FTX scandal rocks Florida college district; victims could embrace highschool teenagers

As prosecutors and FTX’s chapter trustee comb via the wreckage of Sam Bankman-Fried’s ill-fated crypto empire, many questions stay unanswered.

Among the many greatest: How did the person identified and revered within the crypto business as “SBF” commit what authorities officers imagine was a multiyear fraud? Who else aided and abetted within the alleged scheme, the place billions of {dollars} in buyer cash from his FTX change have been looted to cowl losses from an affiliated hedge fund?

Lastly, and possibly most confounding to these who know Bankman-Fried: How might somebody so seemingly virtuous, making heaps of cash and giving a number of it away to dozens of charitable organizations, pull off what seems to be one of the crucial egregious monetary crimes of the century?

The thriller of how Bankman-Fried went from saint to sinner could by no means be totally answered, after all. However it continues to stun folks in locations the place you may anticipate it to, together with his colleagues within the crypto business who inform FOX Enterprise they’d no concept that FTX was constructed on a home of playing cards and run by an alleged criminal.

The movie star endorsers of FTX thought they knew sufficient about SBF to really feel safe in pitching his change as a super-safe method to commerce crypto. Authorities and regulatory officers in Washington, D.C., who leaned on SBF’s huge crypto experience, gladly accepted his political contributions as they weighed methods to manage the burgeoning marketplace for digital cash.

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Some unlikely folks and locations are additionally grappling with what appears to be the twin realities of Bankman-Fried. It is arduous to think about that the varsity district of Broward County, Florida, could be mired within the controversy surrounding the FTX implosion. But the district and college students who have been on the receiving finish of SBF’s charitable efforts discover themselves in the course of the mess — and presumably within the crosshairs of FTX’s chapter trustee John Ray III, FOX Enterprise has discovered.

Broward County and its involvement with the SBF ecosystem at first appears insignificant to the magnitude of the alleged fraud and shock waves it has despatched all through the $1 trillion crypto business. As a lot as $8 billion of buyer cash lacking from supposedly secure accounts, used to finance unrelated actions, makes the fraud one of many greatest since Bernie Madoff’s Ponzi scheme greater than 20 years in the past. The notion {that a} key determine in crypto looted billions of {dollars} in purportedly secure shopper cash added extra uncertainty to a market that has misplaced half of its worth since 2021.

The FTX collapse will definitely drive extra regulation that would crush digital asset values additional. SBF, for his half, has been arrested and charged with eight counts of fraud and faces as much as 115 years in jail. He has pleaded not responsible.

Broward County, in the meantime, is hardly an epicenter of crypto. That may be discovered additional south in Miami, which has develop into a hub of digital-asset innovation. However the story of the county’s involvement with FTX and the fallout from its collapse does present a window into how the alleged scandal is roiling not simply risk-takers in the crypto world, but in addition communities in middle-class America, a FOX Enterprise investigation exhibits.

A racially and economically various area made up of cities and smaller cities with luxurious excessive rises, modest single-family properties and pockets of poverty, Broward’s entanglement within the SBF story begins with a charity occasion in March 2022. Billed as an “FTX Charity Hackathon,” it was spearheaded by SBF’s father, Stanford College regulation professor Joseph Bankman, and developed by SBF’s aunt, Barbara Miller, a Broward County political advisor.

The thought appeared to suit neatly into SBF’s broader aim to make use of the huge wealth he accrued in crypto, then estimated at $30 billion, to fund charities and nonprofits and to make the world a greater place via a philosophy often known as “efficient altruism.” The thought was to entice highschool college students in Broward in addition to neighboring Miami-Dade and Palm Seashore counties to compete for scholarship cash utilizing their entrepreneurial abilities in a format that resembled the favored TV present “Shark Tank.” They might come collectively in “hackathon-style,” borrowing the title from a crypto-protocol to unravel varied issues.

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FOX Enterprise is withholding the names of the scholars to guard their privateness. By most accounts, the hackathon was, at the very least initially, a profitable and teachable second for 20 highschool college students who every obtained $15,000 in faculty scholarship cash from the FTX Basis. They set to work with enterprise leaders to create a plan to show an thought right into a probably viable enterprise.

The success of the occasion, such because it was, is now being questioned, with members of the general public demanding solutions from the varsity board about its involvement with an organization accused of fraud. The varsity district itself is making an attempt to sidestep any of the fallout, telling FOX Enterprise it performed no function within the hackathon occasion and obtained no funds from FTX regardless of the involvement of one among its board members.

The scholars, in the meantime, are rising anxious. The explanation: Chapter attorneys say the hackathon cash — some or the entire complete $1.3 million FTX handed out to the scholars and the appointed “mentors” who participated with them — could possibly be “clawed again” by John Ray, the brand new FTX CEO and chapter trustee. Ray is in search of to repay FTX prospects whose cash was allegedly stolen, prosecutors say, to finance SBF’s varied enterprise, political and charitable efforts.

John J. Ray III, CEO of FTX Group, testifies in the course of the Home Monetary Providers Committee listening to titled Investigating the Collapse of FTX Half I in Washington, D.C., on Dec. 13, 2022. (Nathan Howard/Getty Photos / Getty Photos)

Ray didn’t return emails for remark. Whether or not the cash falls inside his attain stays unclear and relies on when he can set up that SBF and his staff started dipping into buyer accounts to finance different actions. FTX sunk round $190 million into varied charities and nonprofits since its launch in 2019, and in charging paperwork regulators say the fraud started way back to its inception.

Plus, there may be precedent for clawbacks from charities, chapter consultants inform FOX Enterprise. These who put cash into Madoff’s $65 billion fraud have been pressured to return the pretend earnings they took out of his fund after the Ponzi scheme was found in late 2008.

“Coming after the children for the $15,000 scholarships turns into an ethical challenge and could be on the discretion of the chapter attorneys to resolve whether or not or not it’s price it to take action,” mentioned a high chapter lawyer not concerned within the case however spoke on the situation of anonymity to keep away from being related to the controversy. “However the prize cash that was donated to the mentor organizations might definitely be up for grabs if attorneys are struggling to give you the funds elsewhere.”

Blurring the Strains Between Enterprise and Charity

It’s arduous to fathom that only a few months in the past, SBF was touted for his funding acumen and lauded for his huge charitable community. “He all the time appeared to have his coronary heart in the best place,” mentioned a Wall Road government who was engaged on a partnership with SBF and was aware of his want to make use of his wealth for good.

Within the wake of FTX’s collapse, individuals who know SBF query whether or not his charity was merely a cowl for his shady enterprise dealings or a public relations stunt to burnish his fame. SBF, himself, has recommended that a few of his altruism was used to advance his enterprise as a lot as anything. “After I pledged to offer away $2,000 to some brand-name charity as a part of some promotion to FTX’s enterprise, that was as a lot PR as anything,” he informed The Wall Road Journal in January.

The hackathon could not have been a brand-name charity, however it clearly demonstrates the blurred traces between SBF’s enterprise and charitable pursuits.

The venue was the house of the Miami Warmth basketball staff, which turned often known as the FTX Area after SBF spent round $19 million on the naming rights (it has since been renamed the Miami-Dade Area).

Signage for the FTX Area, the place the Miami Warmth basketball staff performs, is illuminated on Nov. 12, 2022. (AP Picture/Marta Lavandier, File / AP Newsroom)

SBF promoted the occasion on his Twitter feed to his million-plus followers and tapped into celebrities, politicians and Wall Road executives who have been a part of his community of contacts. Kevin O’Leary of “Shark Tank” fame and an FTX model ambassador spoke on the convention, as did hedge fund impresario Anthony Scaramucci, then an FTX enterprise companion.

“Shark Tank” investor Kevin O’Leary spoke out concerning the FTX debacle after saying he would again Sam Bankman-Fried once more.  | Getty Photos

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Former baseball nice David Ortiz, New Jersey Sen. Cory Booker and the Miami Warmth’s Udonis Haslem, an early investor in FTX, additionally attended, FOX Enterprise confirmed.

After the convention, O’Leary, Ortiz and Haslem have been hackathon judges together with comic Whitney Cummings. O’Leary, when contacted by FOX Enterprise, mentioned the occasion concerned “highschool college students, some in underserved communities,” and declined additional remark. Reps for Ortiz, Haslem and Cummings did not return calls and emails for remark.

Images of the hackathon posted on-line present that it was considerably of a household affair, as effectively. Bankman-Fried’s mom, Barbara Fried, a authorized educational and high Democratic Celebration fundraiser, attended, as did his father, Joe Bankman, the purpose man in SBF’s charitable efforts.

In a promotional video, Bankman described the FTX Basis as “actually only a group of individuals. It’s the founders of FTX, it’s staff of FTX, it’s customers of FTX, that’s individuals who commerce crypto on the FTX web site, and it’s an organization itself, and so they all received collectively to search out what they assume are the simplest charities on the planet and donate to them.”

He additionally touted the hackathon as a kind of efficient charities as a result of it’ll problem college students “to give you a million-dollar thought to enhance well being in your neighborhood.” By means of a spokeswoman, Fried and Bankman declined remark however didn’t deny Bankman’s function in his son’s operations.

SBF’s aunt, Barbara Miller, the opposite hackathon co-organizer, didn’t seem in promotional materials, however she posted a number of pictures of the hackathon on her Fb web page. “It was a terrific occasion due to the mentors, the FTX groups… and my brother Joe,” she gushed in a submit.

One other distinguished SBF relative attended as effectively: his uncle James Fox Miller, Barbara’s husband, Fb posts present. He’s a distinguished Broward County legal professional, former head of the Florida Bar Affiliation and a companion of Boies Schiller Flexner, the New York-based regulation agency run by superlawyer David Boies.

Meet the Millers

Barbara Miller, 82, and James Fox Miller, 83, are thought of a Broward County energy couple. They have an inclination to maintain a low profile, although particulars of their lives — together with their frequent journeys to Italy, the place they personal a fancy dwelling in Florence — may be discovered on their social media feeds.

Whereas James Fox Miller is taken into account one among Florida’s high litigators, Barbara Miller has been an vital determine in Broward college board politics for practically 4 many years, in keeping with native officers who spoke to FOX Enterprise. She helps elect folks to the board and different native workplaces as a marketing campaign adviser and advisor.

She’s so good at her job that “You possibly can’t get elected to the varsity board with out Barbara Miller in your facet,” one distinguished native politician described her energy to FOX Enterprise.

Varied individuals who have enterprise dealings with SBF say that Barbara and James Fox Miller might even have simply aided their nephew in making his $250 million bond, given their vital wealth. FOX Enterprise has not been in a position to verify the matter.

In response to the federal choose who set the phrases of his bail, SBF can obtain cash or asset ensures totaling $25 million from two different folks of “appreciable means,” one among which can’t be a member of the family to satisfy the circumstances of his bond. SBF’s bond, which permits him to stay beneath home arrest, features a assure from his mother and father on their $4 million Palo Alto dwelling, the place he’s at the moment residing.

An legal professional for Bankman-Fried and a spokesman didn’t return repeated requires remark.

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Not lengthy after the bond was set, SBF’s attorneys requested the court docket to maintain his guarantors apart from his mother and father confidential. A number of information organizations together with The Wall Road Journal, which shares frequent possession with FOX Enterprise, have filed requests with the court docket to hunt their launch.

James Fox Miller did not return emails and phone requires touch upon whether or not he or his spouse helped his nephew meet the bond and different issues. Barbara Miller didn’t return repeated calls and texts for remark.

Hackathon Sparks Controversy

Bankman and Barbara Miller obtained some inside assist to make the hackathon work: Debra Hixon, a Broward County college board member since 2019, and a detailed affiliate of Miller.

Miller helped elect Hixon to her submit, and in keeping with her public filings, Hixon was additionally an FTX-paid advisor for her work. She earned $49,000 in wage in 2021, school-district filings present, and one other $21,000 in 2022, she confirmed to FOX Enterprise. Her contract expired in March of final yr following the hackathon, and he or she says she had no additional involvement with FTX.

Hixon mentioned she cleared her involvement via the district’s attorneys and adopted all county moral tips. A Broward trainer for 36 years, Hixon tells FOX Enterprise that on the behest of Miller ,she approached Bankman within the fall of 2021 with the idea of a charitable occasion to advertise “psychological and bodily well being.”

It’s a trigger near her coronary heart following the dying of her husband, Chris Hixon, the athletic director at Marjory Stoneman Douglas Excessive Faculty in Broward County who was killed within the 2018 mass capturing on the college.

Hixon and Bankman have been instantly on the identical web page, she mentioned. Bankman had been considering an FTX-funded “Shark Tank”-like competitors that by some means promoted psychological wellness whereas giving college students an opportunity to develop real-world enterprise abilities.

Hixon alongside Bankman and Miller started cobbling collectively the small print of the hackathon. Along with the scholar scholarship cash, $1 million was break up between two “mentoring organizations” accountable for serving to the profitable groups develop their enterprise concepts.

The three-member Broward scholar staff and a four-member staff from the Miami-Dade college district ultimately gained high honors. Broward efficiently pitched an thought for a cell app that linked customers with undergrad psychology college students at Florida Worldwide College to supply on-line psychological well being mentoring. The Miami-Dade staff’s profitable idea concerned pairing highschool college students with senior residents to be taught life abilities and advance psychological well being.

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To this point so good. Bankman promised to donate one other $50,000 to a runner-up staff. Images present college students proudly displaying their profitable checks flanked by a few of the movie star individuals, together with O’Leary and SBF himself.

Fox Miller, in a Fb submit, later referred to his spouse’s function within the hackathon because the “key ingredient, form of the egg in deviled eggs,” including, “All the pieces ran like clockwork… each her brother Joe Bankman and nephew Sam Bankman-Fried acknowledged, appreciated and acknowledged my spouse’s accomplishments.”

Quick ahead eight months, and the temper surrounding the hackathon has turned decidedly bitter. On Dec. 12, simply weeks after the FTX implosion, questions swirled about whether or not its commitments to fund charities could possibly be met.

On Fb, Hixon posted that “all scholarships in addition to the grand prize have been totally funded and we stay up for seeing the good issues the scholars accomplish sooner or later.”

Hixon, nonetheless, conceded to FOX Enterprise that she doesn’t know if the mentoring organizations ever moved ahead with creating the scholar concepts into workable entrepreneurial endeavors. Not one of the college students contacted by FOX Enterprise returned requires remark. A spokeswoman for Florida Worldwide College, the mentor of the Broward college students, declined remark, including, “I can’t speculate or focus on donations of any variety.”

The hackathon has additionally develop into an more and more ugly political challenge in Broward County. Crimson Broward, an area conservative-leaning weblog, has detailed the SBF connections to the hackathon as a part of the continued dysfunction within the management of the Broward County college district, which has seen its share of state-mandated turnover for alleged moral lapses.

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Final week at a public board assembly, Chris Nelson, an area conservative political activist who refers to himself as an impartial journalist, immediately confronted Hixon.

“College students have been awarded scholarships via this and now due to the chapter they might not get these scholarships,” he mentioned. “What do you must say about this? Do you’re feeling that there’s any duty on you for having promoted this factor? You and your good friend Barbara Miller have been selling this factor.”

Hixon didn’t reply, however Broward Faculties communications chief John Sullivan did, stating: “We’re not going to reply to something because it pertains to this.”

The Boies Schiller/Fox Miller Connection

Again in New York, the U.S. Lawyer’s Workplace for the Southern District of New York, broadly considered the nation’s most distinguished regulation enforcement company, continues to research the FTX blowup and weigh further indictments.

Its investigation is alleged to be broad and could also be one of many greatest the workplace has performed in many years. Bankman and Fried are mentioned to not be targets. They’ve lately employed authorized counsel and a PR staff to reply questions after Ray mentioned he’s scrutinizing funds they obtained from FTX (Fried didn’t work for the change, however SBF donated hundreds of thousands of {dollars} to her fundraising efforts).

There’s no indication that Fox Miller or his spouse are concerned in any of the allegations in opposition to SBF. Certainly, in keeping with Fox Miller’s Fb web page, he and Barbara have been touring extensively within the months since their nephew’s crypto empire fell aside.

The pair at the moment are on a five-month luxurious cruise all over the world that left Miami on Jan. 6, throughout which they are going to be touring to Papeete in French Polynesia; Casablanca, Morocco; and Barcelona, Spain, in keeping with Fb posts.

The couple are additionally shut with David Boies, Fox Miller’s employer, greatest identified for arguing the Supreme Courtroom case that helped settle the 2000 presidential election. In response to Fb posts, the households vacationed collectively in Marco Island, Florida, over the Christmas interval.

However that hasn’t stopped Boies Schiller from taking purpose at Fox Miller’s nephew. The agency is at the moment representing Florida-based FTX purchasers in three class-action lawsuits filed in Miami federal court docket in opposition to SBF and a few of his movie star model ambassadors. Not one of the celebrities named within the lawsuit have been criminally charged.

A spokeswoman for Boies Schiller didn’t return requires remark.