Before Bitcoin (BTC), Bernie Madoff sat atop the longest, biggest fraud in history. The rise and real-time fall of Sam “SBF” Bankman-Fried, former CEO of crypto exchange FTX, were quick in comparison. Although they are very similar, the story line is not: Create an organization under false pretenses, develop relationships with people in positions of authority, lie to clients, live as long as you can, and try not to get caught.
Madoff’s advisers ran into “liquidity” problems in 2008, around late November to early December, where the fund was unable to meet client redemption requests. On the surface, the quarter of Madoff’s collapse more than ten years ago seems very similar to the implosion of FTX 2022. Bitcoiners who hold the keys will not experience “liquidity problems,” as Bitcoins are not used for other leverage. This is the hardest money to keep in the hands of its rightful owner.
Even close to the collapse, Madoff had planned to pay $173 million in early bonuses to family and friends. When questioned by his sons on December 9, 2008, Madoff confessed to the massive fraud. These numbers are, in many cases, a fraction of the fraud that FTX is accused of. Bitcoin maximalists continue to warn the generating community, third-party custodians and humans cannot be trusted. Satoshi Nakamoto’s white paper remains.
Madoff’s sons communicated, almost immediately, with their attorney, who advised them to contact federal authorities. Madoff was arrested on December 11, a day after federal agencies learned of the fraud.
related: The outcome of the SBF lawsuit may determine how the IRS treats your FTX loss
On November 8th, Binance CEO Changpeng Zhao announced on Twitter that he intended to buy FTX, but quickly reversed that decision, and that there was a “liquidity” problem in FTX. Bitcoin maximalists either watch idly, shaking their heads in disbelief – knowing it’s a matter of time – or just get on with life. Many maximalists may have been part of Mt. Gox, which held approximately 80% of all BTC in circulation at the time of the breach. The “wake-up call” is an unfortunate initiation ritual for some Bitcoiners. FTX will mint many new Bitcoin maximalists.
In December, SBF was arrested in the Bahamas. As authors and researchers, we are confident that the correlation will be immediately identified and investigated with regard to the time of Madoff’s arrest on December 11, 2o08.
When SBF faces extradition to the United States, based on the “Agreement Between the United States and the Bahamas,” he faces a sentence that may mirror that of Madoff, who faced a 150-year prison sentence for his arsenal of convictions. These beliefs include:
- 40 years for two counts of international money laundering
- 20 years for one count of securities fraud
- 20 years for one count of mail fraud
- 20 years for one count of wire fraud
- 20 years for one count of false filings with the Securities and Exchange Commission
- 10 years for one count of money laundering
- Five years for one count of investment adviser fraud
- Five years for one count of false statements
- Five years for one count of perjury
- Five years for one count of theft from an employee benefit plan
To provide some perspective, the longest sentences for recent financial fraud include, in order:
- Shalom Weiss (845 years old)
- Norman Schmidt (330 years old)
- Bernie Madoff (150 years)
- Frederick Brandau (55 years old)
- A tie for fifth place between Charles Lewis, Eduardo Masferrer, Chalana McFarland and Lance Poulsen, who received 30-year sentences.
Based on the limited release document at the time of publication, SBF may have its name in the top five listed above – and may even be at or near the top. It would be fair considering that, among other allegations, political donations may have impacted or influenced the US political elections.
related: Time for crypto enthusiasts to stop supporting their cult of personality
Madoff’s arrest number is 61727-054. Note that these eight odd digits do not represent an account number, an SEC filing record or some secret financial code; the number is the same former inmate number Madoff in the Federal Correctional Complex, Butner.
If and/or when the time comes, SBF may be remembered with equal numerical value rather than the cheeky three-letter moniker (“SBF”). Time will tell. Remember, Madoff pleaded guilty and still received 150 years, eventually dying in custody.
Bitcoin > bribes
Let’s be clear: not your keys, not your coins.
Stop giving your hard-earned money and Bitcoin to “trusted” third parties. Whether or not SBF spends a day in prison, or some age, the future of SBF means nothing to Bitcoin maximalists. In fact, if SBF runs for free, the event will only confirm the larger Ponzi scheme that Bitcoiners know.
Bitcoin maximalists continue to preach, and events such as the collapse of FTX (among many other exchanges) are a reminder of Nakamoto’s words that kicked off the introduction of the Bitcoin white paper: “Trade on the Internet has come to rely almost exclusively on financial institutions. serving as a party a trusted third. […] While the system works well for most transactions, it still suffers from the weaknesses of a trust-based model.
There are and continue to be many lessons to be learned when examining the greed, lack of empathy and overall corruption that humanity has seen throughout history; and as events of this magnitude reveal, at the heart of every failure is trust – or the lack of it.
Bitcoin’s proof-of-work model – including but not limited to how transactions are recorded, timestamps are recorded, hash rates are set, the network broadcasts nodes, incentives are rewarded, verification and privacy is encoded – is the solution that Bitcoiners are working on. comfort in trust lies in the protocol rather than in the individual. Many times, broken worlds and unscrupulous actors make the case for untrustworthy systems.
related: From the NY Times to the WaPo, the media took Bankman-Fried to heart
No matter how well organized, designed or engineered financial systems, exchanges or “cryptocurrencies” are, they all have the same point of failure: human nature and greed.
Bitcoiners realize this, and as many others become aware of financial fraud – whether the impact is direct or indirect – Bitcoin continues to emerge as the most obvious solution. SBF can teach the new generation of “investors” the same hard lesson learned by their parents: When something is too good to be true, it often is.
FTX’s failure is not surprising, and so is the potential relationship between SBF and high officials. The fact that the punishment may not fit the crime(s) is also not surprising. In fact, maximalists realize that Bitcoin will be around long after the SBF dust settles. Create the next Ponzi scheme – Bitcoin maximalists seem immune.
Kenneth Minesinger is a law professor at California Baptist University. He earned his JD from Western State University College of Law after completing his undergraduate career at California State University in San Bernardino.
Dr. Rista Simjanovski is a professor of public administration at California Baptist University. He earned his doctorate from the University of La Verne.
This article is for general information purposes and is not intended and should not be construed as legal or investment advice. The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.