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      Why did the US just ban TikTok from government-issued cellphones?

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      ExplainerWhy did the US just ban TikTok from government-issued cellphones?Trump tried to impose a total ban on the China-based app and some states have already prohibited its use on official devices The US government has approved an unprecedented ban on the use of TikTok on federal government devices. The restrictions – tucked into a spending bill just days before it was passed by Congress, and signed by Joe Biden on Thursday – add to growing uncertainty about the app’s future in the US amid a crackdown from state and federal lawmakers.Officials say the ban is necessary due to national security concerns about the China-based owner of the app, ByteDance. But it also leaves many questions unanswered. Here’s what you need to know.TikTok admits using its app to spy on reporters in effort to track leaksRead moreWhy did the ban happen?The US government has banned TikTok on federal government-issued devices due to national security concerns over its China-based parent company, ByteDance. The US fears that the Chinese government may leverage TikTok to access those devices and US user data. TikTok spokesperson Brooke Oberwetter said the company was “disappointed” that Congress moved forward with the proposal and that it was “a political gesture that will do nothing to advance national security interests”.The ban means that, in about two months, federal government employees will be required to remove TikTok from their government-issued devices unless they are using the app for national security or law enforcement activities.The director of the US Office of Management and Budget and other offices have 60 days to come up with standards and processes for all government employees to remove the app from their phones. Several federal agencies such as the White House and the defense, homeland security and state departments have already banned TikTok, so it won’t change anything for those employees. And earlier this week, Catherine Szpindor, the chief administrator of the House of Representatives, also instructed all staff and lawmakers to delete the app from their devices.How did we get here?US security concerns about TikTok have existed for years. Donald Trump first attempted, unsuccessfully, to ban TikTok in 2020, but bipartisan efforts to regulate and rein in use of the app reached a fever pitch in 2022 after news outlets reported ByteDance employees were accessing US TikTok user information.National security concerns were reinforced by warnings from the FBI director, Christopher Wray, that the Chinese government could use the app to gain access to US users’ devices. Several, predominantly Republican-led states – including Texas, South Dakota and Virginia – have also recently banned the use of TikTok on state government-issued devices.In April, Senator Josh Hawley of Missouri introduced a similar ban to the one now taking effect, calling TikTok a “Trojan horse for the Chinese Communist party”. The measure, the contours of which were largely replicated in the ban that was passed on Friday, was unanimously approved by the Senate earlier in December.Have other countries taken similar actions against TikTok?While other countries such as Indonesia have imposed temporary bans on TikTok, the biggest country that continues to prohibit the use of the app is India. India permanently banned TikTok along with more than 50 other Chinese apps after a deadly border dispute with China, citing national security concerns. National bans in other countries have not lasted more than, at most, a few months.Should we be more worried about TikTok than other apps?It depends on whom you ask. Several digital privacy and civil advocacy groups such as the Electronic Frontier Foundation (EFF) and Fight for the Future say while the potential for China to exploit access to TikTok is indeed concerning, other apps and services offer government entities, including in the US, similar access to user data.“Unless we’re also [going to] ban Twitter and Facebook and YouTube and Uber and Grubhub, this is pointless,” said the Fight for the Future director, Evan Greer. “Yes, it’s possibly a bit easier for the Chinese government to gain access to data through TikTok than other apps, but there’s just so many ways governments can get data from apps.”But lawmakers on both sides of the aisle have introduced bills and applauded efforts to limit the use of TikTok. In addition to Hawley’s bill, Senator Marco Rubio of Florida introduced a bill to ban the company from operating in the US entirely. “This isn’t about creative videos – this is about an app that is collecting data on tens of millions of American children and adults every day,” Rubio said in a press release announcing the bipartisan bill.The Democratic senator Mark Warner of Virginia has also encouraged efforts to ban TikTok on government devices and called for more states to “take action to keep our government technology out of the CCP’s [Chinese Communist party’s] reach”.What are the geopolitical implications of this ban?The US has ramped up its efforts to address potential national security concerns from China over the last few years, including adding more China-based companies and entities to a commerce department blacklist limiting exports to those firms. The focus on TikTok is part of this larger campaign, but some groups warn that a ban on TikTok would lead to similar moves from China.“Blanket bans on apps based on a company’s foreign ownership will only hurt US businesses in the long run because countries could seek to block US online services over similar national security concerns,” said Gillian Diebold, a policy analyst at the Center for Data Innovation.Like other privacy advocates, Diebold said that “policymakers should pursue more promising solutions that address the underlying risks.“For example, to address data concerns, lawmakers should prioritize passing federal privacy legislation to protect consumer data that would explicitly require companies to disclose who they share data with and hold them accountable for those statements,” Diebold said.Could the US ever ban TikTok outright?There have been several attempts at banning TikTok from operating in the US entirely. Rubio’s bill, for instance, would block all of the company’s commercial operations in the US.But the viability of such bans have yet to be proved. Trump’s previous attempt to ban new users from downloading TikTok was blocked in court in part due to free speech concerns. The EFF general counsel, Kurt Opsahl, said a total ban is a violation of free speech and while Rubio’s bill and similar proposed laws to ban TikTok purportedly “protect America from China’s authoritarian government”, they actually adopt “one of the hallmarks of the Chinese internet strategy”.“A government is within its rights to set rules and restrictions on use of official devices it owns, but trying to ban TikTok from public use is something else entirely,” Opsahl said.“TikTok’s security, privacy and its relationship with the Chinese government is indeed concerning, but a total ban is not the answer,” he continued. “A total ban is not narrowly tailored to the least restrictive means to address the security and privacy concerns, and instead lays a censorial blow against the speech of millions of ordinary Americans.”TopicsTikTokUS CongressChinaInternetAppsAsia PacificUS politicsexplainersReuse this content More

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      US bans China-based TikTok app on all federal government devices

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      US bans China-based TikTok app on all federal government devicesMove follows House of Representatives ban, which TikTok called a ‘political measure that will do nothing’ for national security TikTok has been banned on all federal government devices in the US, with limited exceptions, after Joe Biden signed a $1.7tn (£1.4tn) spending bill on Thursday containing a provision that outlaws the China-based app over growing security concerns.The ban – which was approved by Congress in a vote last week – is a major step targeting the fastest-growing social media platform in the world as opponents express worry user data stored in China could be accessed by the government.Various government agencies will develop rules for implementing the ban over the next two months. It will mean that federal government employees are required to remove TikTok from their government-issued devices unless they are using the app for national security or law enforcement activities.TikTok banned on devices issued by US House of RepresentativesRead moreIt follows a flurry of legislative action against the platform in the US, after more than a dozen governors have issued similar orders prohibiting state employees from using TikTok on state-owned devices. Earlier this week, Congress passed legislation to ban TikTok on devices issued to members of the House of Representatives.TikTok did not immediately respond to request for comment. In a statement released after the initial House ban, TikTok said the move was a “political gesture that will do nothing to advance national security interests”.Meanwhile, there has been a push to ban TikTok outright in the US, with legislation introduced by Senator Marco Rubio earlier this month to “ban Beijing-controlled TikTok for good”. That bill echoes moves from the previous administration, after Donald Trump issued an executive order in August 2020 prohibiting US companies from doing business with TikTok’s parent company ByteDance.The order was later revoked by Biden in June 2021 under the condition that the US committee on foreign investment conducted a security review of the platform and suggested a path forward. That investigation has been ongoing for several years.Although ByteDance is based in China, the company has long claimed all US user data is stored in data centers in Virginia and backed up in Singapore.But political pressure began to build anew after BuzzFeed reported in June that China-based ByteDance employees had accessed US TikTok user data multiple times between September 2021 and January 2022.Legislators have expressed concern that the Chinese Communist party could manipulate young users with pro-China content on its algorithmic home page and access sensitive user data.“TikTok, their parent company ByteDance, and other China-based tech companies are required by Chinese law to share their information with the Communist party,” Senator Mark Warner said in July when calling for further investigation of the platform.“Allowing access to American data, down to biometrics such as face prints and voice prints, poses a great risk to not only individual privacy but to national security,” he added.The legislative pressure on TikTok comes as the app has exploded in popularity in recent years, amassing a user base of more than 1 billion after reporting a 45% increase in monthly active users between July 2020 and July 2022. In 2022 it became the most downloaded app in the world, quietly surpassing longstanding forebears Instagram and Twitter.With the meteoric rise has come broad concerns about the app’s impact on its relatively young users. Nearly half of people between 18 and 30 in the US use the platform, a recent Pew Research Center report showed – and 67% of users between the ages of 13 and 18 use the app daily.TopicsTikTokChinaUS politicsBiden administrationnewsReuse this content More

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      TikTok banned on devices issued by US House of Representatives

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      TikTok banned on devices issued by US House of RepresentativesPoliticians ordered to delete Chinese-owned social video app that House has said represents ‘high risk to users’ TikTok has been banned from any devices issued by the US House of Representatives, as political pressure continues to build on the Chinese-owned social video app.The order to delete the app was issued by Catherine Szpindor, the chief administrative officer (CAO) of the House, whose office had warned in August that the app represented a “high risk to users”.According to a memo obtained by NBC News, all lawmakers and staffers with House-issued mobile phones have been ordered to remove TikTok by Szpindor.“House staff are NOT allowed to download the TikTok app on any House mobile devices,” NBC quoted the memo as saying. “If you have the TikTok app on your House mobile device, you will be contacted to remove it.” The move was also reported by Reuters.In a statement the US house of representatives confirmed the ban, saying “we can confirm that the Committee on House Administration has authorized the CAO Office of Cybersecurity to initiate the removal of TikTok Social Media Service from all House-managed devices.”In August the CAO issued a “cyber advisory” labelling TikTok a high-risk app due to its “lack of transparency in how it protects customer data”. It said TikTok, which is owned by Beijing-based ByteDance, “actively harvests content for identifiable data” and stores some user data in China. TikTok says its data is not held in China, but in the US and Singapore.The U.S. House of Representatives’ Chief Administrative Officer has issued a cyber advisory on TikTok, labeling it “high-risk” with personal info accessed from inside China:“we do not recommend the download or use of this application due to these security and privacy concerns.” pic.twitter.com/F87qwFiHhR— Brendan Carr (@BrendanCarrFCC) August 17, 2022
      The CAO move comes amid multiple attempts to restrict the use of TikTok by government and state employees.Last week Congress passed a $1.7tn spending bill, which includes a provision banning TikTok from government devices. The ban will take effect once President Joe Biden signs the legislation into law. According to Reuters, at least 19 US states have partially blocked the app from state-managed devices over security concerns. In a statement released after the Congress ban, TikTok said the move was a “political gesture that will do nothing to advance national security interests”.TikTok admits using its app to spy on reporters in effort to track leaksRead moreThis month the US senator Marco Rubio, a former Republican presidential contender, unveiled a legislative proposal to ban TikTok from the US entirely. Rubio said it was time to “ban Beijing-controlled TikTok for good”.Biden has revoked presidential orders targeting TikTok issued by his predecessor, Donald Trump, which included requiring TikTok to sell its US business. However, the US Committee on Foreign Investment, which scrutinises business deals with non-US companies, is also conducting a security review of TikTok.According to a recent Reuters report, TikTok is offering to operate more of its US business at arm’s length and subject it to outside scrutiny.The office of the House’s chief administrative officer and TikTok have been approached for comment.TopicsTikTokUS CongressUS politicsChinanewsReuse this content More

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      Trump, Bankman-Fried and Musk are the monsters of American capitalism | Robert Reich

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      Trump, Bankman-Fried and Musk are the monsters of American capitalismRobert ReichFor them, and for everyone who still regards them as heroes, there is no morality in business or economics. The winnings go to the most ruthless If this past week presents any single lesson, it’s the social costs of greed. Capitalism is premised on greed but also on guardrails – laws and norms – that prevent greed from becoming so excessive that it threatens the system as a whole.Yet the guardrails can’t hold when avarice becomes the defining trait of an era, as it is now. Laws and norms are no match for the possibility of raking in billions if you’re sufficiently ruthless and unprincipled.Donald Trump’s tax returns, just made public, reveal that he took bogus deductions to reduce his tax liability all the way to zero in 2020. All told, he reported $60m in losses during his presidency while continuing to pull in big money.Every other president since Nixon has released his tax returns. Trump told America he couldn’t because he was in the middle of an IRS audit. But we now learn that the IRS never got around to auditing Trump during his first two years in office, despite being required to do so by a law dating back to Watergate, stating that “individual tax returns for the president and the vice-president are subject to mandatory review”.Of course, Trump is already synonymous with greed and the aggressive violation of laws and norms in pursuit of money and power. Worse yet, when a president of the United States exemplifies – even celebrates – these traits, they leach out into society like underground poison.Meanwhile, this past week the SEC accused Sam Bankman-Fried of illicitly using customer money from FTX from the beginning to fund his crypto empire.“From the start, contrary to what FTX investors and trading customers were told, Bankman-Fried, actively supported by Defendants, continually diverted FTX customer funds … and then used those funds to continue to grow his empire, using billions of dollars to make undisclosed private venture investments, political contributions, and real estate purchases.”If the charge sticks, it represents one of the largest frauds in American history. Until recently, Bankman-Fried was considered a capitalist hero whose philanthropy was a model for aspiring billionaires (he and his business partner also donated generously to politicians).But like the IRS and Trump, the SEC can’t possibly remedy the social costs that Bankman-Fried has unleashed – not just losses to customers and investors but a deepening distrust and cynicism about the system as a whole, the implicit assumption that this is just what billionaires do, that the way to make a fortune is to blatantly disregard norms and laws, and that only chumps are mindful of the common good.Which brings us to Elon Musk, whose slash-and-burn maneuvers at Twitter might cause even the most rabid capitalist to wince. They also raise questions about Musk’s other endeavor, Tesla. Shares in the electric vehicle maker dropped by almost 9% on Thursday as analysts grew increasingly concerned about its fate. Not only is Musk neglecting the carmaker but he’s appropriating executive talent from Tesla to help him at Twitter. (Tesla stock is down over 64% year-to-date.)Musk has never been overly concerned about laws and norms (you’ll recall that he kept Tesla’s factory in Fremont, California, going during the pandemic even when public health authorities refused him permission to do so, resulting in a surge of Covid infections among workers). For him, it’s all about imposing his gargantuan will on others.Trump, Bankman-Fried and Musk are the monsters of American capitalism – as much products of this public-be-damned era as they are contributors to it. For them, and for everyone who still regards them as heroes, there is no morality in business or economics. The winnings go to the most ruthless. Principles are for sissies.But absent any moral code, greed is a public danger. Its poison cannot be contained by laws or accepted norms. Everyone is forced to guard against the next con (or else pull an even bigger con). Laws are broken whenever the gains from breaking them exceed the penalties (multiplied by the odds of getting caught). Social trust erodes.Adam Smith, the so-called father of modern capitalism, never called himself an economist. He called himself a “moral philosopher,” engaged in discovering the characteristics of a good society. He thought his best book was not The Wealth of Nations, the bible of modern capitalist apologists, but the Theory of Moral Sentiments, where he argued that the ethical basis of society lies in compassion for other human beings.Presumably Adam Smith would have bemoaned the growing inequalities, corruption, and cynicism spawned by modern capitalism and three of its prime exemplars – Trump, Bankman-Fried, and Musk.TopicsUS newsOpinionUS politicsUS taxationDonald TrumpSam Bankman-FriedFTXUS economycommentReuse this content More

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      FTX seeks to claw back donations to politicians and charities

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      FTX seeks to claw back donations to politicians and charitiesCollapsed cryptocurrency exchange had reputation for corporate philanthropy to tune of hundreds of millions of dollars FTX, the collapsed cryptocurrency exchange founded by Sam Bankman-Fried, has started trying to claw back payments made by its former management to politicians, celebrities and charities, as it continues to progress through bankruptcy proceedings in the US.FTX “intends to commence actions before the bankruptcy court to require the return of such payments, with interest accruing from the date any action is commenced”, the company said, sharing an email address – FTXrepay@ftx.us – that recipients could use to voluntarily return money.“Recipients are cautioned that making a payment or donation to a third party (including a charity) in the amount of any payment received from a FTX contributor does not prevent the FTX debtors from seeking recovery from the recipient or any subsequent transferee,” FTX added in a statement.Bankman-Fried, other members of FTX leadership and a number of members of the FTX group all developed reputations for corporate philanthropy to the tune of hundreds of millions of dollars.FTX billionaire Sam Bankman-Fried funneled dark money to RepublicansRead moreHe was one of the largest political donors in the United States, giving directly to Democratic politicians and to Republican causes. Other members of the FTX inner circle were also high-profile donors, such as Ryan Salame, the co-chief executive of FTX’s Bahamian subsidiary.As well as political causes, Bankman-Fried donated large sums to charities, endowing the FTX Foundation and FTX Future Fund to promote his interests.The FTX Foundation had given away $140m (£115m), the organisation reported in October, of which $90m had gone to the Future Fund.In criminal charges filed in the state of New York, the Department of Justice has alleged that the donations were the result of criminal money laundering, since the money was effectively taken from customer accounts.The charges also allege campaign finance violations, arguing that Bankman-Fried “and others known and unknown” broke donation limits by making contributions in the names of other people.Clawing back payments made to politicians and charities is likely to be one of the easier parts of the bankruptcy process.Under US law, payments or transfers made within 90 days of bankruptcy are presumed to be preferential if they result in a creditor getting more than it would have been entitled to at the end of the bankruptcy process, and a “clawback” can attempt to recover the difference in the payments.With FTX, which lost more than $8bn from customer withdrawals in a day less than a week before it declared bankruptcy, there could be billions of dollars that the court decides were distributed unfairly.Retail depositors, however, will be hoping that they aren’t treated as typical creditors. In FTX’s terms of service, the company said depositors didn’t hand over ownership of their deposits, which has led some creditors to argue that the crypto they placed in the exchange should not be used to pay the company’s bills.In another crypto bankruptcy, for BlockFi, a shadow bank that went bust after FTX, the court is now ruling on that question.BlockFi filed a motion on Monday with the New Jersey bankruptcy court arguing: “The BlockFi Wallet terms of service are clear. They provide that ‘title to the cryptocurrency held in your BlockFi Wallet shall at all times remain with you and shall not transfer to BlockFi.’“The debtors have no legal or equitable interest in cryptocurrency that was present in the Wallet accounts as of platform pause, and clients should be able to withdraw such assets from the platform if they choose.”As such, normal retail depositors should be able to withdraw their assets, the shadow bank said.TopicsSam Bankman-FriedFTXCryptocurrenciesE-commerceUS politicsnewsReuse this content More

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      in World Politics

      Digital democracy in Indonesia: an Asian Giant in Constant Transformation

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      The Fair Observer website uses digital cookies so it can collect statistics on how many visitors come to the site, what content is viewed and for how long, and the general location of the computer network of the visitor. These statistics are collected and processed using the Google Analytics service. Fair Observer uses these aggregate statistics from website visits to help improve the content of the website and to provide regular reports to our current and future donors and funding organizations. The type of digital cookie information collected during your visit and any derived data cannot be used or combined with other information to personally identify you. Fair Observer does not use personal data collected from its website for advertising purposes or to market to you.As a convenience to you, Fair Observer provides buttons that link to popular social media sites, called social sharing buttons, to help you share Fair Observer content and your comments and opinions about it on these social media sites. These social sharing buttons are provided by and are part of these social media sites. They may collect and use personal data as described in their respective policies. Fair Observer does not receive personal data from your use of these social sharing buttons. It is not necessary that you use these buttons to read Fair Observer content or to share on social media. More

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      Senate votes to ban TikTok on US government-owned devices

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      Senate votes to ban TikTok on US government-owned devicesBill comes after several states barred employees from downloading the app on state-owned gadgets over data concerns The US Senate late on Wednesday passed by voice vote a bill to bar federal employees from using Chinese-owned video-sharing app TikTok on government-owned devices.The bill must still be approved by the US House of Representatives before going to President Joe Biden for approval. The House of Representatives would need to pass the Senate bill before the current congressional session ends, which is expected next week.The vote is the latest action on the part of US lawmakers to crackdown on Chinese companies amid national security fears that Beijing could use them to spy on Americans.Trump’s bid to ban TikTok and WeChat: where are we now?Read moreThe Senate action comes after North Dakota and Iowa this week joined a growing number of states in banning TikTok, owned by ByteDance, from state-owned devices amid concerns that data could be passed on to the Chinese government.During the last Congress, the Senate in August 2020 unanimously approved legislation to bar TikTok from government devices. The bill’s sponsor, Republican Senator Josh Hawley, reintroduced in legislation in 2021.Many federal agencies including the defense, Homeland Security and state departments already ban TikTok from government-owned devices. “TikTok is a major security risk to the United States, and it has no place on government devices,” Hawley said previously.North Dakota Governor Doug Burgum and Iowa Governor Kim Reynolds issued directives prohibiting executive branch agencies from downloading the app on any government-issued equipment. Around a dozen US states have taken similar actions, including Alabama and Utah this week.TikTok has said the concerns are largely fueled by misinformation and are happy to meet with policymakers to discuss the company’s practices.“We’re disappointed that so many states are jumping on the political bandwagon to enact policies based on unfounded falsehoods about TikTok that will do nothing to advance the national security of the United States,” the company said Wednesday.Other states taking similar actions include Texas, Maryland and South Dakota.Republican Senator Marco Rubio on Tuesday unveiled bipartisan legislation to ban TikTok altogether in the United States, ratcheting up pressure on ByteDance due to US fears the app could be used to spy on Americans and censure content. Rubio also is a sponsor of Hawley’s TikTok government-device ban bill.The legislation would block all transactions from any social media company in or under the influence of China and Russia, Rubio’s office said.At a hearing last month, FBI Director Chris Wray said TikTok’s US operations raise national security concerns.In 2020, then President Donald Trump attempted to block new users from downloading TikTok and ban other transactions that would have effectively blocked the apps’ use in the United States but lost a series of court battles over the measure.The government’s committee on foreign investment in the United States, a powerful national security body, in 2020 ordered ByteDance to divest TikTok because of the fears that US user data could be passed to the Chinese government, though ByteDance has not done so.CFIUS and TikTok have been in talks for months to reach a national security agreement to protect the data of TikTok’s more than 100 million users but it does not appear any deal will be reached before the end of the year.TopicsUS SenateTikTokHouse of RepresentativesUS politicsnewsReuse this content More

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      Five things we know about the collapse of FTX and Sam Bankman-Fried

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      ExplainerFive things we know about the collapse of FTX and Sam Bankman-FriedCompany founder was arrested and charged with running a ‘house of cards’ in ‘one of the biggest financial frauds in US history’ It has been another crazy 48 hours in the collapse of FTX, once the second-largest cryptocurrency exchange in the world.On Monday, the company’s now-infamous founder, Sam Bankman-Fried, was arrested in the Bahamas, a day before he was set to give testimony before Congress. On Tuesday US authorities issued damning charges that the 30-year-old former billionaire ran a “house of cards” and was behind “one of the biggest financial frauds in American history”.Lawmakers went ahead with the hearing without Bankman-Fried, who was otherwise occupied, in what looks set to be a series of heated hearings about the collapse.Here are five things we learned about FTX after two days of whirlwind of events.1. What happened at FTX appears to be ‘old-school fraud’While FTX was billed as a behemoth of cryptocurrency, with all the technical complexities that implies, officials on Tuesday alleged that FTX’s downfall is a classic case of fraud.Republican representative and incoming House finance committee chair Patrick McHenry said in Tuesday’s hearing that FTX appears to be “old school fraud, just using new technology”.In a statement, Gary Gensler, chair of the Securities and Exchange Commission (SEC), which charged Bankman-Fried of fraud against investors, echoed this sentiment by saying Bankman-Fried “built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto.“FTX operated behind a veneer of legitimacy,” he said. “But we allege in our complaint that the veneer wasn’t just thin, it was fraudulent.”John Ray III, FTX’s current CEO who was brought in to restructure the company, called it “really old-fashioned embezzlement” when testifying in front of the House Financial Services Committee on Tuesday.When asked to contrast the liquidation of Enron in the early 2000s, which Ray oversaw, he said the crimes of the former energy giant were “highly orchestrated financial machinations by highly sophisticated people to keep transactions off balance sheets”.FTX, in contrast, was “just taking money from customers, and using it for your own purpose,” he said. “Not sophisticated at all.”2. Little is known about where all the money wentRay told lawmakers that there is an “excess of $7bn” in lost FTX funds from 7.6m accounts, with 2.7m based in the US. It is unclear exactly how much money is lost.“There were no corporate controls, no corporate oversight, no independent board,” he said. “The owners, business and senior management had virtual control of all the accounts and could move money or assets as they desired, undetected by customers.”Ray said he had “never seen such an utter lack of record keeping” and there were “absolutely no internal control whatsoever”. FTX – which helped Bankman-Fried amass a personal fortune once valued at $26bn – used QuickBooks to manage its finances. “QuickBooks, very nice tool, not for a multibillion-dollar company,” Ray said.3. Prosecutors believe Bankman-Fried was lying from the beginningWhile Bankman-Fried built a reputation off his philosophy of effective altruism, saying he wanted to use his wealth to make a major positive impact on the world, prosecutors are alleging that Bankman-Fried was defrauding investors since he founded FTX in 2019.“Bankman-Fried was orchestrating a massive, years-long fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire,” the SEC said in its complaint.The complaint describes how Bankman-Fried postured himself as a “responsible leader of the crypto community” and “touted the importance of regulation and accountability”.“But from the start, Bankman-Fried improperly diverted customer assets to his privately-held crypto hedge fund, Alameda Research LLC, and then used those customer funds to make undisclosed venture investments, lavish real estate purchases, and large political donations,” the complaint reads.4. What’s next for Bankman-Fried?The criminal indictment that led to Bankman-Fried’s arrest was unsealed on Tuesday, revealing exactly what charges federal prosecutors have charged him with.Bankman-Fried faces eight criminal counts, including wire fraud on customers and lenders, conspiracies to commit wire fraud on customers and lenders and conspiracies to commit commodities fraud, securities fraud and money laundering.Bankman-Fried could face hefty prison time for the charges but legal experts say it is too early to say yet what sentence he will receive if convicted. Sentencing in white-collar crime is highly influenced by the scale of the fraud, said Duncan Levin, managing partner at Levin & Associates and a former federal prosecutor. Given that FTX’s losses “seem to be close to $2bn, that could drive sentencing to the absolute max,” he said.But at the moment, said Levin, it’s hard to say whether if convicted Bankman-Fried is facing an “Elizabeth Holmes [11 years] or a Bernie Madoff [150 years]”.5. Prosecutors are likely closing in on Bankman-Fried’s inner circle – and the scandal is spreadingThough Bankman-Fried is the only FTX associate who has been charged, US authorities are investigating others who were involved with the company.At a press conference Damian Williams, United States attorney for the southern district of New York, said this was only the beginning. “This investigation is very much ongoing,” he said. “We are not done.” Officials advised anyone involved in the alleged fraud “to come to us before we come to you”.But while US authorities are after FTX insiders, Washington faces its own reckoning. Bankman-Fried and his peers gave millions to politicians of both sides in the hope of steering crypto regulation. The political fallout of FTX’s collapse looks set to be one of the big stories of 2023.TopicsSam Bankman-FriedFTXCryptocurrenciesUS politicsexplainersReuse this content More