By Pam Martens and Russ Martens: January 6, 2023 ~ If you’re looking for the poster child for everything that is toxic about mixing crypto with federally-insured banks, look no further than Silvergate Capital Corporation, parent of federally-insured Silvergate Bank. Yesterday, the company lost 42.73 percent of its market capitalization in one trading session, putting its stock price losses at 91 percent over the past 12 months. The stock has been plunging since April of last year. Then came the jarring news on November 11 that one of its large customers, crypto exchange FTX, was filing for Chapter 11 bankruptcy along with its sister hedge fund, Alameda Research – which, it turns out, had been using (and losing) billions of dollars of FTX customer funds to trade and acquire without the knowledge of customers. More than 100 opaque affiliates of FTX, many headquartered in offshore locations, also filed for bankruptcy. Three … Continue reading →

By Pam Martens and Russ Martens: January 5, 2023 ~ This coming Saturday will mark the 16-month anniversary of former Wall Street Journal reporter Mike Derby setting off a media firestorm with his reporting that the then President of the Dallas Fed, Robert Kaplan, had “made multiple million-dollar-plus stock trades in 2020,” a year in which Kaplan was a voting member of the Fed’s Federal Open Market Committee (FOMC) with access to inside information. While the trading scandal spread to numerous other Fed officials, including Fed Chairman Jerome Powell, the case against Kaplan seemed like a prime candidate for a criminal investigation by the U.S. Department of Justice. Not only was Kaplan sitting on inside information gleaned from the Fed, but he was making market-moving statements himself on television. When Wall Street On Parade obtained Kaplan’s trading records from the Dallas Fed shortly after Derby’s article appeared, it became clear that the stock trading … Continue reading →

By Pam Martens and Russ Martens: January 4, 2023 ~ After multiple federally-insured banks involved with crypto have watched their publicly-traded stocks crater in price over the past year (see above chart); after a former Fed insider blew the whistle on what’s been going down as a result of the Fed’s hands off approach to policing crypto banks; after alleged fraudster operation, FTX, quietly bought a large stake in a federally-insured bank in the state of Washington; and after Senators Elizabeth Warren and Tina Smith sent a blistering demand for answers to the Fed, FDIC, and OCC on December 7 – those three federal agencies issued a new warning to banks yesterday on what life in the crypto lane could mean to their future. The warnings included the following: “The events of the past year have been marked by significant volatility and the exposure of vulnerabilities in the crypto-asset sector. These … Continue reading →

By Pam Martens and Russ Martens: January 3, 2023 ~ Thus far, they are the “untouchables.” The law firms that were at the side of Sam Bankman-Fried every step of the way as he built the FTX crypto exchange — an enterprise that Justice Department prosecutor Damian Williams calls “one of the biggest financial frauds in American history.” Bankman-Fried, the former co-founder and CEO of FTX, has been indicted on eight criminal counts and is wearing a monitoring device as he awaits trial. Caroline Ellison, the former CEO of Bankman-Fried’s now bankrupt hedge fund, Alameda Research, which prosecutors say looted FTX customers’ money, has pleaded guilty to a 7-count criminal indictment. Gary Wang, the former Chief Technology Officer of FTX Trading Ltd., has pleaded guilty to four criminal counts. What’s happening to the lawyers and the law firms that played pivotal roles in putting this house of cards together? Attorneys at … Continue reading →

By Pam Martens and Russ Martens: December 22, 2022 ~ During testimony before the House Financial Services Committee on December 13, John Ray III, the newly appointed CEO of bankrupt crypto exchange FTX, told members of Congress that FTX U.S. had 2.7 million user accounts while FTX International had 7.6 million user accounts. That’s a total of 10.3 million potential customers of FTX that may have been bilked out of some or all of their funds by the alleged mastermind, Sam Bankman-Fried, and his co-conspirators. That’s more than 250 times the defrauded customers of Ponzi mastermind Bernie Madoff. While Ray acknowledged that some FTX users had multiple accounts, even if you cut the 10.3 million user accounts by as much as two-thirds, 3.4 million accounts is still 85 times the number of Madoff victims. If you throw into the mix that Madoff acquired his victims over more than four decades and … Continue reading →

Editor’s Update: Two days after Wall Street On Parade published this article, Judge Abrams decided to recuse herself from this case, writing as follows: “It has come to the Court’s attention that the law firm of Davis Polk & Wardwell LLP, at which my husband is a partner, advised FTX in 2021, as well as represented parties that may be adverse to FTX and Defendant Bankman-Fried in other proceedings (or potential proceedings). My husband has had no involvement in any of these representations. These matters are confidential and their substance is unknown to the Court. Nonetheless, to avoid any possible conflict, or the appearance of one, the Court hereby recuses itself from this action. See 28 U.S.C. § 455. SO ORDERED. Dated: December 23, 2022 New York, New York.” Clearly, not all of these matters were “confidential,” as Judge Abrams states above. The BlockFi deal appeared on the Davis Polk … Continue reading →

By Pam Martens and Russ Martens: December 20, 2022 ~ The Chairman of the Securities and Exchange Commission, Gary Gensler, announced in June that he was going to tackle the structure of the U.S. stock market – ostensibly to make it fairer to the little guy. His plans were released last Wednesday in a mountain of paper that even Wall Street veterans are having difficulty digesting. (See here, here, here, here, and here.) While the overall thrust of the proposed changes appears to be to provide more transparency to order execution, the proposals fail to address key structural issues that have allowed the U.S. stock market to operate as an institutionalized wealth transfer system — moving vast sums of money from the pockets of average Americans to the richest one percent. Both Congress and the SEC were put on notice on March 30, 2014 that the U.S. stock market is rigged. … Continue reading →

By Pam Martens and Russ Martens: December 19, 2022 ~ There’s a dangerous and growing threat to financial stability that is being fueled by crypto money pouring into the coffers of Republicans in Congress – particularly those members who sit on the House Financial Services Committee where crypto devotee Patrick McHenry (R-NC) will take over as Chair in January. Last month, American Prospect’s David Dayen revealed that earlier this year when the crypto exchange FTX and other crypto firms were receiving inquiries from the SEC, Congressman Tom Emmer (R-MN) (the newly-elected Majority Whip) was the lead signatory to a March letter to SEC Chair Gary Gensler signed by four House Republicans and four House Democrats, effectively telling the SEC to back off. The letter also demanded answers to 13 questions, some of which had the appearance of simply trying to burden the SEC with nonsensical paperwork. For example, one question asked: … Continue reading →

By Pam Martens and Russ Martens: December 16, 2022 ~ Over the past week Wall Street On Parade has reached out to a number of individuals connected to FTX Capital Markets, the stock trading platform and SEC-registered brokerage firm that was majority owned by the indicted crypto kingpin, Sam Bankman-Fried. We’ve received two answers to our questions: Either, “I can’t talk about it” or “no comment.” Regulators have been just as tight-lipped. When we emailed one of the lawyers handling the bankruptcy process for FTX, James Bromley of Sullivan & Cromwell, the response came back from a crisis management/public relations firm, Joelle Frank. Their response was “decline to comment.” Bankman-Fried’s ability to enter the regulated world of stock trading in the U.S. while, according to Justice Department prosecutors, he was operating a vast fraud, raises red flags about what other crypto firms may be doing or contemplating. Despite all of the … Continue reading →

By Pam Martens and Russ Martens: December 15, 2022 ~ If you are an average American without insider knowledge of how Congress works these days, you might have felt that you had stepped onto the set of Alice in Wonderland while watching the Senate Banking Committee hearing yesterday. The hearing was convened to examine the sudden collapse of the crypto exchange, FTX; its tentacles that reach into the federally-insured banking sector; and legislation that may be required to rein in the mushrooming risks that crypto poses to U.S. financial stability. Given that more than one million customers of FTX cannot get access to the money or crypto “investments” in their potentially worthless accounts; that the kingpin of this operation, Sam Bankman-Fried, was indicted on Tuesday by the U.S. Department of Justice on eight criminal counts; and that a federally-insured bank, Silvergate Bank, that held FTX customer deposits, has seen its publicly … Continue reading →