Sam Bankman-Fried

Sam Bankman-Fried’s only way out is ratting on Binance and Tether

Sam Bankman-Fried’s only hope of not spending the best years of his life behind bars is to dish the dirt he has on the biggest crypto criminals: Binance and Tether.

SBF got to spend the holidays with his family rather than avoiding other inmates’, er, ‘yule logs’, after making bail and being released to house arrest at his parents’ home in California. The disgraced ex-CEO of the FTX digital asset exchange will hopefully use the time to reflect on his past crimes rather than continue to amplify his patently false justifications for why FTX imploded.

Those justifications appear even less convincing following last Friday’s release of the guilty plea of Caroline Ellison, the former CEO of the SBF-owned, FTX-affiliated market-maker Alameda Research. Ellison explicitly detailed how she and SBF conspired to engage in the wholesale pillaging of FTX customer deposits to fill the holes in Alameda’s balance sheet, while fudging the figures on those same balance sheets to deceive potential investors on the state of FTX/Alameda’s finances.

Ellison and FTX co-founder Gary Wang were hit with multiple charges last week by the Department of Justice (DOJ), the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Both Ellison and Wang are cooperating with the authorities to help bring cases against other culpable FTX/Alameda execs, including former Alameda co-CEO Sam Trabucco, FTX’s director of engineering Nishad Singh, FTX’s investor relations head Ramnik Arora and former co-CEO of FTX’s Bahamian subsidiary Ryan Salame.

Ellison’s apparent coziness with the authorities was hinted at weeks ago but confirmation that she and Wang are cooperating—and earlier reports that Salame had tipped off Bahamian authorities about the illegal commingling of FTX/Alameda funds two days prior to FTX filing for bankruptcy—will put further heat on SBF to work out his own deal with the feds.

Trouble is, SBF held a majority stake in FTX and controlled 90% of Alameda. As the three complaints filed against SBF repeatedly indicate, SBF was calling the shots at both companies and ‘directing’ his co-conspirators to take the illegal actions cited in the complaints.

The authorities appear to have all they need to lock SBF away for the 110 years he theoretically faces if convicted on all charges, putting them firmly in the driver’s seat when it comes to any plea bargaining. The type of deal that Ellison has availed herself of typically require one to fink up the food chain rather than down, but with SBF sitting alone at the top of this criminal pyramid, where can he find a neck larger than his to put on the execution block?

There are two likely targets for SBF’s axe. As luck would have it, both are already under investigation by multiple U.S. federal agencies, all of which would undoubtedly welcome an insider’s insights into the criminality that lies within.

Crypto’s Hatfield-McCoy feud

Changpeng ‘CZ’ Zhao, founder of Binance, the world’s largest digital asset exchange, was an early investor in FTX. Binance launched a couple years before FTX made its debut and the smaller exchange followed Binance’s strategies for attracting customers, including offering leverage of up to 125x on certain trades and a disinterest in adhering to accepted ‘know your customer’ (KYC) and anti-money laundering (AML) practices.

It’s unclear exactly when SBF and CZ began to fall out, but CZ may have become uneasy with the swiftness of FTX’s rise amongst the type of high-risk/high-reward trader to whom Binance catered. CZ may have also been irked by how mainstream media began painting SBF as the ‘crypto’ good guy while simultaneously framing regulatory-averse types like CZ as all that was wrong with the sector.

In 2021, FTX bought out Binance’s 20% stake in the company, a slice that by then was worth over $2 billion. SBF later claimed that the deal was forced by CZ’s unwillingness to provide the type of documentation—including source of funds of Binance’s key managers—that regulators in certain jurisdictions demanded from FTX before granting operating licenses.

SBF went on to make veiled references to CZ’s ‘black hat’ reputation on Twitter, appearing to taunt CZ over the latter’s apparent (and well justified) fear of traveling to the United States in case there was an unsealed warrant for his arrest. Reports later emerged that SBF was badmouthing CZ during his meetings with Washington officials and that word of these comments eventually made it back to CZ.

So when that Alameda balance sheet leaked and exposed previously unknown massive liabilities, CZ was only too quick to give SBF’s tottering enterprise the shove required to send it over the edge. CZ and SBF exchanged more harsh words over Twitter, with SBF publicly accusing CZ of having orchestrated FTX’s demise.

The day before FTX filed for bankruptcy, SBF tweeted that “at some point I might have more to say about a particular sparring partner, so to speak.” That ‘some point’ may have now arrived. SBF has both an appetite for revenge and an insider’s understanding of Binance’s operations. Given that the DoJ is reportedly on the brink of issuing indictments against Binance, SBF may be able to provide that little extra nudge that tumbles CZ off his throne.


SBF’s second option for dishing the dirt is the Tether (USDT) stablecoin and its parent company iFinex, which also operates the controversial Bitfinex exchange. Alameda was Tether’s biggest customer, receiving $36 billion of USDT as of late-2021, and Alameda is believed to have received an additional $4 billion before its lights went out.

Tether’s two public faces—CTO Paolo Ardoino and general counsel Stuart Hoegner—used to insist that companies could only receive USDT after sending the equivalent amount of U.S. dollars. But Tether recently conceded that it sometimes ‘loaned’ Tether to customers provided these loans were “overcollateralized by extremely liquid assets.” Shortly after these loans were disclosed, Tether announced that it would reduce these loans to zero in 2023.

SBF is well-positioned to explain the process by which Alameda acquired its billions of USDT and what perks Tether was willing to offer its largest customer. Given their chumminess, SBF may have also had revealing conversations with Ardoino, Hoegner or Tether’s elusive co-founders Giancarlo Devasini and J.L. van der Velde about Tether’s unwillingness to subject its $66 billion of reserves to a proper third-party audit.

Then there’s what light SBF might be able to shed on Alameda’s decision last March to vastly overpay for a stake in FBH Corp, which acquired a tiny bank in Washington state (Farmington State Bank, subsequently rebranded as Moonstone) in 2020.

FBH is run by Jean Chalopin, chairman of the Bahamas-based Deltec Bank & Trust. Deltec was the bank of choice for both FTX and Alameda, as well as for Tether/Bitfinex. Alameda’s Sam Trabucco nearly choked on his own tongue during a 2021 interview when he was asked whether Alameda used U.S. banks to purchase USDT.

Should SBF be able/willing to share information with the feds on Alameda’s decision to take a stake in a U.S. bank, the ripple effects could be massive. Tether-based wash trading is widely suspected to play a major role in every asset value pump, so if Tether goes down, the entire speculative model that the ‘crypto’ sector has relied on all these years would come to a screeching halt.

SBF’s dilemma

Clearly, there’s no shortage of shoes yet to drop from the FTX implosion, including how extensively its creditors will seek to claw back moneys SBF et al either donated to politicians, used to purchase expensive real estate or invested in crypto projects. The Solana blockchain in particular could take a major hit given the large sums that SBF invested to try to ensure that the glitchy network could restart after each jarring outage.

But the legal actions resulting from SBF’s bargaining with federal authorities will prove the most consequential. With both Binance and Tether suspected of engaging in illegal/unethical conduct to maintain their respective U.S. customer bases and access to the U.S. banking system, U.S. authorities should have no trouble identifying criminal conspiracies under the Racketeer Influenced and Corrupt Organizations (RICO) Act (with up to 20 years in prison per each racketeering count).

Crypto bros love to proclaim their love of game theory, so it’s easy to imagine how much time and brain power they’re currently exerting on how to play this particular version of the Prisoner’s Dilemma. Do they fink on their fellow crooks now or do nothing and hope that their partners in crime aren’t dishing the dirt? With no honor among these thieves, the options are simple: speak now or forever hold your peace.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance,, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.

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