The Rise and Fall of the Cyber-Scale: The Real Stories of a Crime-Detecting Bender in Schools, and the Charges of Black Holes in Russia
WIRED investigated more than 90 of the incidents where false reports of activeshooters send police charging into schools, and found potential connections between many of them. “In speaking to a number of people who experienced it, I can tell you that the anxiety and fear—it was real to them for 15 minutes,” Amanda Klinger, director of programs and cofounder of the Educator’s School Safety Network, told WIRED. “There’s a period of time in these incidents where people are literally running for their lives, law enforcement is responding with their weapons, and people think it’s the real thing.”
Even after extensive sanctions were put in place to cripple Russia’s economy, investigators around the world are still working to reduce the influx of money to Russian military and paramilitary groups. Former Uber executive Joe Sullivan was convicted this week of obstructing a Federal Trade Commission investigation and failure to report a felony, a development that is being watched closely by the tech industry because it is likely the first time a corporate executive has faced criminal charges related to a data breach. While the executive order addresses privacy in some way, it seems like it is more of a Band-Aid than a solution, because it tries to assure Europeans that their data is safe when stored in the US.
Meanwhile, Meta released findings on more than 400 malicious Android and iOS apps that it says were harvesting Facebook credentials to take over users’ accounts. We took a look at how living your life online affects your sense of self and how privacy can be lost with consistent social media posting.
Plus, there is more. Each week, we highlight the news we didn’t cover in-depth ourselves. Click on the headlines below to read the full stories. Stay safe out there.
Source: https://www.wired.com/story/binance-hackers-minted-569-million/
CoinDesk Comes to an End: How Coin Markets Learned about Bankman-Fried and the False Trade Transmutation Against Binance
According to the company, an exploit in the BNB Chain token was used to mint 2 million of the company’s ethereum-based tokens worth $569 million. That money wasn’t actually stolen from Binance, in other words, but rather fabricated out of thin air thanks to a flaw in the security of Binance’s cryptocurrency. But the hack nonetheless seemed poised to flood the market with BNB and thus reduce its value for legitimate owners, while allowing the hackers to walk away with half a billion dollars.
With the help of CoinDesk we know that FTX made up the majority of Alameda’s balance sheet, with it’s native FTT token. Changpeng “CZ” Zhao, the owner of the rival Binance exchange, announced plans to dump his company’s FTT holdings, which sparked a run on withdrawals from FTX, and, very quickly, its collapse once it couldn’t pay customers back.
During the 2008 financial crisis, Bair told CNN there were eerie similarities between the rise and fall of Bankman-Fried and FTX.
The details of Bankman-Fried’s alleged fraud will likely take months, and potentially even longer, to disentangle. The story is familiar and well-known, that he spent years defrauding investors of huge sums of money and then used that money to make illegal campaign contributions in order to live a lavish lifestyle.
Long before his Ponzi scheme collapsed, Madoff was known as a wizard on Wall Street. He managed money for the rich and famous while he was the chairman of the Nasdaq Stock Market.
The chairman of the committee and the senator from Pennsylvania wrote to Bankman-Fried and his lawyer about the collapse of F.
Better Markets CEO Dennis Kelleher said in a statement on Monday that FTX had a strategy of “revolving door hires” from the Commodities Futures Trading Commission (CFTC) and elsewhere “to use their knowledge, influence and access at the agency and in Washington to move FTX’s agenda.”
If your peers and marquee names in venture capital are investing, you have to as well. And that adds credibility with Washington policymakers. Bair, who sits on the board of directors of Paxos, aBlockchain infrastructure company, said it all feeds on itself.
FDIC Chairman Michael Bankman-Fried was arrested on the charges of fraud and tax evasion in the Cryptocurrency Exchange Market
An elaborate scheme that repaid existing clients with new client deposits allowed for the creation of an impossibly consistent track record that eventually proved to be possible.
The former FDIC chair doesn’t believe the FTX implosion will lead to the collapse of the financial system like Lehman Brothers did in 2008. Crypto is still a relatively small part of the broader economy and financial market.
But the bad news is the crypto market remains largely unregulated, making it the Wild Wild West of the financial world. And that leaves investors vulnerable when something breaks.
“You must answer for the failure of both entities that was caused, at least in part, by the clear misuse of client funds and wiped out billions of dollars owed to over a million creditors,” the senators wrote.
The arrest took many by surprise. The House Financial Services Committee was going to hear from S.B.F. on Tuesday. The committee’s Democratic chair, Representative Maxine Waters of California, didn’t see this coming: “The public has been waiting eagerly to get these answers under oath before Congress, and the timing of this arrest denies the public this opportunity,” she said. (S.B.F said he didn’t expect to be arrested)
There are still significant unanswered questions about how client funds were mishandled, how clients were blocked from withdrawing of their own money, and how you orchestrated a cover up.
The Federal Reserve, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency were among those who received letters from Elizabeth Warren and Tina Smith.
“Crypto firms may have closer ties to the banking system than previously understood,” Warren and Smith wrote. “Banks’ relationships with crypto firms raise questions about the safety and soundness of our banking system and highlight potential loopholes that crypto firms may try to exploit to gain further access.”
Bankman- Fried told the paper that he was unaware of market manipulation and never intended to engage in it.
Federal prosecutors are also investigating whether Bankman-Fried played a role in the collapse this spring of two interlinked cryptocurrencies, Terra and Luna, according to the New York Times, which cited two people familiar with the matter.
The moves by Ms. Ellison and Mr. Wang could spur more high-ranking FTX executives to strike plea deals in exchange for their testimony. Mr. Bankman- Fried, who had been extradited to the US from the Bahamas, is in even more legal jeopardy because of that.
The attorney general of the island nation confirmed that Bankman-Fried was extradited to the US Wednesday night. A warrant was issued for his surrender by the Foreign Minister of the Bahamas and it will allow him to be extradited to the US, according to the statement.
The SEC will be filing charges in the Southern District of New York for Mr. Bankman Fried’s violations of the securities laws.
Do I Really Know How to Code? Observation of a Collapsing Coin-Leading Platform: Waters and Bankman-Fried
The United States’ extradition treaty with the Bahamas allows US prosecutors to return defendants to American soil if the charges would be considered punishable by imprisonment of at least a year in both jurisdictions.
“I didn’t knowingly commit fraud,” he told the BBC over the weekend. “I didn’t want any of this to happen. I was certainly not nearly as competent as I thought I was.”
“While I am disappointed that we will not be able to hear from Mr. Bankman-Fried tomorrow, we remain committed to getting to the bottom of what happened,” Waters said in a statement Monday night.
The collapse of FTX appears to be the result of a small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any corporate controls.
Defendants and Bankman-Fried knew that FTX, at Bankman-Fried’s direction, had allowed Alameda to invest “client assets” and that Alameda had in fact done so, using FTX customer funds to make investments far riskier than “treasuries.”
Bankman-Fried said there was no person who was in charge of the risk of FTX customers. That feels embarrassing in retrospect.
There was no knowledge of any of this by Bankman-Fried. “I don’t even know how to code,” he told cryptocurrency vlogger Tiffany Fong in an interview last month.
Sam Bankman-Fried, the CEO of FTX and the SEC: A Post-Bankruptcy-Filing First-Principles State in the Bahamas
The arrest was made based on a sealed indictment in the Southern District of New York, according to Damian Williams.
In a statement, the prime minister of the Bahamas stressed the country is cooperating with law enforcement and regulators in the United States, but its own “regulatory and criminal investigations into the collapse of FTX continue.”
Bankman-Fried quit hours before the bankruptcy filing, and since then has spent the last month trying to convince the public that he wasn’t a bad guy.
Bankman- Fried was listed as a witness and written testimony was also provided by the other witness, FTX’sCEO John Ray, in the committee’s notice of the hearing.
“As part of their deception, we allege that Caroline Ellison and Sam Bankman-Fried schemed to manipulate the price of FTT, an exchange crypto security token that was integral to FTX, to prop up the value of their house of cards,” said SEC Chair Gary Gensler in a statement.
Bankman-Fried apologized during his virtual appearance at the New York Times DealBook Summit. “There are things I would do anything to do over.”
The allegations against SBF also focus on his statements to investors that FTX was a safe place to invest because of an automated “risk engine” that would sell off a customer’s assets to make sure their collateral stayed at the required levels.
That unlimited negative balance didn’t upset things until crypto prices fell earlier this year, leading to lenders demanding repayment from Alameda. The SEC alleges SBF directed the firm to pay them using funds from FTX while hiding the billions of dollars Alameda now owed to FTX for its “line of credit” and continuing to withdraw hundreds of millions of dollars for himself and other executives.
Prior to his arrest, SBF had continued an ongoing post-bankruptcy-filing media tour of Twitter Spaces chats and Zoom calls, with at least two live appearances on Monday, and he was expected to appear remotely today to testify before the House Financial Services Committee. John J. Ray III, FTX’s new CEO, is expected to give testimony at 10 AM.
His arrest has led to jubilation within the sphere of criptomism, but there was some speculation that his political donations might earn him a free pass from US law enforcement.
The FTX Case: An Ace in the Hole, Not a Flaw: The Case against an Ex-Employee
The first indication that Bankman- Fried was going to be in for a battle was a written preview of Ray’s testimony. “Never in my career have I seen such an utter failure of corporate controls at every level of an organization,” wrote Ray, before describing Bankman-Fried and his inner circle as “grossly inexperienced and unsophisticated.”
Ray told lawmakers that the crimes committed at Enron were orchestrated financial machinations by sophisticated people. FTX, on the other hand, was “not sophisticated at all.”
Bankman-Fried could face up to 115 years in prison if convicted on all eight counts against him in a federal indictment unsealed Tuesday morning, according to congressional statutory maximum sentencing guidelines.
There’s still a ton we don’t know about the case. But the fact that prosecutors put together an eight-count, 14-page indictment just four weeks after FTX filed for bankruptcy suggests prosecutors may have an ace in the hole, and/or a preponderance of evidence against the company. (The SDNY are an aggressive people, but they are not sloppy, and they don’t indict without a solid case.)
I have been told by lawyers not involved in the case that the arrest of Bankman-Fried signals to prosecutors that former FTX employees are helping them.
One or more of the ex-employees would be smart to rush to become a cooperator, and it would not be surprised to learn that they had done so. He added: “The fact that only one person has been charged so far would seem to indicate this as well.”
Editor’s Note: Casey Michel is a writer and investigative journalist covering kleptocracy and dark money networks across the globe. He is the author of American Kleptocracy: How the US created the World’s greatest Money Laundering scheme in History, and is also working on a book about foreign lobbying in Washington, DC. The opinions expressed in this article are his own. Read more opinion at CNN.
Many of the cases which resemble traditional Ponzi schemes are as old as American capitalism itself. They almost always pair a lack of regulation and oversight with promises of easy wealth schemes, all predicated on some kind of proprietary technology that seems to generate returns out of thin air.
The same story is repeated over and over in American history. The American economy was badly affected by speculative investors in the rail industry in the Panic of 1873, leading to bank failures and widespread destitution.
Bankman-Fried, a failed cryptocurrency entrepreneur, filed bankruptcy in the Metropolitan Detention Center: A Manhattan hearing on a grand jury trial
Once he is stateside, Bankman-Fried will appear before a judge in Manhattan for a bail hearing. When he arrives in New York it will affect the timing of the hearing.
People familiar with the matter told CNN that Bankman-Fried was negotiating with prosecutors in New York to avoid a jail sentence.
A man appeared to be holding a bag of personal belongings at the hearing. Bankman-Fried gave his occupation as “entrepreneur and executive” and told the magistrate that his address was “a little unclear right now.”
In the week and a half since his arrest in the Bahamas, the Bankman-Fried has been held in a prison that US officials have described overcrowded, dirty and lacking medical care. The cells are crowded and often lack mattresses.
Prosecutors and attorneys for Bankman-Fried are discussing an arrangement for his release, with conditions, that would enable the failed crypto entrepreneur to avoid spending time at the Metropolitan Detention Center. The MDC is a pre-trial holding facility that former inmates and rights advocates have described as inhumane, citing frequent lockdowns, overcrowding and power outages that have left it without heat in the middle of winter.
After investors rushed to withdraw deposits from the exchange, FTX and its sister trading house, Alameda, both filed for bankruptcy.
Two senior executives associated with collapsed crypto exchange FTX have pleaded guilty to multiple criminal charges and are cooperating with federal prosecutors, according to unsealed court records. The SEC charged the pair with civil fraud on Wednesday night.
Amalgamated Results from a Collapsed Internet-Focus Investigation by the US Attorney for the Southern District of New York
Damian Williams, the US attorney for the Southern District of New York, announced the charges in a video message Wednesday night. He said that the investigation was still ongoing and the charges in the case were not the last.
GARY WANG, 29, is charged with and has pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; one count of wire fraud, which carries a maximum sentence of 20 years in prison; one count of conspiracy to commit commodities fraud, which carries a maximum sentence of five years in prison; and one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison.
The SEC said thatEllison and Wang were involved in the scheme to cheat FTX investors and conduct that was critical to its success.
CAROLINE ELLISON, 28, is charged with and has pled guilty to two counts of conspiracy to commit wire fraud, each of which carry a maximum sentence of 20 years in prison; two counts of wire fraud, each of which carry a maximum sentence of 20 years in prison; one count of conspiracy to commit commodities fraud, which carries a maximum sentence of five years in prison; one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison; and one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison.
Williams said last week that the investigation was very much ongoing and moving quickly. “I also said last week’s announcement would not be our last and let me be clear, once again, neither is today’s.”
“When FTT and the rest of the house of cards collapsed, Mr. Bankman-Fried, Ms. Ellison, and Mr. Wang left investors holding the bag,” SEC Chairman Gary Gensler said in a statement.
Two executives from Sam Bankman-Fried’s fallen internet empire have pleaded guilty and are cooperating with prosecutors. Damian Williams, the US Attorney for the New York region, made the announcement late Wednesday.
The SEC and CCI have filed updated civil suits which include details on Wang and Ellison. “Wang, with Ellison’s knowledge and consent, exempted Alameda from the risk mitigation measures” FTX used, providing Alameda Research with a “virtually unlimited ‘line of credit,’” according to the updated SEC complaint.
In a response to a staff question, Ellison acknowledged that she had made a mistake in a November 6th post in which she said she would buy his FTT holdings at $22 per token. Most of the staff resigned.
A counterexample to the banker, Bankman-Fried, on stealing billions of dollars from customers of a crypto-trading platform
The judge said Bankman-Fried would be arraigned on the charges that he stole billions of dollars from customers of his crypto-trading platform at a future date.
Bankman-Fried was wearing a navy suit jacket and white button- down shirt while being escorted into the courtroom. The sound of clanking from the shackles around his ankles could be heard as he walked to his seat at the defense table.
Bankman- Fried said yes when the judge asked if he understood the consequences of skipping out on bail.
Other bail conditions include the surrender of firearms, mental health treatment, and prohibiting businesses from opening new lines of credit or transactions over $1,000 without government approval.
Roos said evidence against Bankman-Fried includes multiple cooperating witnesses, the testimony of other employees of the companies and encrypted messages.
Prosecutors say billions in customer and investor funds are missing, accusing a small circle of insiders at FTX and Bankman-Fried’s crypto hedge fund, Alameda Research, of misusing the money for themselves from the very start of their operation.
The 30-year-old, whose net worth had been calculated to be in the billions until recently, will live in San Francisco with his parents and wear an electronic monitoring device. SBF is scheduled to appear in person at his next hearing on the afternoon of January 3rd in New York City.
It would be more shocking if the SBF continued with their media tour after charges were filed, since we didn’t see any mention of computers or internet restrictions.