Sam Bankman-Fried, the founder of the collapsed crypto exchange FTX, has many regrets. But chief among them is the one that may have directly led to his companys downfall.
While lobbying for favorable crypto regulation in Washington, D.C., Bankman-Fried in meetings privately criticized Changpeng Zhao, the CEO of the rival exchange Binance. Word about the whisper campaign got back to Zhao, who ultimately set off a run by FTXs customers to withdraw their deposits by tweeting that he would sell off his huge holdings in that companys in-house cryptocurrency, FTT.
The criticism was not a good strategic move on my part, Mr. Bankman-Fried said in an interview with the New York Times published on Monday, just days after FTX declared bankruptcy. I was pretty frustrated at a lot of what I saw happening, but I shouldve understood that it was not a good decision of me to express that.
Now Bankman-Fried, often referred by crypto industry insiders by his initials, SBF, is at the center of a firestorm over the implosion. Authorities in the Bahamas, where his company is based, and in the U.S., are investigating what happened to FTX, which was valued at $32 billion earlier this year, and whether criminal charges are warranted.
The companys spectacular disintegration also set off major aftershocks across the crypto industry, which was already facing turbulence because of the sputtering economy. As soon as trouble at Bankman-Frieds business became public, virtually every cryptocurrency immediately crashed in value.
At one point last week, Zhao, after sparking the run on FTX, offered to rescue the company by buying it. But after inspecting its books, he withdrew the offer, saying that he had found serious financial problems.
Using the Signal chat app with Bankman-Fried and his representatives, Mr. Zhao simply posted a short note to break the news, according to two people interviewed by the New York Times: Sam, Im sorry, but we wont be able to continue this deal. Way too many issues. CZ.
Bankman-Fried responded to the rejection by telling employees in a message obtained by the Times: I shouldnt throw stones in a glass house, so Ill hold back a bit. Except to say: probably they never really planned to go through with the deal.
In the few days since the bankruptcy, Bankman-Fried, who lost most of his $16 billion fortune in the collapse, said hes taking it relatively well. You wouldve thought that Id be getting no sleep right now, and instead Im getting some, he said. It could be worse.
Additionally, Bankman-Fried said he relaxes by playing the video game Storybook Brawlalbeit from an undisclosed location out of fear for his safety.
It helps me unwind a bit, he said. It clears my mind.
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Frontier Airlines and five foreign carriers have agreed to refund more than $600 million combined to travelers whose trips were canceled or significantly delayed since the start of the pandemic, federal officials said Monday.
The U.S. Department of Transportation said it also fined the same airlines more than $7 million for delaying refunds so long that they violated consumer-protection rules.
The largest U.S. airlines, which accounted for the bulk of complaints about refunds, avoided fines, and an official said no other U.S. carriers are being investigated for potential fines.
Consumers flooded the agency with thousands of complaints about their inability to get refunds when the airlines canceled huge numbers of flights after the pandemic hit the U.S. in early 2020. It was by far the leading category of complaints.
When Americans buy a ticket on an airline, we expect to get to our destination safely, reliably and affordably, and our job at DOT is to hold airlines accountable for these expectations, Transportation Secretary Pete Buttigieg said.
The department said Frontier Airlines is refunding $222 million and paying a $2.2 million civil penalty.
In a consent order, the government charged that Frontier changed its definition of a significant delay to make refunds less likely, and an online system to process credits went down for a 15-day period in 2020.
Frontier spokeswoman Jennifer de la Cruz said the Denver-based airline issued nearly $100 million in goodwill refunds, including to people with non-refundable tickets who canceled on their own and were not entitled to a refund under federal law.
The refunds demonstrate Frontiers commitment to treating our customers with fairness and flexibility, de la Cruz said.
The Transportation Department said TAP Portugal will refund $126.5 million and pay a $1.1 million fine; Air India will pay $121.5 million in refunds and a $1.4 million penalty; Aeromexico will pay $13.6 million and a $900,000 fine; Israels El Al will pay $61.9 million and a $900,000 penalty; and Colombias Avianca will pay $76.8 million and a $750,000 fine.
We have more enforcement actions and investigations underway and there may be more news to come by way of fines, Buttigieg said during a call with reporters.
However, there will be no fines for other U.S. airlines because they responded shortly after the Transportation Department reminded them in April 2020 of their obligation to provide quick refunds, said Blane Workie, the assistant general counsel for the Transportation Departments Office of Aviation Consumer Protection.
We do not have any pending cases against other U.S. carriers. Our remaining cases are against foreign air carriers, Workie said on the same call with Buttigieg.
That did not satisfy consumer advocates, who said that the major U.S. airlines also violated rules around refunds even if they took corrective steps more quickly.
Frontier was a bad player in all this, and they deserve to be fined, and were glad they are paying the refunds they were supposed to pay, but we are very critical of how the DOT just seems to not want to go after the biggest fish, the ones causing the most problems, said Bill McGee of the American Economic Liberties Project, a non-partisan group that opposes concentrated industrial power.
In 2020, United Airlines had the most refund-related complaints filed with DOT more than 10,000 although smaller Frontier had a higher rate of complaints. Air Canada, El Al and TAP Portugal were next, both over 5,000, followed by American Airlines and Frontier, both topping 4,000.
Air Canada agreed last year to pay $4.5 million to settle similar U.S. allegations of slow refunds and was given credit of $2.5 million for refunds. The Transportation Department initially sought $25.5 million in that case.
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Twitter owner Elon Musk, who has called himself a free speech absolutist, has resorted to firing company engineers who publicly criticize him on the social-media service.
In one case, Musk announced the firing in a tweet. In another, the former employee said he was fired after he openly rebuked Musk.
Engineer Eric Frohnhoefer, who worked on Twitters app for the Android mobile operating system, on Sunday reposted one of Musks tweets with a comment, saying that Musks understanding of a technical part of Twitters app was wrong. Musk replied and asked Frohnhoefer to elaborate, before writing, Twitter is super slow on Android. What have you done to fix that?
After attempting to explain his thinking in a number of tweets, Frohnhoefer was asked by another user why he hadnt shared his feedback with his new boss privately. The engineer, who has worked at Twitter for more than eight years, replied, maybe he should ask questions privately. Maybe use Slack or email.
On Monday morning, Musk wrote that Frohnhoefer had been fired. Frohnhoefer retweeted that post, and included a saluting emoji that many employees used when they were laid off earlier this month. Twitter and Frohnhoefer didnt immediately respond to requests for comment on his status.
Another engineer, Ben Leib, was also fired after calling out Musk. He retweeted the same technical post from Musk, writing, As the former tech lead for timelines infrastructure at Twitter, I can confidently say that this man has no idea wtf hes talking about. Leib, who worked at Twitter for a decade, confirmed to Bloomberg that he was fired on Sunday.
Twitter has been thrown into chaos since Musk took over late last month. Many workers remain upset that Musk fired half of the companys 7,000-plus employees, including most of the senior managers, within about a week of his $44 billion buyout.
The billionaire also rapidly changed the corporate culture. While it wasnt previously routine for employees to challenge leadership publicly at Twitter, workers often spoke out on internal Slack channels and by email before Musk showed up, sometimes posting criticism or concerns to the entire company.
Musks changes have led to a lack of communication internally in terms of who is in charge and what the companys priorities are, current and former staffers say.
The moves have also led to concerns that San Francisco-based Twitter is vulnerable to product breakdowns or technical outages. On Monday, Twitter implemented another coding freeze, halting product updates to the app, and employees werent given a clear reason why.
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The top U.S. banking regulator at the Federal Reserve is urging Congress to pass legislation that would impose regulation on crypto currencies in the wake of the swift collapse last week of FTX, a leading crypto exchange.
Michael Barr, the Feds vice chair for supervision, said in prepared testimony released Monday that recent events in crypto have highlighted the risks to investors and consumers associated with new and novel asset classes and activities when not accompanied by strong guardrails.
Barr, who took office in July, is scheduled to testify before Congress Tuesday for the first time as vice chair. He did not refer specifically to FTX in his written remarks.
Yet his appearance comes after FTX, the third-largest crypto currency exchange, formerly led by Sam Bankman-Fried, filed for bankruptcy Friday. The fall of FTX has rippled throughout the crypto world, with lender BlockFi pausing customer withdrawals.
Barr said some financial innovations offer opportunities, but as we have recently seen, many innovations also carry risks. Those include runs on deposits, collapsing asset values, misuse of customer funds, fraud, theft, manipulation, and money laundering, he said.
These risks, if not well controlled, can harm retail investors and cut against the goals of a safe and fair financial system, Barr said.
The collapse of FTX occurred outside the banking system, Barr noted, a focus of his oversight.
But recent events remind us of the potential for systemic risk if interlinkages develop between the crypto system that exists today and the traditional financial system, he said.
Regarding the banking system overall, most large banks have healthy levels of cash reserves, Barr said, beyond even what is required by regulation.
But with the economy slowing as the Fed rapidly lifts interest rates, banks may come under more stress, he said.
The economic outlook has weakened, increasing uncertainty, Barr said. A weaker economy could put stress on households and businesses and, thus, on the banking system as a whole.
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The collapse of one of the worlds largest crypto companies has sent ripples throughout the cryptocurrency ecosystem.
If the sector goes up in flames, the writing was likely on the wall, according to Dennis Kelleher, one of DCs most influential voices in banking and finance.
Kelleher is the co-founder and CEO of Better Markets, an independent organization that for the past decade has sought to reform and improve the U.S. financial system. And Kelleher, who in 2012 was referred to by the New York Times as one of the most powerful lobbyists on financial regulatory reform, is no fan of cryptocurrency.
No one should be shocked by FTXs demise, Kelleher wrote in a scathing statement released on Sunday. The fiction of crypto was visible to all who wanted to see.
Kelleher is of course referring to the spectacular meltdown of FTX, one of the largest crypto exchanges that declared bankruptcy last week. The companys downfall has been compared to a Lehmans Brothers moment for the sector, sparking fears of contagion across the industry and sending the value of most cryptocurrencies plummeting over the past week.
Kelleher said that FTXs collapse was clear to see as long as you werent on the payroll of FTX/crypto (directly or indirectly) and didnt let FOMO and greed cloud your judgment, but that too many investors had been swayed by the industrys promise and the charm of its figureheads.
To this day there is no valid use case for crypto, and no amount of personality cult or hype will change that fact, he wrote.
Many crypto observers were shocked by the FTX collapse, and especially by how far the once-shining star of company founder and former CEO, Sam Bankman-Fried had fallen. Commonly referred to as SBF, his affable demeanor and discussion of philanthropic philosophy won him many admirers.
At the center of SBFs sprawling crypto empire was FTX, which earlier this year was worth $32 billion. But the company turned out to be a delicate house of cards that came tumbling down last week after a tweet from Changpeng Zhao, CEO of rival exchange Binance, helped spark a run on FTT, a token native to FTX, that caused the exchanges value to plummet. Just days later, the Wall Street Journal reported that SBF had been dipping into customer funds to invest in his other company Alameda Research. FTX declared bankruptcy on Nov. 11, and announced SBFs resignation.
The chaos wiped out billions of dollars in value at FTX, and the fiasco isnt finished. Over the weekend, FTX shared it was investigating a number of unauthorized transactions as over $600 million was siphoned out of FTX users wallets. A hacker is believed to be responsible. And as for SBF, hes reportedly under supervision by authorities in the Bahamas, where FTX is based, and could face U.S. criminal charges.
But for skeptics like Kelleher, SBF, FTX, and the entire crypto industry was just a delusion people let themselves believe in exchange for a big payout.
FTX/SBF/crypto spent enormous amounts of money to make sure many people (including smart and influential people who should have known better) had gigantic financial incentives to not understand, see or question the fiction and fraud that is crypto, Kelleher wrote.
Kelleher described a meeting between Better Markets and SBF and his team one year ago at which the FTX founder was unable to provide satisfactory answers to tough factual questions. The watchdog then accused investors of not completing proper due diligence when it came to crypto companies, and added that the vision crypto investors were being sold on was little more than hope, smoke, and the desire to make a quick buck.
In recent years, major public companies including software developer Microstrategy and Elon Musks Tesla have bought Bitcoin and declared it on their balance sheets.
But 2022 has been a rough year for crypto bulls. The so-called crypto winter has been raging for months, and the FTX meltdown has only darkened the sectors outlook.
Kelleher wrote that JPMorgan Chase CEO Jamie Dimon has been one of the few to share his views on cryptocurrencys shortcomings, but that he was bullied into silence by other banks who wanted to get some of the crypto cash for themselves before the crash.
Earlier this year, Dimon said that he doesnt think cryptocurrencies can be called real currencies, preferring to call them crypto-tokens. Last year, the banker called Bitcoinone of the first cryptocurrencies to hit the marketworthless, and in 2017, he referred to the same currency as a fraud that was inevitably set to blow up.
Binances Zhao said last week that the crypto market would eventually heal itself, but only if regulators stepped in to steer the industry, a view shared by several other industry leaders. But Kelleher wrote that not even regulation would be enough to save the sector, as it had become a lawless industry by choice.
Rather than being a legitimate business that constructively engages with regulators and complies with the laws and rules as other legitimate companies do, cryptos chosen strategy is to fight against regulators and regulation, while trying to get the easiest regulator and most favorable legislation, he wrote.
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