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SBF faces 8 criminal charges; Binance reportedly has billions in undisclosed reserves

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The biggest news in the cryptoverse for Dec. 13 includes the arrest of former FTX CEO Sam Bankman-Fried, the testimony of FTX’s new CEO John Ray on what led to the exchange’s failure and Binance reportedly having billions stored away in secret reserves.

CryptoSlate Top Stories

The indictment filed by the US Attorney for the Southern District of New York (SDNY) Damian Williams for the arrest of FTX founder Sam Bankman-Fried includes eight criminal charges.

The charges include conspiracy to commit money laundering, conspiracy to commit wire fraud on customers and lenders, conspiracy to commit commodities and security fraud, and separate wire fraud on customers and lenders.

The Indictment also includes conspiracy to defraud the United States and violating campaign finance laws.

Moreover, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have both filed separate charges against the ex-CEO.

Binance CEO Changpeng Zhao was undeterred after $1.4 billion worth of assets were withdrawn in a day.

Despite uncertainties, the CEO believes it’s a good idea to “stress test withdrawals” on each centralized exchange on a rotating basis.

However, Nansen, a Hong Kong-based blockchain analytics platform, reported that assets worth $3 billion had been removed from Binance in the last 24 hours.

Former FTX CEO Sam Bankman-Fried (SBF) claims in his planned testimony before the U.S. House of Representatives Committee on Financial Services that he was pressured into filing for bankruptcy for the FTX companies by the law firm Sullivan & Cromwell, asserting that their motivation for doing so was the potential legal and consultancy fees.

SBF was set to testify before the U.S. House of Representatives Committee on Financial Services on Dec. 13. However, he was arrested in the Bahamas on Dec. 12, at the request of the U.S. government.

Forbes obtained a draft of Bankman-Fried’s planned testimony and has published it verbatim.

In the testimony, SBF makes a claim under ‘Chapter 11’ that he had received an “offer for billions of dollars to help make customers whole,” shortly after signing a nomination for John Ray to take over FTX as CEO.

Binance’s publicly reported reserves may only be a fraction of all the assets it holds and the exchange has “more money than it is letting on,” a source told CryptoSlate, citing people familiar with the matter — including ex-Binance employees.

Sources told CryptoSlate that “Binance is safe” since the exchange’s CEO Changpeng ‘CZ’ Zhao has disclosed “maybe only half or a fraction of what he actually owns.”

“In the early days of Binance most of the funds were going directly to CZ which means there’s reserves behind the reserves.”

Concerning the potential lack of transparency around Binance’s reserves, sources said “you should be more worried if there were no money behind CZ.”

FTX CEO John Ray III Dec. 13 testimony to the U.S. Congress revealed that the bankrupt exchange commingled assets and stored wallets’ private keys without encryption.

According to Ray, FTX’s collapse was caused by the failure of corporate controls — the worst he has seen in over 40 years of handling bankruptcy cases. He noted that FTX’s operation was concentrated in the hands of a “very small group of grossly inexperienced and unsophisticated individuals” who failed to implement the form of control necessary for a company holding other people’s money.

Earlier in the day, FTX co-founder Sam Bankman-Fried was arrested in the Bahamas on the orders of the U.S. government. A Dec. 12 press statement by the Bahamas Attorney General revealed that the U.S. government had filed criminal charges against SBF and is likely to request extradition.

The U.S. Attorney for the Southern District of New York, Damian Williams, confirmed the development. Williams said SBF “was arrested at the request of the U.S. Government, based on a sealed indictment filed by the SDNY.”

Binance recorded over $2 billion in outflows in Ethereum-based tokens since Dec. 12 –its highest daily withdrawal since June– according to Nansen data.

When Binance users’ withdrew assets this aggressively in June, the crypto market was reeling from Terra Luna’s collapse.

A separate tweet from the blockchain intelligence platform reported that the exchange recorded over $2.5 billion in withdrawals in the last 24 hours and has a negative netflow of $1.57 billion. The exchange had an inflow of around $935 million during this period.

Research Highlight

Less than 12% of the current Bitcoin (BTC) supply is held on exchanges, marking a new low since January 2018, according to Glassnode data analyzed by CryptoSlate.

The chart below demonstrates the BTC balance held on exchanges with the orange line and starts in Jan. 2018, when the balance was just above 10.8%.

BTC balance on exchanges
BTC balance on exchanges

Exchanges’ BTC reserves grew exponentially between Jan. 2018 and Jan. 2020, when the COVID-19 pandemic started. On Jan. 2020, nearly 18% of all BTC supply was held on exchanges. After that peak,  the amount of BTC held on exchanges started to shrink steadily and fell as low as today’s 12%.

Crypto Market

In the last 24 hours, Bitcoin (BTC) increased by 4.01% to trade at $17,717.64, while Ethereum (ETH) increased by 4.92% to trade at $1,316.80.

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