Sam Bankman-Fried’s arrest in the Bahamas on Monday marks the beginning of a new chapter in the FTX saga, one that will pit the former crypto billionaire against the Southern District of New York.
The indictment is expected to remain sealed until Tuesday morning. U.S. prosecutors haven’t commented, and neither the Attorney General of the Bahamas nor the Royal Bahamas Police Force would confirm the nature of the charges against Bankman-Fried.
The New York Times reported that the charges against Bankman-Fried included conspiracy to commit wire fraud and securities fraud, as well as standalone charges of securities fraud, wire fraud and money laundering.
The SEC has initiated a separate set of charges against Bankman-Fried, relating to “violations of our securities laws, which will be filed publicly tomorrow in the Southern District of New York,” enforcement director Gurbir Grewal said in a statement on Monday.
A spokesperson for the SEC declined further comment.
The charges could land Bankman-Fried in prison for decades, legal experts told CNBC. But before he ever serves time, U.S. prosecutors have to secure an extradition from the Bahamas back to New York.
An effort to extradite
“It is inconceivable to me that the Justice Department would have charged this case unless they were confident that they could extradite him,” Renato Mariotti, a former federal prosecutor, told CNBC.
Mariotti anticipates an extradition will take weeks to complete.
“The statement by the Bahamian government suggests that they’re going to cooperate,” Mariotti said.
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The U.S. and the Bahamas have had an extradition treaty in place since 1931, with the most recent iteration codified in 1990. Because Bankman-Fried hasn’t been convicted in the Bahamas yet, U.S. prosecutors had to secure an arrest warrant and provide sufficient evidence to the Bahamians that he had committed a crime.
Extradition is the first step in a process that could take years to finish. Given the magnitude of Bankman-Fried’s alleged crimes, prosecutors and regulators will be pursuing concurrent cases around the world.
A trial in the U.S. “may not occur for years,” Mariotti said.
“The more that they charge, the bigger that the case is, the more time they’re going to need to get in motion,” he said. “I would say late 2023 is the earliest a trial would occur.”
Prosecutors could argue that FTX breached its fiduciary duty by allegedly using customer funds to artificially stabilize the price of the company’s self-issued FTT coin, Mariotti said.
Intent is also a factor in fraud cases, and Bankman-Fried insists he didn’t know about potentially fraudulent activity. He told CNBC’s Andrew Ross Sorkin at the New York Times DealBook conference that he “didn’t knowingly commingle funds.”
“I didn’t ever try to commit fraud,” Bankman-Fried said.
In prepared testimony for the House Financial Services committee, new FTX CEO John Ray confirmed that commingling of funds had occurred between FTX and Alameda Research, Bankman-Fried’s hedge fund.
Other legal trouble
Beyond the criminal charges set to be unveiled Tuesday morning, Bankman-Fried is also facing civil action, which could be brought by the SEC, the Commodity Futures Trading Commission and state banking and securities regulators, said Richard Levin, who chairs the fintech and regulation practice at Nelson Mullins Riley & Scarborough.
The CFTC and lawmakers have begun their probes into FTX and Bankman-Fried, who told Sorkin he was down to his last $100,000.
Shortly after Bankman-Fried’s arrest, the SEC appeared to confirm that the agency would pursue a separate set of charges from the criminal indictment.
Lawmakers also expressed their satisfaction at Bankman-Fried’s arrest. Senator Sherrod Brown (D-Ohio), who chairs the Senate Committee on Banking, Housing, and Urban Affairs, applauded both the Justice Department and Bahamian law enforcement “for holding Sam Bankman-Fried accountable.”
Rep. Maxine Waters (D-Calif.), the chairwoman of the House Financial Services Committee, echoed that sentiment, but expressed disappointment that Bankman-Fried was arrested before his House testimony, which was scheduled for Tuesday.
“I am surprised to hear that Sam Bankman-Fried was arrested in the Bahamas at the direction of the United States Attorney,” Waters said in a statement.
“[The] American public deserves to hear directly from Mr. Bankman-Fried about the actions that’ve harmed over one million people,” Waters continued.
Bankman-Fried had also been invited to appear before the Senate prior to his arrest. That hearing will occur on Wednesday.
It’s unclear whether the SEC or the CFTC will take the lead in securing civil damages.
“The question of who would be taking the lead there, whether it be the SEC or CFTC, depends on whether or not there were securities involved,” Mariotti told CNBC.
SEC Chairman Gary Gensler, who met with Bankman-Fried and FTX executives earlier this year, has said publicly that “many crypto tokens are securities,” which would make his agency the primary regulator.
But many exchanges, including FTX, have crypto derivatives platforms that sell financial products like futures and options, which fall under the CFTC’s jurisdiction.
“For selling unregistered securities without a registration or an exemption, you could be looking at the Securities Exchange Commission suing for disgorgement — monetary penalties,” said Levin, who’s represented clients before both agencies.
Investors who have lost their savings aren’t waiting. Class-action suits have already been filed against FTX endorsers, like comedian Larry David and football superstar Tom Brady. One suit excoriated the celebrities for allegedly failing to do their “due diligence prior to marketing [FTX] to the public.”
FTX’s industry peers are also filing suit against Bankman-Fried. Failed lender BlockFi sued Bankman-Fried in November, seeking unnamed collateral that the FTX founder provided for the crypto lending firm.
FTX and Bankman-Fried had previously rescued BlockFi from insolvency in June, but when FTX failed, BlockFi was left with a similar liquidity problem and filed for bankruptcy protection in New Jersey.
Bankman-Fried has also been sued in Florida and California federal courts. He faces class-action suits in both states over “one of the great frauds in history,” a California court filing said.
The largest securities class-action settlement was for $7.2 billion in the Enron accounting fraud case, according to Stanford research. The possibility of a multibillion-dollar settlement would come on top of civil and criminal fines that Bankman-Fried faces.
A life behind bars
If the DOJ were able to secure a conviction, a judge would look to several factors to determine how long to sentence him.
Based on the size of the losses, if Bankman-Fried is convicted on any of the fraud charges, he could be behind bars for years — potentially for the rest of his life, said Braden Perry, a partner at Kennyhertz Perry who advises clients on anti-money laundering, compliance and enforcement issues.
But the length of any potential sentence is hard to predict, said Perry, who was previously a senior trial lawyer for the CFTC, FTX’s only official U.S. regulator.
Federal sentencing guidelines follow a numeric system to determine the maximum and minimum allowable sentence, but the system can be esoteric. The scale, or “offense level,” starts at one, and maxes out at 43.
A wire fraud conviction rates as a seven on the scale, with a minimum sentence ranging from zero to six months.
But mitigating factors and enhancements can alter that rating, Perry told CNBC.
“The dollar value of loss plays a significant role. Under the guidelines, any loss above $550 million adds 30 points to the base level offense,” Perry said. FTX customers have lost billions of dollars.
“Having 25 or more victims adds 6 points, [and] use of certain regulated markets adds 4,” Perry said.
That means Bankman-Fried could be facing life in federal prison, without the possibility of supervised release, if he’s convicted on just one of the offenses that prosecutors will reportedly pursue.
If convicted, his sentence could be reduced by mitigating factors.
“In practice, many white-collar defendants are sentenced to lesser sentences than what the guidelines dictate,” Perry said. Even in large fraud cases, that 30-point enhancement previously mentioned can be considered punitive.
By way of comparison, Stefan Qin, the Australian founder of a $90 million cryptocurrency hedge fund, was sentenced to more than seven years in prison after he pleaded guilty to one count of securities fraud.
In a landmark shift for the U.S. housing finance system, the Federal Housing Finance Agency has issued a directive ordering Fannie Mae and Freddie Mac to formally consider cryptocurrency as an asset in single-family mortgage loan risk assessments.
The move, signed by FHFA Director William J. Pulte on Wednesday, signals a new era of crypto integration into traditional financial infrastructure — this time within the core of American home lending.
The order directs both housing finance giants to develop proposals that include digital assets — without requiring borrowers to liquidate them into U.S. dollars prior to a loan closing.
Pulte said in a post on X that the move aligns with President Donald Trump‘s vision “to make the United States the crypto capital of the world.”
Historically, cryptocurrency has been excluded from underwriting frameworks due to volatility, regulatory uncertainty, and the inability to easily verify reserves. This directive changes that.
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The decision comes at a time of increasing institutional embrace of crypto across banking, payments, and federal policy.
“Cryptocurrency is an emerging asset class that may offer an opportunity to build wealth outside of the stock and bond markets,” the order states, acknowledging crypto’s growing role in household financial portfolios.
The directive restricts consideration to digital assets that are stored on U.S.-regulated, centralized exchanges and can be clearly evidenced. It also requires Fannie Mae and Freddie Mac to develop internal adjustments to account for crypto’s market volatility and ensure that any risk-weighted reserves comprised of crypto do not compromise underwriting standards.
Under the directive, both enterprises must submit their assessment proposals to the boards of directors for approval and then to the FHFA for final review.
Fannie Mae and Freddie Mac were put under government control in September 2008 as entities that are known as government-sponsored enterprises, or GSEs.
Arevon Energy just brought a massive new battery storage project online in San Diego’s Barrio Logan neighborhood, and it’s built to keep the lights on when the grid gets stressed.
The new Peregrine Energy Storage Project clocks in at 200 megawatts (MW)/400 megawatt-hours (MWh), making it one of the biggest battery storage facilities in the San Diego region. That’s enough stored energy to power around 200,000 homes for two hours during peak demand.
Built for $300 million, Peregrine is the fifth utility-scale energy storage project Arevon has launched in California. It uses lithium iron phosphate (LFP) batteries, which are known for their safety and thermal stability. LFP batteries use iron, phosphate, and lithium to create a strong chemical bond that resists overheating, making them safer than other lithium-ion chemistries. They also have a longer lifespan and are less prone to degradation over time.
The facility created more than 90 construction jobs and is expected to generate over $28 million in property tax revenue over its lifetime.
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Energy storage projects like this are key to making California’s grid more stable and reliable. By soaking up clean energy when demand is low and discharging it when the grid is under strain, Peregrine helps reduce blackouts and avoid spikes in electricity prices.
“The successful completion of Peregrine Energy Storage is a result of the collaborative efforts of the project’s stakeholders and the local community who collectively support California’s renewable energy goals,” said Kevin Smith, CEO of Arevon.
Arevon already operates more than 3.2 gigawatts (GW) of renewable energy projects in California, with another 800 MW under construction. Nationwide, it owns and operates 4.7 GW of solar and storage projects across 17 states.
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The time is finally here: there are actual driverless Tesla Robotaxis on the road, at least in a portion of Austin, Texas, as of this weekend. And thanks to their ridership of exclusively Tesla influencers, almost all of the miles they’ve put under their belt has been filmed or livestreamed, which gives us plenty of footage to discover what’s gone right and what’s gone wrong.
Tesla’s Robotaxi service went live on Sunday around noon, at least for the relatively small number of Tesla influencers who were invited to ride.
It’s a limited launch in several other ways, too – it’s geofenced to somewhere around 30 square miles in South Austin which Tesla spent additional time mapping and testing in, it’s supported by backup teleoperation, it doesn’t operate from 12am-6am or in bad weather, and every car has a “safety monitor” in the passenger seat with access to controls to stop the vehicle.
Because of that decade of promises, a lot of eyes have been on this launch – and also because of the fact that every invited rider is chasing views on social media, so we have a lot of footage just a few days in.
To be clear, this is not the first driverless taxi on the road. GM used to operate robotaxis through subsidiary Cruise (more on that in the Take), and Google has its Waymo robotaxis in multiple US cities (it just expanded its service area last week) and is even testing overseas.
But, Tesla is Tesla, and there’s always more attention on what Tesla does. So lets put a little more attention on the various errors that we’ve seen from Robotaxis in the 3 days since launch.
But, soon, errors started creeping in. We added some as updates to that article as they came in, but we thought this article would be better to compile them all (and thanks to r/SelfDrivingCars which compiled several others)
Indecision leads to driving into an oncoming lane
In Tesla Daily’s first Robotaxi ride, the Tesla tries to attempt a left turn one intersection early, gets indecisive, then continues on, driving through an oncoming lane for a time before re-entering a left turn lane ahead. See the whole exchange starting at around 7:08 in this video:
Robotaxi stops in middle of street for about a minute
Dirty Tesla pressed the “pull over” button to get dropped off early, and the car got confused and tried to let him out in the middle of a left turn lane. Support ended up “resuming the ride” and the Robotaxi found a nearby gas station to drop him off at. The whole interaction took about a minute, starting at ~8:58 in the video:
Robotaxi drops rider off in an intersection, stays there for ~55 seconds
Farzad also asked for a slightly early dropoff, and the car stopped quite early… as in, gridlocked in an intersection and leaking out into one lane of traffic. Thanks to wide Texas streets for letting others by, I guess. 38:04 in the video:
Tesla phantom brakes when caught by sun glare
Kim Java had a hard “phantom braking” moment, where the vehicle hits the brakes for no particular reason, while driving into the setting sun. 10:13 in the video:
Safety monitor intervenes, presses “stop in lane” to avoid UPS truck
In what seems to be the first true intervention caught on video, Dave Lee was approaching a parking spot when a UPS truck stopped in the lane and started backing up. The Tesla “safety monitor” in the front seat wisely anticipated the situation and was hovering the “stop in lane” button, then pressed it when it seemed like the car wouldn’t stop on its own. The car then remained in position while the UPS truck backed up, giving it just enough room, but it probably would have been nicer if it backed up a little more. Excellent job by the safety monitor here, really. 28:53 in the video:
The previous day, Dave Lee was getting picked up by a Robotaxi in a parking lot and it hit a curb in the parking lot right at the start of the drive (at 0:39 in the video).
Robotaxi hits a bump too fast, then goes 27 in a 15mph zone
Farzad was heading to a disc golf course on a low-speed street. The Robotaxi handled one speed bump well, but then took another one too fast. It then drove past a 15mph speed limit sign, slowed down for a deer, and then picked speed back up to 27mph. The whole exchange starts around 14:27:
In the same video, starting at 4:56, the car seems not to know what to do about a shopping bag in the road – it brakes, then considers going around it, then just runs it over.
Tesla brakes for nearby police, exterior view
Edward Niedermeyer, a longtime Tesla hater, posted a video from an exterior angle of a Robotaxi behaving strangely nearby police vehicles. The Robotaxi passes by one police vehicle with lights on in a parking lot, then brakes rather hard when it passes by another police car blocking a side intersection, then passes by another at normal speed, then brakes hard for a fourth despite it being in a parking lot behind a curb. Slowing down would be appropriate behavior in this instance, but the braking events seem more sudden than necessary, and inconsistent given the position of the police vehicles involved.
Safety monitor intervenes, hops in drivers seat in parking lot
In what seems to be the second intervention, Dirty Tesla had just gotten out of the taxi and while it was trying to leave the parking lot, it nearly ran into a parked car. The Safety monitor intervened to stop the car, then apparently got out and drove the car away manually (not captured in video).
Super tight squeeze for robotaxi in one of my last drives 🫢
The owner of the parked car asked if it was my car and I told him it was a robotaxi. The robotaxi backed up and then the driver of the parked car left. It looked like the tire touched the parked car. The safety driver… pic.twitter.com/DzNuAQk6Su
Yes, the title is lighthearted. I was going for irony.
The fact is that there are issues with Tesla’s approach to self-driving, and these various videos show them.
Tesla drivers are well acquainted with the current limitations and quirks of FSD as well, many of which were shown off in the clips above. It doesn’t do well with sun glare (neither do you, but you can wear sunglasses and/or flip down the visor for a little help), it sometimes misses speed bumps, it phantom brakes, and it has weird moments of indecision sometimes. C’mon, we’ve all seen it, let’s be honest with ourselves here.
As best I can tell from hundreds of miles away, these vehicles exhibit pretty similar behavior to the FSD in the vehicles I’ve driven. It works pretty well a lot of the time, but most of the time I’m also glad I’m there in the driver’s seat so I can tell it to STOP CHANGING LANES FOR THE 5TH TIME THIS MINUTE FOR PETE’S SAKE.
Tesla’s system also uses only cameras, not LiDAR, and most experts (including Tesla engineers) agree that incorporating multiple sensing modes is the correct path to take (here’s more on that). Tesla is using only cameras because it’s cheaper, and thus more scalable (though LiDAR prices have dropped rapidly).
In particular, LiDAR does better in poor weather than cameras do. We haven’t seen particularly bad weather yet for Robotaxi (there was rain in Austin on the morning of the Robotaxi’s launch – and the launch coincidentally did not happen until afternoon), and Tesla’s FSD system does work in the rain.
But even I, in famously sunny Southern California, have encountered a rainstorm severe enough for FSD to suddenly shut off and tell me to take over. So, in the very conditions that you’d definitely want an enclosed space to keep you safe from the weather, Robotaxi might not work.
So far, the errors we’ve seen above have not caused any sort of damage, either to Tesla occupants or the general public (except for some curb rash, perhaps), but as miles get put on the system, it is inevitable that something will happen.
When something does happen, the public will not respond kindly to it. Recall when GM’s Cruise robotaxi got into an accident in San Francisco – which was actually entirely the fault of a human driver. A human driver struck a pedestrian, who was then pushed into the path of a Cruise vehicle which didn’t have time to stop, and hit the pedestrian as well.
This was largely reported as a self-driving car crash, even though Cruise didn’t cause the accident in the first place. Cruise was, however, responsible for having poor after-crash behavior, as the car didn’t realize the pedestrian was stuck under the vehicle and dragged her on the road for several feet, and then hid this fact from investigators. As a result, its license was pulled in California and it soon shut down elsewhere as well.
We are all aware of how many unpredictable things happen on the road every day, and how many problems are caused by human drivers. Autonomous technology does promise solutions to that, particularly in its theoretical ability to make decisions quickly. But autonomous technology has heretofore not been great at understanding what to do in unexpected situations, like the Cruise issue above.
Waymo has had issues as well, one of which you can see in my own experience with the system, where the car I was in got stuck for several minutes trying and failing to make a left turn into a crowded street. Or this clip where it gets stuck in a parking lot and needs a manual driver.
One pattern I do notice is that a lot of Tesla’s errors seem to happen when the car is dropping off or picking up riders. This could be because parking lots are more complex spaces than roads, or simply because the ability to park is a newer feature for FSD. In my time in Waymos, it also seems the least decisive when trying to find parking or pickup spots.
But the exceptional part about these Tesla issues is that it’s only been three days, and there are reportedly only 10 cars and 20-some riders using the system. Tesla has always said that it could scale its solution to an entire fleet with a single software update, without geofencing, thus turning the entire fleet autonomous overnight.
And Tesla has also always been famous for the “move fast and break things” approach which is so common in Silicon Valley. This is all well and good for tech, but when you’re dealing with thousands of pounds of metal going down the road near pedestrians, things can get serious real quick.
Thankfully, Tesla does seem to be taking a more measured approach than we might have expected, given its inclusion of safety monitors who we’ve already seen avoid two accidents in just the first three days of operation. But that’s not scalable, and while Tesla fans have pointed out that Waymo also started with safety monitors, it didn’t charge fees or take public rides during that testing phase, and Tesla is doing both.
It remains to be seen if Tesla’s approach will be scalable faster than Waymo’s (or MOIA’s, or Zoox, or anyone else’s), but given the first few days of limited operation in Austin, the dream of expanding everywhere overnight does seem unlikely.
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