How is the case against crypto-cash intermediary Bankman-Fried different from a bank that couldn’t cover a “run on the bank”?
In: 10
“Run on the bank” refers to when many people withdraw their money all at once. Although Bankman-Fried experienced that, it’s not why he’s in trouble. When a run happens, there tends to be an investigation on why it happened, and a check to see if the books are being kept properly. In his case….his books were shady AF. He had lent himself a billion without disclosing it to practically anyone, he’d lied to investors, he had irresponsibly incomplete records, and so on. So yes, there was a sudden rush to pull more cash than his company had on hand, but he’s only in trouble for the assumed crimes he committed to get to that point.
The difference is that a bank would have records indicating to whom the money was currently loaned, or in what it was currently invested. They could account for all of their money
Bankman-Fried can’t tell the investors where the money, they’ve been told they earned, is, because it was never actually earned.
The difference is the reason FTX “couldn’t cover the run” was he was secretly passing money from FTX to Alameda Research, which then lost it in a series of risky trades.
The passing of money from his left hand to his right *is illegal*. And it was not disclosed to his customers.