sky-high inflation down to normal levels.
Despite the positive sign, each of the major stock indexes fell nearly 1% on the news, in part because the Fed also signaled that it would not begin cutting rates until 2024.
The market outlook going into 2023
Analysts said they expect market volatility and a potential recession between now and the first half of next year. Still, some predicted that a strong finish to the year would buoy the economy and markets.
“There’s potential for markets to gyrate up or down quite a bit,” Dave Sekera, chief U.S. market strategist at Morningstar, told ABC News.
“Our U.S. economics team does believe if there is a recession, it will be short and shallow,” he added. “In our outlook for the second half of 2023, we do think the economy will rebound.”
Moya, of OANDA, said persistent volatility stems from a host of factors, such as the zero-COVID policy in China, the movement of inflation and the possibility of a recession.
“We’re probably going to see more choppy conditions,” he said. “This is a difficult economy to get excited about.”
(NEW YORK) — A federal judge in New York has decided it’s best to let a jury define what beer actually is.
The judge denied a request for summary judgment from Modelo, which is seeking to hold Constellation Brands liable for selling Corona-branded hard seltzer.
Modelo has allowed Constellation Brands to use the Corona name on certain beers, but Modelo has said hard seltzer products fall outside of a trademark licensing agreement.
The outcome of the case depends on whether the hard seltzer products constitute “beer” and therefore fall within the licensing agreement, as Constellation Brands argued. Modelo argued no reasonable jury could confuse beer for hard seltzer.
In his ruling, Judge Lewis Kaplan conceded Modelo may have the better argument, but he said the word “beer” is too ambiguous.
“Modelo has more dictionaries on its side of this debate over the meaning of ‘beer’ than does [Constellation Brands],” Kaplan wrote. “But the fact remains that the dictionaries, however important, do not resolve this case.”
(NEW YORK) — “We’re going to keep growing and making a lot of money,” social media influencer Zack Morris said during a Dec. 11 recording on Twitter.
“I never dump on my followers….” he tweeted in February.
Morris, whose real name is Edward Constantinescu, might not be making so much money anymore. The Justice Department announced on Wednesday that it had charged him and seven other men with what’s known as a “pump and dump” scheme that made more than $114 million collectively.
The eight suspects have pleaded not guilty, according to the court docket.
Lawyers who could comment for them were not listed on the docket as of Wednesday.
The Justice Department alleges that Constantinescu along with Perry “PJ” Matlock, 38, of The Woodlands, Texas; John Rybarczyk, 32, of Spring, Texas; Gary Deel, 28, of Beverly Hills, California; Stefan Hrvatin, 35, of Miami; Tom Cooperman, 34, of Beverly Hills, California; Mitchell Hennessey, 23, of Hoboken, New Jersey; and, Dan Knight, 23, of Houston engaged in a scheme to “pump and dump” securities based on “false” and “misleading” information and lies about their investments to their social media followers.
They are each charged with conspiracy to commit securities fraud.
Constantinescu is also accused of engaging in monetary transactions in property derived from specified unlawful activity and three counts of securities fraud. Cooperman, Deel, Hennessey, Hrvatin, Matlock and Rybarczyk are each charged with multiple counts of securities fraud.
Federal prosecutors said in a news release that the eight suspects are accused of using their online followings to spread “false, positive information” about securities they purchased, such as their “view that the security would increase in price, and the price the security could reach—to induce other investors to buy the security and artificially drive up its price.”
The men would also post “misleading” messages including about holding onto a security longer than they were going to and that they did “due diligence” on the security, the Justice Department alleged.
The defendants collectively had 1.5 million followers on Twitter, including Constantinescu, who has more than 500,000 followers.
The men then allegedly “secretly sold their own shares of the security at a higher price to secure a profit for themselves, at or around the time they posted messages to induce other investors to purchase the same security and concealed their intent to sell,” the indictment, in the Southern District of Texas, states.
“These messages were false and misleading, and omitted material information, because the defendants concealed their intent to use these messages to induce other investors to purchase the securities so that defendants could sell their shares at a higher price at and around the time of the messages,” the indictment claims.
The Securities and Exchange Commission has also filed an injunction alleging the same as the Justice Department but not holding the men criminally accountable.
Constantinescu, according to court documents, is suspected of using his “pump and dump” money to buy various luxury cars and previously joked about the SEC on his Twitter account.
According to prosecutors, the men also had a chat channel on the platform Discord which claimed to be a free stock tip group, but which they used to further engage in their scheme. In private messages, however, they outlined their deceit, the Justice Department said.
“We’re robbing f—— idiots of their money,” Daniel Knight allegedly said in a private chat with the other suspects.
“Securities fraud victimizes innocent investors and undermines the integrity of our public markets,” Assistant Attorney General Kenneth A. Polite Jr., of the Justice Department’s criminal division, said in a statement. “As these charges demonstrate, the department will continue to prosecute those who defraud investors by spreading false and misleading information, including over social media, to line their own pockets.”
(WASHINGTON) — The Federal Reserve said Wednesday it was raising its short-term borrowing rate another 0.5%, slowing an aggressive series of rate increases while continuing an effort to cool the economy and dial back inflation.
The increase in borrowing costs matched economist predictions.
The latest rate hike pulls the Fed back from three consecutive 0.75% increases, signaling confidence that the central bank can bring sky-high inflation down to normal levels.
The move arrives a day after a government report revealed that inflation stood at 7.1% last month compared with a year prior, continuing a monthslong decline from a 40-year record reached over the summer. However, inflation remains at a level more than triple the Fed’s target rate of 2%.
In a statement on Wednesday, the Fed said it expects that additional rate hikes will be necessary to further reduce inflation.
“Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures,” the central bank said, adding that it remains “highly attentive to inflation risks.”
The announcement marks the latest in a string of borrowing cost increases imposed by the Fed in recent months as it tries to slash price increases by slowing the economy and choking off demand. The approach, however, risks tipping the U.S. into a recession and putting millions out of work.
So far, however, the labor market has proven resilient, bolstering the hopes of policymakers seeking to avert a downturn but also raising fears of a prolonged bout of inflation driven by wage gains.
Hiring last month exceeded expectations and wages grew a blistering 5.1% compared to a year earlier, offering welcome relief for workers strained by price hikes.
But rising wages often push companies to hike prices to make up for the added costs, which can worsen inflation and make it more difficult to reverse.
Despite the robust job market, growing evidence suggests the Fed’s rate hikes have put the brakes on some economic activity.
Home sales fell for the ninth month in a row in October, the most recent month on record. Sales of existing homes, such as single-family homes and condominiums, were down about 28% from a year earlier.
Meanwhile, the personal savings rate fell to 2.3% last month, the lowest rate in nearly two decades, according to data from the Commerce Department. The failure to stash extra funds suggests that savings stockpiled during the pandemic have strained under the weight of high prices.
(WASHINGTON) — Senators across both major parties on Wednesday sharply criticized bankrupt cryptocurrency exchange FTX and its former CEO Sam Bankman-Fried, while advocating for regulation of the digital currency sector.
Lawmakers on the chamber’s banking committee differed significantly, however, on whether FTX exemplified wider industry dangers or merely a run-of-the-mill fraud that could occur at any business. In turn, they indicated a range of opinions on the type and extent of crypto regulation.
Democrats expressed concern about systemic flaws in the crypto industry raised by the FTX debacle, while some Republicans characterized the corporate collapse as a one-off instance of fraud divorced from the promising financial technology that enabled it.
Sam Bankman-Fried is ‘the villain’
“The myth of Sam Bankman-Fried and his crypto trading success was supposed to impress us,” Sherrod Brown, D-Ohio, said. “In this story, Bankman-Fried was the shiny object. Now he’s the villain.”
“But this story is bigger than one person and one firm,” he added.
Sen. Pat Toomey, R-Pa., also skewered the mismanagement of FTX but said its corporate collapse does not reflect negatively on the potential economic value of cryptocurrency.
“We owe it to each customer to get to the bottom of the FTX implosion,” Toomey said. “While all the facts have not yet come to light, we’ve clearly witnessed wrongdoing that was almost certainly illegal.”
“The wrongful behavior that occurred here is not specific to the underlying asset,” he added. “FTX and cryptocurrencies are not the same thing.”
‘Good old-fashioned fraud’
FTX, previously valued at $32 billion, declared bankruptcy in November, within weeks of a customer sell-off totaling billions of dollars.
Bankman-Fried, 30, was arrested Monday in the Bahamas after federal prosecutors in New York filed an eight-count indictment including allegations of fraud and conspiracy, according to the Royal Bahamas Police Force.
Sam Bankman-Fried’s lawyer, Mark S. Cohen, offered his first comments on the arrest of his client Tuesday morning.
“Mr. Bankman-Fried is reviewing the charges with his legal team and considering all of his legal options,” Cohen said in a statement.
Bankman-Fried’s application for bail was denied on Tuesday after a judge determined he was too much of a flight risk. He will be remanded until Feb. 8, 2023, to the Bahamas Department of Corrections.
There are more than $8 billion in customer losses, said Gretchen Lowe of the Commodity Futures Trading Commission, a federal agency.
Sen. Cynthia Lummis, R-Wyo., characterized the collapse of FTX as “good old-fashioned fraud,” but defended the innovative potential of cryptocurrency.
“FTX is a failure of people, safeguards and regulation — it’s not a failure of technology,” she said, adding that the cryptocurrency industry requires regulation.
Potential regulation of cryptocurrency
Bipartisan legislation introduced by Sen. Elizabeth Warren, D-Mass., and Sen. Roger Marshall, R-Ky., on Wednesday aims to address the use of cryptocurrency for illicit activities by applying a current set of anti-money laundering rules to digital currency, including Know Your Customer requirements — rules that require banks and other financial institutions to understand the profile of and risks posed by a customer.
“Crypto has become the preferred tool for terrorists, for ransomware gangs, for drug dealers and for rogue states that want to launder money,” Warren said.
Hilary J. Allen, a professor at American University Washington College of Law and a witness at the hearing, proposed an outright ban on cryptocurrency in the U.S.
“A ban on crypto would be the most straightforward way of protecting both investors and the financial system,” she said. “It would end the uncontrolled creation of crypto assets and also ensure that crypto assets never require a bailout.”
Other witnesses supported regulation but indicated that cryptocurrency technology offers significant value for the nation’s economy, cautioning against aggressive action that could hinder the value generated by the sector.
Kevin O’Leary, an entrepreneur and host of the television show “Shark Tank,” who previously endorsed FTX as a paid promoter, said the downfall of the company would ultimately highlight the transparency delivered by cryptocurrency, as customers seek to recover lost funds.
“I think what’s going to happen as we peel the onion on FTX over the next year or two is the shining outcome of the success of the blockchain to track these assets will become the focus of everybody,” he said.
Sen. Tina Smith, D-Minn., sought to to bring attention to the FTX customers who stand to lose their investments on the platform after its collapse.
“We shouldn’t lose sight of the fact that millions of dollars disappeared overnight,” she said. “This is money that belonged to people who couldn’t afford to lose their money.”
(NEW YORK) — The U.S. Securities and Exchange Commission on Tuesday charged Sam Bankman-Fried, the embattled former CEO of cryptocurrency giant FTX and trading firm Alameda Research, with defrauding investors.
“FTX’s collapse highlights the very real risks that unregistered crypto asset trading platforms can pose for investors and customers alike,” Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said in a statement.
Bankman-Fried was arrested Monday in the Bahamas after federal prosecutors in New York filed criminal charges contained in a sealed indictment, according to the Royal Bahamas Police Force. He is expected to appear in court in the Bahamas on Tuesday.
Here’s how the news is developing. All times Eastern.
Dec 13, 5:44 PM EST
Bankman-Fried denied bail due to flight risk
Sam Bankman-Fried’s application for bail was denied on Tuesday after a judge determined he was too much of a flight risk.
He will be remanded until Feb. 8, 2023, in the Bahamas Department of Corrections.
Bankman-Fried will be held in the prison’s medical department Tuesday night with a few other inmates, according to the prison chief.
Dec 13, 3:49 PM EST
Jean-Pierre won’t say whether Biden will return donations
White House press secretary Karine Jean-Pierre would not engage when asked specifically about FTX founder Sam Bankman-Fried’s arrest, and deferred to the Hatch Act when pressed if President Joe Biden planned to return the more than $5 million in donations that were given to his 2020 campaign.
The Hatch Act prevents federal employees, like Jean-Pierre, from engaging in political campaigning.
Jean-Pierre also wouldn’t give Biden’s opinion on the arrest and collapse of FTX. However, she was more willing to talk about what could be done to put regulations in place in the crypto sphere.
“This administration has consistently urged Congress to take action to address regulatory gaps posed by digital assets and support legislative efforts to enact crypto legislation to better protect American consumers that just last month Secretary [of the Treasury Janet] Yellen, in fact, called on Congress to ‘move quickly to fill the regulatory gaps.’ That’s a quote that she said herself and the administration has identified what those gaps look like,” Jean-Pierre told reporters. “But again, we have urged this is something for Congress to do.”
U.S. Attorney Damian Williams urged politicians to return the millions of dollars donated by Bankman-Fried at a press conference earlier Tuesday.
-ABC News’ Molly Nagle
Dec 13, 2:52 PM EST
More than $8 billion in FTX customer losses, federal official says
Sam Bankman-Fried defrauded customers and investors in FTX as well as lenders to his hedge fund, Alameda Research, and he violated campaign finance laws, federal prosecutors in New York said Tuesday as they discussed the fruits of a “complex and sprawling” investigation.
The criminal charges came one month after FTX filed a $32 billion bankruptcy and U.S. Attorney Damian Williams said the investigation was ongoing and “moving very quickly.”
Williams said he authorized charges against Bankman-Fried on Wednesday of last week. A grand jury returned an indictment Friday.
There are more than $8 billion in customer losses, said Gretchen Lowe of the Commodity Futures Trading Commission.
In addition to fraud and conspiracy, the indictment alleged Bankman-Fried violated campaign finance laws by making tens of millions of dollars in campaign donations — to both Republicans and Democrats — with stolen funds. The contributions were made in the name of Alameda Research with money taken from FTX, the indictment alleged.
Williams urged political campaigns and candidates who received donations from Bankman-Fried or Alameda to work with his office to return the money.
Bankman-Fried is fighting extradition from the Bahamas to New York to face all of these charges.
“Fraud is fraud,” FBI Assistant Director Michael Driscoll said. “It does not matter the complexity of the investment scheme.”
-ABC News’ Aaron Katersky
Dec 13, 12:22 PM EST
Bankman-Fried doesn’t waive extradition in court appearance
Sam Bankman-Fried did not waive his rights to an extradition hearing as he made his first court appearance in the Bahamas on Tuesday.
Had he waived his rights, the U.S. would have been able to extradite Bankman-Fried immediately. It’s unclear now how quickly an extradition could happen.
The court proceedings were still ongoing as of noon.
-ABC News’ Will Gretsky
Dec 13, 12:09 PM EST
‘No separateness whatsoever’ between FTX and Alameda Research, FTX CEO says
FTX CEO John Ray, who is overseeing the company’s bankruptcy proceedings, told House members on Tuesday that no separation existed between the operations of FTX and Alameda Research, a crypto hedge fund also founded by Bankman-Fried.
“There were virtually no internal controls and no separateness whatsoever,” Ray said.
Bankman-Fried faces accusations that FTX used deposits to pay Alameda Research creditors, a claim reportedly made by former Alameda Research CEO Caroline Ellison during a call in early November.
In an interview last week, Bankman-Fried told ABC News’ George Stephanopoulos that he was not aware that was true but said Alameda had a large position open on FTX that was “overcollateralized a year ago.”
Ray told House members that FTX transferred several billion dollars in customer funds to Alameda Research.
When asked by Rep. Patrick McHenry, R-N.C., if there was a distinction between FTX and Alameda Research, Ray said, “Absolutely not. There’s no distinction whatsoever.”
“The owners of the company could run free reign,” Ray added, noting that Bankman-Fried owned 90% of Alameda Research.
Dec 13, 11:38 AM EST
Bankman-Fried’s lawyer offers first comment
Sam Bankman-Fried’s lawyer, Mark S. Cohen, offered his first comments on the arrest of his client Tuesday morning.
“Mr. Bankman-Fried is reviewing the charges with his legal team and considering all of his legal options,” Cohen said in a statement.
Bankman-Fried was scheduled to make his first court appearance in the Bahamas Tuesday.
Dec 13, 11:38 AM EST
FTX CEO John Ray blasts ‘utter lack of record keeping’
John Ray, the new CEO of bankrupt crypto exchange FTX, who oversaw the dissolution of Enron, testified before House members on Tuesday that FTX lacked corporate controls to an extent he had never witnessed.
“I’ve never seen an utter lack of record keeping,” Ray said. “Absolutely no internal controls.”
Earlier this year, FTX was valued at $32 billion. Within weeks of a customer sell-off totaling billions of dollars, the company declared bankruptcy.
Company officials communicated invoice and expense reports over Slack, an internal messaging service, Ray said.
He said FTX employees used the accounting software QuickBooks, which is popular among small businesses.
“Nothing against QuickBooks — it’s a very nice tool,” Ray said. “Not for a multibillion-dollar company.”
Dec 13, 9:57 AM EST
Eight-count indictment unsealed against Bankman-Fried
The eight-count indictment from the Southern District of New York charges Sam Bankman-Fried with conspiracy and fraud.
“Bankman-Fried, along with others, engaged in a scheme to defraud customers of by misappropriating those customers’ deposits, and using those deposits to pay expenses and debts of Alameda Research,” the indictment said.
The indictment also said Bankman-Fried provided false and misleading information to lenders about the true financial condition of Alameda, his privately held crypto hedge fund.
There’s a final count of conspiracy to violate campaign finance laws through political donations that concealed the source and exceeded the permissible amount.
“In or about 2022, Samuel Bankman-Fried, the defendant, and one or more other conspirators agreed to and did make corporate contributes to candidates and committees in the Southern District of New York that were reported in the name of another person,” the indictment said.
Federal prosecutors were expected to elaborate on the charges at an afternoon news conference in Manhattan.
Dec 13, 8:51 AM EST
‘It’s serious’: Former prosecutor says public statements could hurt FTX founder
While the full criminal charges have yet to be released, the Securities and Exchange Commission released it’s complaint against Sam Bankman-Fried early Tuesday.
“It’s serious,” said Brendan Quigley, a former federal securities fraud prosecutor in New York who is now a partner at Baker Botta. “Assuming they can show promises were made to counterparties, investors or clients about where money was going to go, and that it didn’t go there, that’s a serious offense, probably wire fraud at least.”
Bankman-Fried’s public statements could come back to haunt him, including an interview with ABC News’ George Stephanopoulos.
“The big thing will be if SDNY can shows conflicts either between his public statements or between his current public statement and something that was said or promised to investors,” Quigley said.
Dec 13, 8:32 AM EST
Bankman-Fried built ‘house of cards’: SEC
Though cryptocurrency can seem a mystical world, the civil complaint from the Securities and Exchange Commission reads like a standard case of securities fraud, accusing Sam Bankman-Fried of building a “house of cards.”
Bankman-Fried raised $1.8 billion for FTX while “orchestrating a massive, years-long fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire,” the complaint said.
Customers sent billions of dollars to FTX believing their assets were secure but, from the start, the SEC said Bankman-Fried “improperly diverted customer assets to his privately-held crypto hedge fund, Alameda Research LLC, and then used those customer funds to make undisclosed venture investments, lavish real estate purchases, and large political donations.”
Federal prosecutors in New York said they would unseal related criminal charges later Tuesday.
“We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto,” said SEC Chair Gary Gensler.
The civil complaint seeks penalties and fines, but also to prohibit Bankman-Fried from “participating in the offer or sale of securities including crypto asset securities” in the future, a move that would complete his fall as the poster child for the emerging cryptocurrency marketplace.
Dec 13, 8:32 AM EST
Bankman-Fried refused request for Senate testimony
While Sam Bankman-Fried was set to give testimony to a House committee Tuesday, later canceled after his arrest late Monday, he continues to reject requests from the Senate for a hearing of its own.
In a joint statement Monday afternoon, prior to his arrest, the top Democrat and Republican on the Senate Banking Committee called Bankman-Fried’s refusal to appear “an unprecedented abdication of responsibility.”
“Virtually every CEO, financial regulator, and administration official for Republicans and Democrats has agreed to testify in front of both the Senate and House when called upon — that is how congressional oversight works,” Sens. Sherrod Brown, D-Ohio, and Pat Toomey, R-Pa., said in a statement. “We have offered Sam Bankman-Fried two different dates for providing testimony before the Senate Banking, Housing, and Urban Affairs Committee, and are willing to accommodate virtual testimony. He has declined in an unprecedented abdication of accountability.”
The committee will continue efforting an appearance from Bankman-Fried because he is “unwilling to accept service of a subpoena.”
Dec 13, 8:32 AM EST
What to know about former FTX CEO Sam Bankman-Fried?
Sam Bankman-Fried, the 30-year-old founder of FTX, quickly ascended to the top of the cryptocurrency sector, garnering goodwill in recent years as a philanthropist and leading proponent of industry regulation.
The cover of Fortune Magazine in August asked readers whether Bankman-Fried, known by some as “SBF,” was “the next Warren Buffett.”
After the sudden bankruptcy of FTX, however, he faced withering questions over the mismanagement of billions in customer funds.
Meanwhile, his net worth plummeted from $16 billion to $0 in less than a week, according to an estimate from Bloomberg.
(NEW YORK) — Cryptocurrency exchange FTX collapsed from a multibillion-dollar corporate darling into a bankrupt cautionary tale within a matter of weeks
Former FTX CEO Sam Bankman-Fried, who appeared on the cover of Fortune magazine in August as “the next Warren Buffett,” was slapped with an eight-count indictment from the Southern District of New York on Tuesday for charges of fraud and conspiracy.
The fall of FTX is one of the most sudden and massive in recent corporate history.
Here is a look at the company’s downfall, by the numbers:
10%: In 2018, that’s how much more Bitcoin was selling for in Japan compared with the U.S. The then-25-year-old Bankman-Fried bought large amounts of the popular token in the U.S. and sold them in Japan, moving as much as $25 million in Bitcoin each day. The profits from this trade helped him launch FTX.
$32 billion: That was the value of FTX as recently as January. FTX, an exchange that allows users to buy and sell cryptocurrency, drew customers for its low trading fees, the variety of coins on offer, and the complex futures and options trades available. The company declared bankruptcy in November, within weeks of a customer sell-off totaling billions of dollars
$210 million: That was the size of a stake taken in FTX by Sequoia Capital, a top venture firm. Last month, Sequoia Capital wrote down its stake in FTX to $0.
As many as 1 million: The number of creditors owed money by FTX, Rep. Maxine Waters, D-Calif., said on Tuesday. Some crypto traders, who deposited their savings on the platform, may never get their money back.
At least $3 billion: The amount that FTX owes to creditors, according to Waters.
$26 billion: The estimated size of Bankman-Fried’s net worth at its peak in March.
$5.2 million: The amount that Bankman-Fried gave in support of Joe Biden’s 2020 presidential bid, making him the campaign’s second-largest donor after former New York City Mayor Michael Bloomberg.
0: As of last October, that’s the number of people in the world under 30 years old who were wealthier than Bankman-Fried, then 29 years old, Forbes reported.
$100,000: The amount of money currently held by Bankman-Fried, he told ABC News’ George Stephanopoulos last week.
90%: The stake in Alameda Research owned by Bankman-Fried, according to House testimony from new FTX CEO John Ray on Tuesday.
Bankman-Fried faces accusations that FTX used deposits to pay Alameda Research creditors, a claim reportedly made by former Alameda Research CEO Caroline Ellison during a call in early November.
In an interview last week, Bankman-Fried told Stephanopoulos that he was not aware that was true but said Alameda had a large position open on FTX that was “overcollateralized a year ago.”
Ray, who is overseeing the company’s bankruptcy proceedings, said at as House committee hearing Tuesday that no separation existed between the operations of FTX and Alameda Research
“There were virtually no internal controls and no separateness whatsoever,” Ray said.
Several billion dollars: The amount of customer funds that FTX lent to Alameda Research, the crypto hedge fund also founded by Bankman-Fried, Ray told House members on Tuesday.
“We know the size of the harm was significant,” he said.
11: The number of professional athletes and other celebrities sued last month over their endorsement of FTX. The list of celebrities includes Larry David, Naomi Osaka, Tom Brady, Stephen Curry and Kevin O’Leary.
“I had no knowledge, nor did any of the other celebrities, of what occurred here,” O’Leary, an entrepreneur and panelist on the TV show “Shark Tank,” told ABC’s “Nightline” in November.
8: The number of counts of conspiracy and fraud brought against Bankman-Fried in an indictment unsealed by the Southern District of New York on Tuesday.
“Bankman-Fried, along with others, engaged in a scheme to defraud customers by misappropriating those customers’ deposits, and using those deposits to pay expenses and debts of Alameda Research,” the indictment said.
(NEW YORK) — Subaru is recalling more than 270,000 SUVs due to a potential fire risk, with owners urged to park their cars outside until inspected and repaired.
The recall impacts certain 2019-2022 model year Subaru Ascent vehicles, the company said.
A production-related defect involving a ground bolt may increase the risk of fire while the heater is in operation, according to Subaru.
So far, two fires have been reported, though there have been no crashes or injuries due to this issue, the National Highway Traffic Safety Administration said in a statementTuesday about the recall.
The NHTSA said the recall affects 271,694 select Subaru Ascent vehicles, which is Subaru’s largest vehicle and only three-row SUV. Subaru said an estimated .6% of potentially affected vehicles will likely require repair.
Subaru said it will contact the owners of the affected vehicles within 60 days and replace the ground bolts and other components if necessary for free.
Until an inspection and repair are completed, owners are advised to park their vehicle outside, away from garages, carports or other structures, and to avoid leaving the vehicle unattended while the engine is running.
“If an owner notices or smells smoke coming from the dash or driver’s footwell area, they should immediately stop operating the vehicle and turn the ignition switch to the ‘off’ position,” Subaru said in a statement.
Customers can find out if their car is affected here by entering the vehicle’s 17-digit vehicle identification number.
(NEW YORK) — The U.S. Securities and Exchange Commission on Tuesday charged Sam Bankman-Fried, the embattled former CEO of cryptocurrency giant FTX and trading firm Alameda Research, with defrauding investors.
“FTX’s collapse highlights the very real risks that unregistered crypto asset trading platforms can pose for investors and customers alike,” Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said in a statement.
Bankman-Fried was arrested Monday in the Bahamas after federal prosecutors in New York filed criminal charges contained in a sealed indictment, according to the Royal Bahamas Police Force. He is expected to appear in court in the Bahamas on Tuesday.
Here’s how the news is developing. All times Eastern.
Dec 13, 5:01 PM EST
Bankman-Fried denied bail due to flight risk
Sam Bankman-Fried’s application for bail was denied on Tuesday after a judge determined he was too much of a flight risk.
He will be remanded until Feb. 8, 2023, in the Bahamas Department of Corrections.
-ABC News’ Will Gretsky
Dec 13, 3:49 PM EST
Jean-Pierre won’t say whether Biden will return donations
White House press secretary Karine Jean-Pierre would not engage when asked specifically about FTX founder Sam Bankman-Fried’s arrest, and deferred to the Hatch Act when pressed if President Joe Biden planned to return the more than $5 million in donations that were given to his 2020 campaign.
The Hatch Act prevents federal employees, like Jean-Pierre, from engaging in political campaigning.
Jean-Pierre also wouldn’t give Biden’s opinion on the arrest and collapse of FTX. However, she was more willing to talk about what could be done to put regulations in place in the crypto sphere.
“This administration has consistently urged Congress to take action to address regulatory gaps posed by digital assets and support legislative efforts to enact crypto legislation to better protect American consumers that just last month Secretary [of the Treasury Janet] Yellen, in fact, called on Congress to ‘move quickly to fill the regulatory gaps.’ That’s a quote that she said herself and the administration has identified what those gaps look like,” Jean-Pierre told reporters. “But again, we have urged this is something for Congress to do.”
U.S. Attorney Damian Williams urged politicians to return the millions of dollars donated by Bankman-Fried at a press conference earlier Tuesday.
-ABC News’ Molly Nagle
Dec 13, 2:52 PM EST
More than $8 billion in FTX customer losses, federal official says
Sam Bankman-Fried defrauded customers and investors in FTX as well as lenders to his hedge fund, Alameda Research, and he violated campaign finance laws, federal prosecutors in New York said Tuesday as they discussed the fruits of a “complex and sprawling” investigation.
The criminal charges came one month after FTX filed a $32 billion bankruptcy and U.S. Attorney Damian Williams said the investigation was ongoing and “moving very quickly.”
Williams said he authorized charges against Bankman-Fried on Wednesday of last week. A grand jury returned an indictment Friday.
There are more than $8 billion in customer losses, said Gretchen Lowe of the Commodity Futures Trading Commission.
In addition to fraud and conspiracy, the indictment alleged Bankman-Fried violated campaign finance laws by making tens of millions of dollars in campaign donations — to both Republicans and Democrats — with stolen funds. The contributions were made in the name of Alameda Research with money taken from FTX, the indictment alleged.
Williams urged political campaigns and candidates who received donations from Bankman-Fried or Alameda to work with his office to return the money.
Bankman-Fried is fighting extradition from the Bahamas to New York to face all of these charges.
“Fraud is fraud,” FBI Assistant Director Michael Driscoll said. “It does not matter the complexity of the investment scheme.”
-ABC News’ Aaron Katersky
Dec 13, 12:22 PM EST
Bankman-Fried doesn’t waive extradition in court appearance
Sam Bankman-Fried did not waive his rights to an extradition hearing as he made his first court appearance in the Bahamas on Tuesday.
Had he waived his rights, the U.S. would have been able to extradite Bankman-Fried immediately. It’s unclear now how quickly an extradition could happen.
The court proceedings were still ongoing as of noon.
-ABC News’ Will Gretsky
Dec 13, 12:09 PM EST
‘No separateness whatsoever’ between FTX and Alameda Research, FTX CEO says
FTX CEO John Ray, who is overseeing the company’s bankruptcy proceedings, told House members on Tuesday that no separation existed between the operations of FTX and Alameda Research, a crypto hedge fund also founded by Bankman-Fried.
“There were virtually no internal controls and no separateness whatsoever,” Ray said.
Bankman-Fried faces accusations that FTX used deposits to pay Alameda Research creditors, a claim reportedly made by former Alameda Research CEO Caroline Ellison during a call in early November.
In an interview last week, Bankman-Fried told ABC News’ George Stephanopoulos that he was not aware that was true but said Alameda had a large position open on FTX that was “overcollateralized a year ago.”
Ray told House members that FTX transferred several billion dollars in customer funds to Alameda Research.
When asked by Rep. Patrick McHenry, R-N.C., if there was a distinction between FTX and Alameda Research, Ray said, “Absolutely not. There’s no distinction whatsoever.”
“The owners of the company could run free reign,” Ray added, noting that Bankman-Fried owned 90% of Alameda Research.
Dec 13, 11:38 AM EST
Bankman-Fried’s lawyer offers first comment
Sam Bankman-Fried’s lawyer, Mark S. Cohen, offered his first comments on the arrest of his client Tuesday morning.
“Mr. Bankman-Fried is reviewing the charges with his legal team and considering all of his legal options,” Cohen said in a statement.
Bankman-Fried was scheduled to make his first court appearance in the Bahamas Tuesday.
Dec 13, 11:38 AM EST
FTX CEO John Ray blasts ‘utter lack of record keeping’
John Ray, the new CEO of bankrupt crypto exchange FTX, who oversaw the dissolution of Enron, testified before House members on Tuesday that FTX lacked corporate controls to an extent he had never witnessed.
“I’ve never seen an utter lack of record keeping,” Ray said. “Absolutely no internal controls.”
Earlier this year, FTX was valued at $32 billion. Within weeks of a customer sell-off totaling billions of dollars, the company declared bankruptcy.
Company officials communicated invoice and expense reports over Slack, an internal messaging service, Ray said.
He said FTX employees used the accounting software QuickBooks, which is popular among small businesses.
“Nothing against QuickBooks — it’s a very nice tool,” Ray said. “Not for a multibillion-dollar company.”
Dec 13, 9:57 AM EST
Eight-count indictment unsealed against Bankman-Fried
The eight-count indictment from the Southern District of New York charges Sam Bankman-Fried with conspiracy and fraud.
“Bankman-Fried, along with others, engaged in a scheme to defraud customers of by misappropriating those customers’ deposits, and using those deposits to pay expenses and debts of Alameda Research,” the indictment said.
The indictment also said Bankman-Fried provided false and misleading information to lenders about the true financial condition of Alameda, his privately held crypto hedge fund.
There’s a final count of conspiracy to violate campaign finance laws through political donations that concealed the source and exceeded the permissible amount.
“In or about 2022, Samuel Bankman-Fried, the defendant, and one or more other conspirators agreed to and did make corporate contributes to candidates and committees in the Southern District of New York that were reported in the name of another person,” the indictment said.
Federal prosecutors were expected to elaborate on the charges at an afternoon news conference in Manhattan.
Dec 13, 8:51 AM EST
‘It’s serious’: Former prosecutor says public statements could hurt FTX founder
While the full criminal charges have yet to be released, the Securities and Exchange Commission released it’s complaint against Sam Bankman-Fried early Tuesday.
“It’s serious,” said Brendan Quigley, a former federal securities fraud prosecutor in New York who is now a partner at Baker Botta. “Assuming they can show promises were made to counterparties, investors or clients about where money was going to go, and that it didn’t go there, that’s a serious offense, probably wire fraud at least.”
Bankman-Fried’s public statements could come back to haunt him, including an interview with ABC News’ George Stephanopoulos.
“The big thing will be if SDNY can shows conflicts either between his public statements or between his current public statement and something that was said or promised to investors,” Quigley said.
Dec 13, 8:32 AM EST
Bankman-Fried built ‘house of cards’: SEC
Though cryptocurrency can seem a mystical world, the civil complaint from the Securities and Exchange Commission reads like a standard case of securities fraud, accusing Sam Bankman-Fried of building a “house of cards.”
Bankman-Fried raised $1.8 billion for FTX while “orchestrating a massive, years-long fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire,” the complaint said.
Customers sent billions of dollars to FTX believing their assets were secure but, from the start, the SEC said Bankman-Fried “improperly diverted customer assets to his privately-held crypto hedge fund, Alameda Research LLC, and then used those customer funds to make undisclosed venture investments, lavish real estate purchases, and large political donations.”
Federal prosecutors in New York said they would unseal related criminal charges later Tuesday.
“We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto,” said SEC Chair Gary Gensler.
The civil complaint seeks penalties and fines, but also to prohibit Bankman-Fried from “participating in the offer or sale of securities including crypto asset securities” in the future, a move that would complete his fall as the poster child for the emerging cryptocurrency marketplace.
Dec 13, 8:32 AM EST
Bankman-Fried refused request for Senate testimony
While Sam Bankman-Fried was set to give testimony to a House committee Tuesday, later canceled after his arrest late Monday, he continues to reject requests from the Senate for a hearing of its own.
In a joint statement Monday afternoon, prior to his arrest, the top Democrat and Republican on the Senate Banking Committee called Bankman-Fried’s refusal to appear “an unprecedented abdication of responsibility.”
“Virtually every CEO, financial regulator, and administration official for Republicans and Democrats has agreed to testify in front of both the Senate and House when called upon — that is how congressional oversight works,” Sens. Sherrod Brown, D-Ohio, and Pat Toomey, R-Pa., said in a statement. “We have offered Sam Bankman-Fried two different dates for providing testimony before the Senate Banking, Housing, and Urban Affairs Committee, and are willing to accommodate virtual testimony. He has declined in an unprecedented abdication of accountability.”
The committee will continue efforting an appearance from Bankman-Fried because he is “unwilling to accept service of a subpoena.”
Dec 13, 8:32 AM EST
What to know about former FTX CEO Sam Bankman-Fried?
Sam Bankman-Fried, the 30-year-old founder of FTX, quickly ascended to the top of the cryptocurrency sector, garnering goodwill in recent years as a philanthropist and leading proponent of industry regulation.
The cover of Fortune Magazine in August asked readers whether Bankman-Fried, known by some as “SBF,” was “the next Warren Buffett.”
After the sudden bankruptcy of FTX, however, he faced withering questions over the mismanagement of billions in customer funds.
Meanwhile, his net worth plummeted from $16 billion to $0 in less than a week, according to an estimate from Bloomberg.
(NEW YORK) — The U.S. Securities and Exchange Commission on Tuesday charged Sam Bankman-Fried, the embattled former CEO of cryptocurrency giant FTX and trading firm Alameda Research, with defrauding investors.
“FTX’s collapse highlights the very real risks that unregistered crypto asset trading platforms can pose for investors and customers alike,” Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said in a statement.
Bankman-Fried was arrested Monday in the Bahamas after federal prosecutors in New York filed criminal charges contained in a sealed indictment, according to the Royal Bahamas Police Force. He is expected to appear in court in the Bahamas on Tuesday.
Here’s how the news is developing. All times Eastern:
Dec 13, 8:51 AM EST
‘It’s serious’: Former prosecutor says public statements could hurt FTX founder
While the full criminal charges have yet to be released, the Securities and Exchange Commission released it’s complaint against Sam Bankman-Fried early Tuesday.
“It’s serious,” said Brendan Quigley, a former federal securities fraud prosecutor in New York who is now a partner at Baker Botta. “Assuming they can show promises were made to counterparties, investors or clients about where money was going to go, and that it didn’t go there, that’s a serious offense, probably wire fraud at least.”
Bankman-Fried’s public statements could come back to haunt him, including an interview with ABC News’ George Stephanopoulos.
“The big thing will be if SDNY can shows conflicts either between his public statements or between his current public statement and something that was said or promised to investors,” Quigley said.
Dec 13, 8:32 AM EST
Bankman-Fried built ‘house of cards’: SEC
Though cryptocurrency can seem a mystical world, the civil complaint from the Securities and Exchange Commission reads like a standard case of securities fraud, accusing Sam Bankman-Fried of building a “house of cards.”
Bankman-Fried raised $1.8 billion for FTX while “orchestrating a massive, years-long fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire,” the complaint said.
Customers sent billions of dollars to FTX believing their assets were secure but, from the start, the SEC said Bankman-Fried “improperly diverted customer assets to his privately-held crypto hedge fund, Alameda Research LLC, and then used those customer funds to make undisclosed venture investments, lavish real estate purchases, and large political donations.”
Federal prosecutors in New York said they would unseal related criminal charges later Tuesday.
“We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto,” said SEC Chair Gary Gensler.
The civil complaint seeks penalties and fines, but also to prohibit Bankman-Fried from “participating in the offer or sale of securities including crypto asset securities” in the future, a move that would complete his fall as the poster child for the emerging cryptocurrency marketplace.
Dec 13, 8:32 AM EST
Bankman-Fried refused request for Senate testimony
While Sam Bankman-Fried was set to give testimony to a House committee Tuesday, later canceled after his arrest late Monday, he continues to reject requests from the Senate for a hearing of its own.
In a joint statement Monday afternoon, prior to his arrest, the top Democrat and Republican on the Senate Banking Committee called Bankman-Fried’s refusal to appear “an unprecedented abdication of responsibility.”
“Virtually every CEO, financial regulator, and administration official for Republicans and Democrats has agreed to testify in front of both the Senate and House when called upon — that is how congressional oversight works,” Sens. Sherrod Brown, D-Ohio, and Pat Toomey, R-Pa., said in a statement. “We have offered Sam Bankman-Fried two different dates for providing testimony before the Senate Banking, Housing, and Urban Affairs Committee, and are willing to accommodate virtual testimony. He has declined in an unprecedented abdication of accountability.”
The committee will continue efforting an appearance from Bankman-Fried because he is “unwilling to accept service of a subpoena.”
Dec 13, 8:32 AM EST
What to know about former FTX CEO Sam Bankman-Fried?
Sam Bankman-Fried, the 30-year-old founder of FTX, quickly ascended to the top of the cryptocurrency sector, garnering goodwill in recent years as a philanthropist and leading proponent of industry regulation.
The cover of Fortune Magazine in August asked readers whether Bankman-Fried, known by some as “SBF,” was “the next Warren Buffett.”
After the sudden bankruptcy of FTX, however, he faced withering questions over the mismanagement of billions in customer funds.
Meanwhile, his net worth plummeted from $16 billion to $0 in less than a week, according to an estimate from Bloomberg.
