Fintech
As Sam Bankman-Fried awaits prison sentence, FTX customers await a surprise: Full repayment
As Sam Bankman-Fried prepares to face sentencing next month for his criminal fraud conviction tied to the epic collapse of FTX in 2022, former customers of the crypto exchange have reasons to believe they could actually recoup their money.
Bankman-Fried, who could spend the rest of his life behind bars, was found guilty in November on seven criminal counts after roughly $10 billion in customer funds from his company went missing. Some of that money went to pay for Bankman-Fried’s lavish lifestyle, but much of it went towards other investments that have, of late, appreciated dramatically in value.
Lawyers representing the bankruptcy estate of FTX told a judge in Delaware last week that they expect to fully repay customers and creditors with legitimate claims. Bankruptcy attorney Andrew Dietderich, who works with FTX’s new leadership team, said “there is still a great amount of work and risk” ahead in getting all the money back to clients, but that the team has a “strategy to achieve it.”
It’s a welcome development for the many thousands of customers (reportedly up to a million) who collectively lost billions of dollars in FTX’s collapse 15 months ago, when the crypto exchange spiraled into bankruptcy in a matter of days. Given the lightly regulated and unsecured nature of FTX — and the crypto industry at large — those clients faced the real possibility that the vast majority of their money had evaporated. Plenty of failed hedge funds and lenders lost virtually everything during the 2022 crypto winter.
Bankman-Fried never believed his company’s situation was that dire.
Even as regulators and federal prosecutors unearthed evidence showing that the 31-year-old entrepreneur and his top lieutenants had been pilfering billions of dollars from customer wallets for years, Bankman-Fried insisted that all the money was still somehow accessible.
“FTX US remains fully solvent,” Bankman-Fried wrote in a Substack post on Jan. 12, 2023, while he was under house arrest at his parents’ home in Palo Alto, California. He said the exchange “should be able to return all customers’ funds.”
In some ways, his narrative appears to be proving true.
For months, FTX’s new CEO, John Ray III, and his team of restructuring advisors have been clawing back cash, luxury property, and crypto, as well as tracking down missing assets. They’ve already collected more than $7 billion, and that doesn’t include valuables like $26 million in gifts and property to Bankman-Fried’s parents, or the $700 million handed over to K5 Global and founder Michael Kives, who invested FTX cash in companies like SpaceX. Some of those investments have seen a precipitous rise in value.
FTX had been negotiating with bidders about a potential reboot of the company, but those efforts were scrapped last month.
Braden Perry, who was once a senior trial lawyer for the Commodity Futures Trading Commission, FTX’s only official U.S. regulator, told CNBC that the decision to repay users in full came after ”the abandonment of efforts to restart the FTX crypto exchange,” in favor of “a focus on liquidating assets to make customers whole.”
Getting actual money back in the hands of customers still remains a challenge. While a lot of the value has been recouped and more is to come, divvying up large amounts of cash is a complex process in bankruptcies, particularly when so much of the money is in non-traditional and illiquid assets.
Even Ray was doubtful at the beginning of the process, noting in late 2022 that, “At the end of the day, we’re not going to be able to recover all the losses here.”
‘Sam coins’ soar
What Ray wasn’t banking on was a huge market rebound. When he made those remarks, crypto was mired in a bear market, with bitcoin trading at around $16,000. It’s now above $47,000.
In September, the bankruptcy team released a status report showing that FTX had $3.4 billion worth of digital assets, with over $1.1 billion coming from its Solana investment.
Solana fits into a category of so-called “Sam coins,” a group that also includes Serum, a token created and promoted by FTX and sister hedge fund Alameda Research. After the dust settled from FTX’s bankruptcy, Solana saw a huge run-up in its price, and it continued to rally after the September report. Since the end of that month, it’s spiked fivefold.
Meanwhile, FTX’s bitcoin stash, which was worth $560 million at the time of the September report, is today valued north of $1 billion.
Bankman-Fried’s investments weren’t limited to crypto. He also used client money to back startups like Anthropic, the artificial intelligence company founded by ex-OpenAI employees. FTX invested $500 million in Anthropic in 2021, before the generative AI boom. Anthropic’s valuation hit $18 billion in December 2023, which would value FTX’s roughly 8% stake at about $1.4 billion.
During Bankman-Fried’s criminal trial in New York, Judge Lewis Kaplan denied the defense’s request that it be permitted to say that FTX’s investment in Anthropic was a smart bet. The bankruptcy estate of FTX has been looking to sell its Anthropic stake, according to a court filing this month.
In his biography on Bankman-Fried titled “Going Infinite,” Michael Lewis said he was told by an investor interested in bidding for the venture portfolio that “if it was sold intelligently, it should go for at least $2 billion.” Lewis, who published his book late last year, wrote that, based on his back-of-the-envelope math, the $7.3 billion that Ray’s team had come up with didn’t include Serum, some large clawbacks and other venture investments that had appreciated in value.
For FTX customers, being made whole, according to a judge’s ruling, means getting the cash equivalent of what their crypto was worth in November 2022. In other words, they’re not seeing any of the upside of FTX’s investments or being given virtual coins that would allow them to cash out at higher valuations.
Still, some investors have found a way to participate in the FTX’s ongoing odyssey. The market for FTX IOUs lit up last year as it became clear that the bankruptcy estate was cobbling together a lucrative portfolio. One financial firm that had lost around $100 million initially sold its FTX debt for 6 cents on the dollar in a new secondary market out of concern that he may never get a better deal. As of December, those claims were going for more than 70 cents on the dollar.
If customers are eventually made whole, that could play a big role in Bankman-Fried’s appeal, likely following his sentencing, which is set to take place in Brooklyn on March 28. Perry said it could also affect how the judge handles sentencing in the first place.
“Under the federal sentencing guidelines, and even assuming no monetary loss, SBF still faces at least 70 months in prison based on his base level offense, number of victims, sophisticated means, and leadership role,” Perry said.
The massive losses that were originally expected would suggest 30 to years to life, Perry added.
Renato Mariotti, a former prosecutor in the U.S. Justice Department’s Securities and Commodities Fraud Section, told CNBC that judges typically consider the amount of restitution paid to victims at sentencing.
“If the victim is made whole, that is a big plus for the defendant,” said Mariotti. He noted, however, that the extent of the fraud coupled with Bankman-Fried’s false testimony and violation of bond conditions could limit the reduction.
“I usually advise clients to pay restitution before sentencing if at all possible,” Mariotti said.
Source: cnbc.com
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Fintech
Gaia-X Introduces the Compliance Document to Enable and Increase Trust, Security, and European Sovereignty in Digital Ecosystems
Gaia-X, a leading European initiative aimed at establishing a secure, transparent, and interoperable digital infrastructure, has unveiled its Compliance Document. This essential framework defines the standards that data providers, data consumers, data exchanges, and digital infrastructures must follow to participate in the Gaia-X ecosystem. Aligned with the core European values of transparency, data protection, and cybersecurity, the document promotes innovation and competitiveness while ensuring that organisations operate globally under clear, standardised rules.
Why Gaia-X Compliance Matters
The Gaia-X Compliance Document is not just a set of rules but a foundational guide for creating trust in the evolving digital marketplace. It focuses on three key areas:
- Openness and Transparency: Gaia-X supports global efforts to create interoperable data spaces built on federated cloud infrastructures. By ensuring transparency in operations, data handling, and service processes, Gaia-X fosters trust across the entire ecosystem, ensuring stakeholders have clear insight into the services they use.
- Security and Data Protection: In compliance with GDPR and other European regulations, such as the Data Act and Data Governance Act, Gaia-X ensures that personal and non-personal data are handled securely. Service providers are required to implement strong privacy protections and technical safeguards, offering businesses and users peace of mind.
- European Sovereignty: At its core and especially with its Label Level 3, Gaia-X guarantees European control over digital infrastructure, ensuring that services comply with European laws and standards. However, Gaia-X is designed with global interoperability in mind, providing tools and frameworks that can be adapted to meet the regulations of other regions worldwide.
Key Components of Gaia-X Compliance
1. Standards-Based Approach: The Gaia-X compliance framework builds on globally recognised standards, ensuring a high level of security and compliance across industries.
2. Label System for Differentiation: Gaia-X has introduced a clear labelling system to categorise services based on their level of compliance:
- Gaia-X Standard Compliance: A universal set of standards designed to apply to all types of providers worldwide.
- Gaia-X Label Level 1: Entry-level compliance with standard data protection and security following European laws.
- Gaia-X Label Level 2: Higher-level data protection and security standards following European laws and widely based on certifications.
- Gaia-X Label Level 3: The highest compliance level for services requiring exceptional data handling, security, and legal control for European providers only.
These labels provide clarity for both providers and users, ensuring transparency in service offerings.
3. Trust Anchors and Continuous Validation: Gaia-X ensures ongoing trust and compliance through its Trust Framework, powered by the Gaia-X Digital Clearing House (GXDCH). This system continuously validates verifiable credentials, allowing automated trust assessments across the ecosystem.
Benefits for Ecosystem Participants
The Gaia-X Compliance offers significant advantages to both service providers and users:
- For Users: Businesses and governments benefit from greater choice, transparency, and control over the digital services they utilise. With Gaia-X’s clear compliance standards, users can confidently select services that meet their specific security, privacy, compliance or sovereignty needs, allowing them to select their preferred Label Level while maintaining flexibility and avoiding vendor lock-in.
- For Providers: Gaia-X offers a clear path to certification and compliance, enabling companies to demonstrate adherence to top-tier security and privacy standards. By aligning with European regulations, providers enhance their credibility, position themselves as digital market leaders, and answer to market demand. The standardised use of the Gaia-X Ontology ensures that cloud providers can achieve true interoperability across ecosystems.
The Gaia-X Compliance Document highlights Europe’s commitment to digital sovereignty, security, and trust, providing a foundation for a trusted digital marketplace aligned with European values and laws. It serves as a blueprint for global organisations to operate securely, transparently, and interoperably.
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Fintech
Banking in the United Arab Emirates stands at an inflection point between the traditional branch-based model and a digital AI-enabled future – new Capco survey
A desire for more insights into personal finances, a willingness to share data to unlock individually tailored services, and a high level of comfort with AI-driven guidance are key themes to emerge from the new survey of UAE retail banking customers conducted by Capco, the global management and technology consultancy.
As the UAE pushes forward with ambitious plans to grow its digital economy, Capco’s Bank of the Future survey of over 1,200 UAE banking service users aged between 18 and 65 found that 89% have become more confident in using mobile and digital banking services over the last two years. Eight in ten (83%) now use mobile apps to access banking, offering a solid foundation for future banking innovation.
In addition, 87% of respondents say they would be attracted to an app that offered personalized insights into their finances, including 41% who say this would be ‘extremely attractive’. The survey also reveals that 72% would ‘definitely’ or ‘probably’ share additional personal data – such as social media profiles or wearables data – to unlock personalized products, services or offers.
In support of its main survey, Capco conducted more focused polling of 500 consumers that looked specifically at the adoption of digital-first banking services. This found that nine in ten UAE respondents (89%) now have digital-first accounts, including both international and UAE-based firms. Three-quarters (76%) have an account with a UAE-based digital-first provider.
Capco’s survey findings highlight opportunities for UAE banks and fintechs to capitalize on positive attitudes to data sharing and innovation to deliver the products and services that consumers say they want. It also offers recommended paths forward for banks as they explore how best to apply the latest approaches to data analytics and AI to address customers’ aspirations.
James Arnett, Managing Partner, APAC & Middle East at Capco, said: “Consumers in the UAE are looking for products and services that provide a more bespoke user experience, including personalized financial insights. Seizing this opportunity will require an ever more nuanced understanding of individual consumer’s aspirations, and banks and other providers will need to prepare by investing in improved data management and advanced analytics.”
Naim Alame, Managing Partner, Middle East at Capco, said: “Consumers want convenient, integrated financial services and seamless digital journeys enabled by improved connectivity, data analytics and AI. Delivering the products and experiences that consumers want will require more agile banking models and significantly greater collaboration with third parties in order to embed value-added financial services ever more deeply into customers’ lives.
“For the bank of the future, collaboration may prove to be as important a priority as disruption. Offering a mobile-first experience that embeds payment aggregations, finance options and other ecosystem services to provide a more seamless and holistic experience will be the key to keeping customers engaged.”
Other key findings in Capco’s UAE survey report include:
86% of respondents would be attracted by a banking app that integrates financial services with the non-financial services they use in their daily lives, such as ride hailing and e-commerce.
- 37% would find such an app ‘extremely attractive’.
The characteristics that would convince a respondent to use a specific bank or financial institution include ‘a wide range of services’ (51%) and ‘more accessible services’ (45%).*
- ‘Trust in the company’ (39%) and ‘highly personalized products’ (34%) are also seen as important.
Four in ten of respondents (41%) cite cashback options as a value-added feature they consider when selecting a new card or account.*
- Other important features respondents would consider include discounts on travel (33%), monthly offers such as retail discounts (32%) and the ability to use points to make purchases (32%).
As digitalization accelerates, 72% of those using payment services identify online payments as a preferred payment method and 69% mention digital wallets.*
- Cash remains a preferred payment method for 51% of respondents, and cheques continue to be preferred by 28%.
- In Capco’s recent Kingdom of Saudi Arabia (KSA) banking survey, online payments (65%) and cards (65%) were the leading preferred methods of payment, while 57% of respondents cited digital wallets, 55% mentioned cash, but only 11% chose cheques.
The UAE played host to the COP28 global climate conference in late 2023, and almost nine in ten respondents (88%) say it is important that their primary bank has a proactive stance on ESG issues.
- In our KSA banking survey, 80% of respondents stated that this is important.
*Multiple responses permitted
Capco’s UAE survey report can be accessed here.
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RegVerse, a leading provider of compliance solutions, has announced a significant update to its Avery platform, designed to enhance compliance support for Registered Investment Advisors (RIAs). The latest update brings new features and functionalities that address the evolving regulatory landscape, helping RIAs stay compliant with the latest rules and regulations.
What’s New in the Avery Platform Update?
The Avery platform update introduces several enhancements aimed at making compliance easier and more efficient for RIAs. These updates are designed to help firms navigate complex regulatory requirements, reduce compliance costs, and improve overall operational efficiency.
Key Features of the Avery Platform Update:
- Enhanced Regulatory Reporting: The updated platform includes new reporting capabilities that allow RIAs to generate detailed compliance reports quickly and accurately. This feature is particularly useful for meeting the reporting requirements of regulators such as the SEC.
- Automated Compliance Checks: Avery now offers automated compliance checks that monitor for potential violations in real-time. This proactive approach helps RIAs identify and address compliance issues before they become significant problems.
- Improved Document Management: The platform’s document management system has been upgraded to support secure storage, retrieval, and sharing of compliance-related documents. This helps RIAs maintain organized records and ensures that they can provide necessary documentation during audits.
- Customizable Dashboards: The update includes customizable dashboards that provide RIAs with a comprehensive view of their compliance status. Users can track key metrics, set alerts for potential issues, and gain insights into their overall compliance performance.
Benefits of the Avery Platform for RIAs
The Avery platform update is designed to address some of the most pressing challenges faced by RIAs in today’s regulatory environment. By providing advanced compliance tools and streamlined processes, Avery helps RIAs achieve the following benefits:
- Reduced Compliance Burden: Automated compliance checks and streamlined reporting reduce the manual workload for compliance teams, allowing them to focus on more strategic tasks.
- Enhanced Risk Management: Real-time monitoring and proactive alerts help RIAs identify and mitigate risks early, reducing the likelihood of regulatory violations and associated penalties.
- Improved Client Trust: By maintaining high compliance standards, RIAs can build trust with their clients, demonstrating a commitment to operating with integrity and transparency.
The Future of Compliance for RIAs
As the regulatory landscape continues to evolve, RIAs must stay vigilant and proactive in managing their compliance obligations. The latest update to the Avery platform reflects RegVerse’s commitment to supporting RIAs with innovative solutions that simplify compliance and reduce risk.
Looking ahead, RegVerse plans to continue enhancing the Avery platform with new features and integrations that address emerging regulatory challenges. By staying at the forefront of compliance technology, RegVerse aims to help RIAs navigate the complexities of the regulatory environment with confidence and ease.
For RIAs seeking a comprehensive compliance solution, the updated Avery platform offers a powerful toolset that can help them achieve their regulatory goals and maintain a strong compliance posture in an increasingly complex market.
Source: Investment News
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