FTX, one of the largest crypto exchange, filed for bankruptcy on November 11. The U.S. federal prosecutors waited until Monday, December 12, to accuse its founder, Sam Bankman-Fried.

Sam Bankman-Fried, who like to be called SBF, was arrested in Bahamas and charged with fraud and conspiracy over FTX collapse. The eight-count charges including conspiracy to commit wire fraud against customers and lenders, money laundering and violation of campaign finance laws. If convicted, SBF will spend years in prison.

FTX was founded in 2019 and from his lavish life style, we can see the inappropriate use of the deposits from customers to pay the debts and expenses of SBF’s private trading firm, Alameda Research to make investments.

The failure of his Bahama-based exchange, once valued at $32 billion, has resulted in billions of dollars of potential losses for millions of creditors, including retail investors, and this has sent shockwaves through the crypto industry. He successfully gained the trust of investors like BlackRock, Sequoia Capital and the Ontario Teachers’ Pension Plan.

SBF insisted that he was unaware of the details of what Alameda was doing and denied wrong doing but apologized for what he characterized as oversight and errors.

Already lawmakers said that it would take months if not years to track down the assets, and it is impossible to recover all the losses there. He is already painted as a fraudster and made victims of small and big investors. This is the call for the crypto industry to come into compliance with the laws.

This time the case of FTX doesn’t make the crypto industry look good, and Binance, who once came to the rescue of FTX but ducked out, crypto miner Argo Blockchain is approaching a bankruptcy filing.         

Crypto trading has been known for its asymmetric returns, and making a return of 10 times, is like pulling wool over the investor’s eyes.

Now we take you to the birthplace of FTX which was in Hong Kong before it moved to Bahamas. In Hong Kong it was joined by Genesis Block, who is a crypto retail service company part-owned by Alameda Ventures and its CEO, Caroline Ellison, one-time lover of SBF.

Genesis Block has been known for trading with exchange of crypto with cash and the business was so hot that people were literally lining up around the corner with bags of cash at Genesis Block. But this time when FTX filed for bankruptcy, they shut down their trading portal and stop accepting deposits.

The collapse left the local investors a very bad experience but the city’s crucial role in FTX ascent to the top of the digital asset industry is without no reason. First of all Genesis Block has a network of bank accounts which provide easy access to onboard clients. Trade of crypto is what traditional banks often avoid. Genesis Block has the relationship with those high net worth clients and rich families who have interest in crypto.

Genesis Block started its business in 2017 and flourished during the trading frenzy, buying crypto in Hong Kong and trade with Japan and Korea with a profit.

SBF met the executives of Genesis Block in Macao in 2018, which is a city near Hong Kong that rivals with Las Vegas as the world’s biggest gambling hub. It was a perfect setting for the two of them, and eventually they became what I would call partners-in-crime. Very soon Genesis Block operated a bitcoin ATM across Asia with FTX and Alameda onboard. Their offices are one floor above the other, and employees and traders were working directly for FTX.

Business was traded in places where other investors would shy away, such as Cambodia. They started crypto mining in China which allowed them to exchange renminbi for crypto deals.

In Hong Kong SBF built a personality cult and posted as a workaholic sleeping on a beanbag in the office adding to his curly hairdo in T-shirt and baggy shorts. He fooled everyone with his “boy genius” look.

But today, Sam Bankman-Fried, at his 30, is more often described as Bernie Madoff, the fraudster who orchestrated a notorious Ponzi scheme.

SBF was widely viewed as one of the few reliable figures in a freewheeling, loosely regulated industry. His donation of $5.6 million to Biden’s 2020 election campaign, TV commercials for basketball star Stephen Curry and N.F.L., quarterback Tom Bradley, have made him the forefront of an industry’s effort to bring crypto into the mainstream of American business world. Not to forget that this was found out SBF wanted to influence the direction of policy and legislation on the cryptocurrency industry.

Its collapse started in this spring when the crypto market began to tank, and other crypto companies who lent to Alameda started to call in the loans. FTX started to take more money from FTX customers to bail Alameda. In this fall, customers of the FTX started to demand their money and not knowing the financial hole was already $8 billion, the whole enterprises collapsed.    

All this while, SBF wanted people to know the enormous effort he took to service humanity. He tried to distinguish from other crypto billionaires for something which is known as E.A. of effective altruism, a philanthropic movement to do good. But this time FTX collapsed and wiped out small investors and brought havoc to the industry. In a very short time, he swapped his role from hero to villain.

Sam Bankman-Fried’s father, Joseph Bankman, is a tax professor at Stanford Law School, was helping his son to shape the narrative of his crypto business to shape the world. He was a paid employee of FTX who traveled frequently to Bahamas. He focused on FTX’s charitable operations

His mother, Barbara Fried, was also a professor at the Stanford Law School who was retired and resigned last month as chairwoman of the board of a political donor network known as Mind the Gap which she helped to support Democratic campaigns and causes. She had no role in FTX although she was a retired professor on the intersection of law and philosophy, and has written about effective altruism, which happened to be a charitable movement that his son embraced.

After FTX collapsed, both of them and friends they turned to from the Stanford faculty for legal advice. Many friends in the social circle view their situation in a sympathetic manner as the parents won’t have known about any wrong doing at FTX, may even have been naïve in their embrace of crypto. It is a tragedy to them.

Written before the press:

For Hong Kong, the timing for FTX’s collapsed could not be worse  as it was just weeks ago, its financial secretary, Paul Chan, just underlined its ambitions to be Asia’s premier crypto hub. The former financial hub just came out from the pandemic restriction by following China’s decision just a week ago, was desperate to look for any opportunity that can restore its days of glory. Its policy to lead the global market to develop financial innovation with the virtual-asset community and become the hub of the crypto hub in the world would have to scrap now.

Sam Bankman-Fried established FTX in Hong Kong in 2018 and moved it to Bahamas in 2021.

Hong Kong has one of the world’s biggest crypto customers, mainland China, at its doorstep. And in June, its government passed an amendment to anti-laundering guidelines before granting the license to the crypto traders. This may have come too late.

FTX is busted and SBF is charged with eight criminal charges, including wire fraud and conspiracy to commit money laundry. It has created a notorious reputation to the crypto trading which is often related to blackmailing and money laundering. SBF would be put behind prison for many years.   

Binance who went in dispute with FTX and failed to bail it out when the market started the run on it. Now CZ is busy putting off fire as it is useless to say that it owns $60 billion in crypto assets without issuing a statement of liabilities.

The whole thing could have been a scam as it has never been regularized like the banks and this crypto industry started thirteen years ago. As of March 2022, there were more than 9,000 other cryptocurrencies in the marketplace, of which more than 70 had a market capitalization exceeding $1 billion.

It allows just about everyone to mint cryptocurrencies and market them in ways that circumvent traditional regulatory structures that can protect the general public.