Sam Bankman-Fried Released on $250 Million Bond
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Sam Bankman-Fried Released on $250 Million Bond

FTX founder makes first U.S. court appearance following his extradition from the Bahamas

By CORINNE RAMEY
Fri, Dec 23, 2022 8:58amGrey Clock 3 min

FTX founder Sam Bankman-Fried was released on a $250 million bond Thursday and ordered to detention in his parents’ Palo Alto, Calif., home, after the former executive’s first appearance in a New York federal court following his extradition from the Bahamas.

Mr. Bankman-Fried, charged with engaging in criminal conduct that contributed to the cryptocurrency exchange’s collapse, came to court shackled by the ankles and wearing a charcoal grey suit. He sat quietly at the defence table, flanked by his lawyers.

Mr. Bankman-Fried left the courthouse in a black SUV. At a later date he will enter a plea on charges that he engaged in fraud and other offences, a federal magistrate judge said. The next court hearing is set for Jan. 3.

Magistrate Judge Gabriel Gorenstein set the bail package, which requires Mr. Bankman-Fried to be under electronic monitoring and restricts his travel to parts of northern California and New York.

Assistant U.S. Attorney Nicolas Roos called Mr. Bankman-Fried’s alleged crimes “a fraud of epic proportions” and said he believed the $250 million bond was the largest ever. The judge said the bond would be cosigned by four financially responsible people, including one non-family member.

The evidence against Mr. Bankman-Fried includes the testimony of multiple cooperators and more than a dozen witnesses from FTX and his crypto-trading firm Alameda Research, as well as encrypted text messages and tens of thousands of pages of financial documents, Mr. Roos said.

The government agreed to the bail package, Mr. Roos said, because Mr. Bankman-Fried had consented to extradition. Mr. Bankman-Fried’s financial assets had diminished significantly from when they were worth billions of dollars, he said.

Mark Cohen, a lawyer for Mr. Bankman-Fried, said his client agreed to extradition, which could have taken years, in order to address the charges. He noted Mr. Bankman-Fried would be living with both of his parents, who helped to secure his bond with the equity interest in their home.

Judge Gorenstein said he agreed to the bail package because he believed Mr. Bankman-Fried wasn’t a flight risk and didn’t pose a danger to the community.

“It will be very difficult for this defendant to hide without being recognised,” the judge said. Mr. Bankman-Fried had achieved such notoriety that it would be impossible for him to conduct any financial transactions, the judge added.

When the judge asked if Mr. Bankman-Fried understood that he could be charged with bail jumping if he failed to appear in court, he looked at his lawyers then said, “Yes, I do.”

Mr. Bankman-Fried has acknowledged making mistakes while running the company, but has denied committing fraud.

His appearance caps a dramatic series of legal developments that began when Mr. Bankman-Fried told a Bahamas judge Wednesday morning that he wanted to be transferred immediately to the U.S. to face charges and try to “make the relevant customers whole.”

After U.S. officials had him on a plane en route to New York on Wednesday night, they announced that two of his closest associates had pleaded guilty to several criminal offences and were cooperating with prosecutors.

Caroline Ellison, the former chief executive of Alameda Research, pleaded guilty to seven criminal counts, and former FTX Chief Technology Officer Gary Wang to four counts, according to their plea agreements. Their cooperation with investigators likely strengthens prosecutors’ case against Mr. Bankman-Fried, who is accused of defrauding customers, lenders and investors. It could also increase the legal peril facing other former FTX officials who played a role in the alleged scheme, as prosecutors have two insiders’ accounts and documents upon which they could rely at any future trials.

According to documents made public Thursday, Ms. Ellison and Mr. Wang pleaded guilty to participating in a scheme to defraud FTX customers from 2019 through November 2022 by misappropriating customer deposits and lending them to Alameda. Ms. Ellison also admitted participating in a scheme to defraud Alameda lenders by providing false information about its financial condition. She and Mr. Wang also pleaded guilty to misleading FTX investors.

Manhattan U.S. Attorney Damian Williams said in a video statement Wednesday that the investigation into FTX is ongoing. He urged anyone who participated in misconduct at FTX or Alameda to come forward soon.

A lawyer for Ms. Ellison declined to comment after her guilty plea was announced. A lawyer for Mr. Wang said his client took his obligations as a cooperating witness seriously.

Both Ms. Ellison, 28 years old, and Mr. Wang, 29, have ties to Mr. Bankman-Fried that predate his founding of FTX. Ms. Ellison and Mr. Bankman-Fried worked together at Jane Street, a quantitative-trading firm, and were once romantically involved. Mr. Wang and Mr. Bankman-Fried were in the same coed living group at the Massachusetts Institute of Technology.

The Securities and Exchange Commission and Commodity Futures Trading Commission also filed lawsuits against Ms. Ellison and Mr. Wang late Wednesday for their roles in a scheme to defraud FTX investors. Both agreed to settle the SEC’s and CFTC’s claims and to accept liability, according to the regulators.

Mr. Bankman-Fried is also charged with conspiring with others to make illegal campaign contributions. Mr. Williams said Mr. Bankman-Fried made political contributions look like they were coming from wealthy associates when in reality they were funded by Alameda with money from stolen customer funds.

Mr. Bankman-Fried personally donated $40 million to political campaigns and committees—mostly to Democrats and liberal-leaning groups.

FTX’s new management has said it would try to recoup campaign contributions made by Mr. Bankman-Fried and other FTX executives to pay back creditors.



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China Tried Using Economic Ties to Bring Taiwan Closer. It Isn’t Working.

As geopolitical tensions rise, Taiwan is shifting its economy to rely more on the U.S. and other countries but at a cost

By JOYU WANG and Nathaniel Taplin
Tue, Nov 28, 2023 6 min

TAIPEI—For years, Beijing hoped to win control of Taiwan by convincing its people their economic futures were inextricably tied to China.

Instead, more Taiwanese businesses are pivoting to the U.S. and other markets, reducing the island democracy’s dependence on China and angering Beijing as it sees its economic leverage over Taiwan ebb.

In one sign of the shift, the U.S. replaced mainland China as the top buyer of Taiwanese agricultural products for the first time last year.

Electronics firms such as chip maker Taiwan Semiconductor Manufacturing Co. are also selling more goods to American and other non-Chinese buyers, thanks in part to Washington’s chip restrictions and Apple’s bets on Taiwanese chips.

Overall, Taiwanese exports to the U.S. in the first 10 months of 2023 were more than 80% higher than in the same period of 2018, Taiwanese government data shows. Taiwanese exports to the mainland were 1% lower—a major change from a decade or so ago when China’s and Taiwan’s economies were rapidly integrating.

Taiwan’s outbound investment has also shifted. After flowing mostly to mainland China in the early 2000s, it has now moved decisively toward other destinations, including Southeast Asia, India and the U.S.

Taiwanese electronics giant Foxconn, which assembles iPhones in mainland China, is expanding in India and Vietnam after Apple began pushing its suppliers to diversify.

Chinese state media recently reported that China had opened tax and land-use probes into Foxconn. Though Taiwanese officials and analysts interpreted the probes as a sign that China wants Foxconn founder Terry Gou to drop plans to run in Taiwan’s presidential election in January, some have said Beijing may also be trying to pressure Foxconn into resisting decoupling with China.

“Any attempt to ‘talk down’ the mainland’s economy or to seek ‘decoupling’ is driven by ulterior motives and will be futile,” said a spokeswoman for Beijing’s Taiwan Affairs Office in September. “The mainland is always the best choice for Taiwanese compatriots and businesses.”

Fully decoupling from mainland China’s economy likely isn’t possible, and would be disastrous for Taiwan, not to mention China, even if it were.

Foxconn and other major Taiwanese companies depend heavily on China for parts, testing and buyers. Some 25% of Taiwan’s electronic-parts imports still come from the mainland.

If China’s weakened economy returns to strong growth, it could shift the calculus back in favor of the mainland, where the Communist Party claims Taiwan despite never having ruled it. About 21% of Taiwan’s total goods trade this year has been with mainland China, versus 14% for the U.S., though the U.S. share has risen from 11% in 2018.

“My hunch is that the large manufacturing sectors will try to stay in the Chinese market, even with harsh conditions,” said Alexander Huang, director of the international affairs department of the opposition Kuomintang Party, whose supporters include business people with mainland ties. “If you talk to those business owners, they say, ‘Nah, no way will I give it to my competitors.’”

Even so, many forces are pushing Taiwan to rewire its economic relationship with China.

Trump-era tariffs and Biden administration export controls have raised the cost of sourcing from China, and in some cases prohibited it. U.S. firms are pushing their Taiwanese suppliers to diversify sourcing, and rising wages in China have made it less attractive than before.

Long-running shifts in Taiwanese sentiment toward China—and China’s own efforts to punish the island using its economic leverage—are also factors. China has banned Taiwanese agricultural products such as pineapple and, in 2022, grouper fish, and restricted outbound tourism to Taiwan.

Those restrictions to some degree have backfired, pushing Taiwanese businesses to look elsewhere.

Casting for new markets

Chang Chia-sheng, who runs a fish farming operation in Taiwan, said his main export target a decade ago was mainland China. But as geopolitical tensions climbed, he looked elsewhere. Sales to Americans have jumped fivefold since 2018, he said. “In the U.S., things just seem to work out more easily,” Chang said.

The U.S. and Taiwan reached an agreement in May on a number of trade and investment measures to deepen ties, though the deal stopped short of reducing tariffs.

In the June quarter of 2023, 63% of revenue at TSMC, which makes most of the world’s most cutting-edge logic chips, came from the U.S., up from 54% in the same period in 2018, according to S&P Global data. Just 12% of TSMC’s revenue now comes from Chinese buyers, down from 22% in the second quarter of 2018.

Taiwan’s government is also encouraging closer economic links with Southeast Asia, South Asia, Australia and New Zealand. Its “New Southbound Policy,” rolled out in 2016, has been the subject of fierce debate in Taiwan, with the Kuomintang Party saying steps to boost relations—like handing out scholarships—aren’t worth the cost.

Exports to “New Southbound” partners have risen, however, to $66 billion in the first nine months of 2023, about 50% higher than the same period in 2016.

“Frankly speaking, we’re responding reactively” to the need for more diverse trading partners, Taiwan’s Economic Minister Wang Mei-hua said. “Taiwan needs to manage the risks on its own, but we also need our allies to join us more in mitigating these risks.”

Together, the U.S. and the six largest Southeast Asian economies accounted for 36% of Taiwanese exports in the third quarter of 2023, according to data from CEIC, surpassing the percentage sent to mainland China and Hong Kong on a quarterly basis for the first time since 2002.

In September, Taiwan sent less than 21% of its exports to the mainland, the lowest percentage since the global financial crisis.

Taiwanese foreign investment into mainland China, steady at around $10 billion a year for most of the early 2010s, plummeted in late 2018 and has since been running at about half that level, according to Taiwanese government data. In 2023 so far, just 13% of Taiwan’s investment went to mainland China; 25% went to other Asian locations, and nearly half went to the U.S.

A survey of Taiwanese businesses conducted last year on behalf of the Center for Strategic and International Studies, a Washington think tank, found that nearly 60% had moved or were considering moving some production or sourcing out of China—a significantly higher rate than European or American firms.

Jay Yen, chief executive of Yen and Brothers, a Taiwanese frozen-food processing company, said his firm received a government subsidy of around $75,000 to market his products to American consumers. China now only accounts for about 3% of its revenue, he said.

That said, “if you really have to consider the risks of a war between the U.S. and China and its potential impact on Taiwan, you might want to place your bets on a third country—neither China nor the U.S.,” Yen added.

Reversing the tide

After China began to open up its economy in the late 1970s, Taiwanese businesses were among the first investors.

By the 2000s, China seemed to be succeeding in its strategy of integrating the two economies, with more than 28% of Taiwan’s exports going to the mainland in 2010, from less than 4% a decade earlier.

Direct flights between the two sides were normalised for the first time in decades. Mainland tourists were allowed to visit Taiwan on their own.

By 2014, the tide was turning as more Taiwanese grew worried about over dependence on China. Student demonstrators protested against a trade pact, later abandoned, that would have deepened ties with China. President Tsai Ing-wen, who took office in 2016, has pushed to diversify Taiwan’s economy.

China has responded by moving trade issues more into the spotlight.

In April, it opened an investigation into Taiwanese trade restrictions that it says limit exports of more than 2,400 items from the mainland to the island in violation of World Trade Organization rules. In October, China’s Ministry of Commerce announced the probe would be extended until Jan. 12—the day before Taiwan’s coming election.

Taiwan’s government has called the probe politically motivated.

Chinese officials have implied that Beijing could suspend preferential tariff rates for some Taiwanese goods in China under a 2010 deal signed when Kuomintang’s Ma Ying-jeou was president. Beijing has also reacted angrily to Taiwan’s recent trade agreement with the U.S.

For Taiwanese companies, building and operating new factories in places other than China isn’t cheap or easy. Protests have at times disrupted operations at Indian plants operated by Foxconn and Wistron, another Apple supplier. In September, a fire halted production at a Taiwanese facility in Tamil Nadu.

Still, some Taiwanese businesspeople have clearly soured on China.

“The electronics industry has already become a Chinese empire, not a Taiwanese one,” says Leo Chiu, who worked in mainland China in quality control for an electronics manufacturer for 14 years before concluding he couldn’t move up further there and returning to Taiwan in 2019. Many of his old colleagues have left, he said.

“If Xi Jinping steps down, there’s still a chance it could change,” says Chiu. “But I think it’s very hard.”

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