FTX founder Bankman-Fried sent back to Bahamas jail

FTX's Sam Bankman-Fried sent back to Bahamas jail, wants to see U.S. indictment

FTX founder Sam Bankman-Fried was sent back to a Bahamas jail Monday in a chaotic courtroom scene, after a reported plan for him to waive his extradition to the U.S. stalled. However, multiple media reports later in the day said that he had told his Bahamian lawyer to proceed with extradition hearings, and he’s now expected back in court later this week.

Reports over the weekend indicated that Bankman-Fried would consent to extradition, but the former crypto billionaire told a different story Monday, demanding to see a copy of his federal indictment before agreeing to return to the U.S. He will return to Fox Hill jail rather than surrendering himself to U.S. custody.

Bankman-Fried’s legal team signaled that they would fight extradition last week. CNBC and several other outlets reported that Bankman-Fried had changed his mind and would instead submit himself for extradition on Monday.

FTX founder Sam Bankman-Fried (C) is led away handcuffed by officers of the Royal Bahamas Police Force at the Nassau, Bahamas, courthouse on December 19, 2022. 

Kris Ingraham | Afp | Getty Images

In open court, chaos reigned. Bankman-Fried, 30, dressed in a blue suit and white button-down shirt, was visibly shaking. His Bahamian defense attorney., Jerone Roberts, told the court that he was “shocked” that Bankman-Fried was in court.

“I did not request him to be here this morning,” the attorney said. Franklyn Williams KC, the Bahamian prosecutor, said that he “understood that [Bankman-Fried] intended to waive extradition,” according to an NBC News producer present in the courtroom.

The FTX founder arrived at Bahamian court in a convoy of police vehicles, heavily guarded, just after 10 a.m. ET.

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After the hearing closed, the New York Times and Washington Post both reported that Bankman-Fried agreed to extradition, citing Roberts. “We as counsel will prepare the necessary documents to trigger the court,” Mr. Roberts told the Times. CNBC has not yet been able to confirm these reports independently.

The move comes just days after he was remanded to the medical unit of Bahamas’ notorious Fox Hill Prison.

The State Department in a 2020 report called the conditions at Fox Hill Prison “harsh,” citing “overcrowding, poor nutrition, inadequate sanitation, poor ventilation, and inadequate medical care.”

Sam Bankman-Fried, founder of FTX, is escorted inside of the Magistrate’s Court in Nassau, Bahamas, on Monday, Dec. 19, 2022. 

Victor J. Blue | Bloomberg | Getty Images

Medical care in particular is spotty at the Bahamian prison, the report said. The former billionaire was transported from one of his several multimillion-dollar penthouse homes to the prison last week — though Bankman-Fried was entitled to his own room in the medical wing, Bloomberg reported.

Bankman-Fried faces life in federal prison, without the possibility of supervised release, if convicted on just one of eight offenses that prosecutors have charged him with.

His sentence could be reduced by mitigating factors. Trial lawyers and former prosecutors say that, in practice, many white-collar defendants are given lesser sentences than what the guidelines dictate. So, even in large fraud cases, you can see life sentences drastically reduced.

WATCH: Why Sam Bankman-Fried may decide to drop his fight against being extradited to the U.S.

Why Sam Bankman-Fried may decide to drop his fight against being extradited to the U.S.

How Sam Bankman-Fried ran $8 billion fraud: Government prosecutors

FTX back in bankruptcy court as Sam Bankman-Fried tries again for bail in the Bahamas

Before his surprise Monday night arrest, Sam Bankman-Fried had apologized for everything he could think of, to everyone who would listen. In a leaked draft of his aborted House testimony, he wrote that he was truly, for his entire adult life, “sad.” He “f—– up,” he tweeted, and wrote, and said.

He told Bahamas regulators he was “deeply sorry for ending up in this position.” But when Bankman-Fried was escorted out of his penthouse apartment in Nassau in handcuffs, it still wasn’t clear what he was apologizing for, having stridently denied committing fraud to CNBC’s Andrew Ross Sorkin, ABC News’ George Stephanopoulos, and across Twitter for weeks.

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But the day after his arrest, federal prosecutors and regulators unsealed dozens of pages of filings and charges that accused Bankman-Fried of not just having perpetrated a fraud, but having done so “from the start,” according to a filing from the Securities Exchange Commission

Far from having “f—– up,” SEC and Commodity Futures Trading Commission regulators, alongside federal prosecutors from the United States Attorney’s Office for the Southern District of New York, allege that Bankman-Fried was at the heart — indeed, the driver — of “one of the biggest financial frauds in American history,” in the words of U.S. Attorney Damian Williams. The allegations against Bankman-Fried were assembled with stunning speed, but offer insight into one of the highest-profile fraud prosecutions since Enron.

Bankman-Fried founded his crypto hedge fund Alameda Research in November 2017, renting office space in Berkeley, California. The scion of two Stanford law professors, Bankman-Fried had graduated from MIT, worked at the prestigious quantitative trading firm Jane Street Capital, and had broken into cryptocurrencies with a MIT classmate, Gary Wang.

Alameda Research was essentially an arbitrage shop, purchasing bitcoin at a lower price from one exchange and selling it for a higher price at another. Price differences in South Korea versus the rest of the world allowed Bankman-Fried and Wang to profit tremendously from what was nicknamed “the kimchi swap.”

In April 2019, Bankman-Fried and Wang — along with U.C. Berkeley graduate Nishad Singh — founded FTX.com, an international cryptocurrency exchange that offered customers innovative trading features, a responsive platform, and a reliable experience.

Federal regulators at the CFTC say that just a month after founding FTX.com, Bankman-Fried, “unbeknownst to all but a small circle of insiders,” was leveraging customer assets — specifically, customers’ personal cryptocurrency deposits — for Alameda’s own bets. 

Rehypothecation is the term for when businesses legally use customer assets to speculate and invest. But Bankman-Fried didn’t have permission from customers to gamble with their funds. FTX’s own terms of use specifically forbade him, or Alameda, from using customer money for anything — unless the customer allowed it.

And from FTX’s inception, there was a lot of customer money. The CFTC cited 2019 reports from FTX which pegged the futures volume alone as often exceeding $100 million every day.

Using customer money for Alameda’s bets constituted fraud, the CFTC alleges. In the Southern District of New York, where Bankman-Fried was indicted by a grand jury, Bankman-Fried faces criminal fraud charges as well. From the very genesis of FTX, regulators allege, Bankman-Fried was using customer funds to bankroll his speculative investments.

It is a swift fall from grace for the one-time king of crypto, who as recently as two months ago was hailed as the savior of the industry. Now, Bankman-Fried heads to a Bahamian court on Monday to surrender himself to the U.S. extradition process, according to a person familiar with the matter. A criminal trial awaits him once he is back on U.S. soil.

Attorneys for Bankman-Fried, and attorneys for his former companies, did not immediately return requests for comment. A representative for Bankman-Fried declined to comment.

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The rise of the Alameda-FTX empire

FTX quickly rose, launching its own token, FTT, in July 2019 and snagging an equity investment from Binance in November of that year.

By 2021, according to the CFTC filing, FTX and its subsidiaries held roughly $15 billion worth of assets, and accounted for 10% of global digital transaction volume, clearing $16 billion worth of customer trades every day.

The firm’s “years-long” fraud didn’t just extend to playing with customer money, according to the SEC. 

FTX was able to operate so effectively, clear such massive volume, and generate such interest because it had a designated market maker (DMM) of its own. In traditional finance, a DMM is a firm that will buy and sell securities to and from customers, hoping to clear a profit in any difference in price, called the spread.

From FTX’s 2019 founding, Alameda was that market maker, snapping up and releasing cryptocurrencies on the exchange. Alameda and FTX’s symbiotic relationship proved advantageous for both ends of Bankman-Fried’s growing empire.

As FTX matured, other market makers came online to offer liquidity. But Alameda was, and remained, FTX’s largest liquidity provider, easing platform function at “Bankman-Fried’s direction,” the SEC alleges.

Unlike those other market makers or power users, Alameda had a set of powerful tools at its disposal. 

In August 2019, the SEC alleges, Bankman-Fried directed his team at FTX to program an exception into the exchange’s code, allowing Alameda to “maintain a negative balance in its account, untethered from any collateral requirements.”

“No other customer account at FTX was permitted to maintain a negative balance,” the SEC filing continues. The negative balance meant that Alameda was allegedly effectively backstopped by customer assets while making trades.

Former Alameda CEO Caroline Ellison once alluded to this in a widely disseminated interview. 

“We tend not to have things like stop losses,” Ellison said.

In traditional finance, a stop-loss order helps traders limit exposure to a potentially losing trade. When an asset (a stock, for example) reaches a pre-determined lower limit, the stop-loss order will automatically sell off the asset to prevent losses from spiraling out of control.

Not content with what would eventually become a “virtually unlimited” line of credit from investors — his own customers — Bankman-Fried conspired to stack the deck in Alameda’s favor, regulators say.

FTX offered power users access to an API — an interface that allowed the user to bypass FTX’s front-end platform and communicate directly with FTX’s back-end systems. Normal users were still subjected to common-sense checks: verifying that they had enough money in their account, for example.

Alameda traders could access a fast-lane which let them shunt past other users and shave “several milliseconds” off their trade execution times, according to the CFTC. The kind of high-frequency trading that FTX users engaged in made that invaluable.

I didn't ever try to commit fraud on anyone: Sam Bankman-Fried

A lousy crypto hedge fund

Despite the deck being stacked in Alameda’s favor, the hedge fund offered terrible returns. A court filing indicated that Alameda lost over $3.7 billion over its lifetime, despite public statements by FTX leaders touting how profitable the trading arm was.

Alameda’s losses and lending structure were a critical component of FTX’s eventual collapse.

Alameda didn’t just play fast and loose with customer money. The hedge fund borrowed aggressively from multiple lenders, including Voyager Digital and BlockFi Lending. Both those companies entered Chapter 11 bankruptcy proceedings this year, and FTX targeted both for acquisition.

Alameda secured its loans from Voyager and BlockFi with FTT tokens, which FTX minted itself. Bankman-Fried’s empire controlled the vast majority of the available currency, with only a small amount of FTT actually circulating at any time.

Alameda should have acknowledged the fact that its tokens couldn’t be sold at the price that they claimed they were worth, the CFTC alleges in its complaint. 

This was because any attempt by Alameda to sell off their FTT tokens would crater FTT’s price, given how much of the available supply Alameda controlled.

Instead of correctly marking its tokens to market, though, Alameda recorded their entire hoard of FTT as being worth the prevailing market price.

Alameda used this methodology with other coins as well, including Solana and Serum (a token created and promoted by FTX and Alameda), using them to collateralize billions in loans to other crypto players. Industry insiders even had a nickname for those tokens — “Sam coins.”

The tables turned after the collapse of Luna, a stablecoin whose implosion and subsequent crash devastated other lenders and crypto firms and sent crypto prices plunging. Major Alameda lenders, like Voyager, declared bankruptcy. Remaining lenders began to execute margin calls or liquidate open positions with customers, including Alameda.

The CFTC alleges that between May and June 2022, Alameda was subjected to “a large number of margin calls and loan recalls.”

Unbeknownst to investors, lenders, or regulators, Alameda lacked enough liquid assets to service its loan obligations.

But while Alameda was illiquid, FTX’s customers — who had been constantly reassured that the exchange, and Bankman-Fried, were determined to protect their interests — were not. 

Sam Bankman-Fried in jail in the Bahamas till February as Senate FTX hearing kicks off

The fraud — exposed

Bankman-Fried stepped down from his leadership position at Alameda Research in Oct. 2021 in what CFTC regulators claim was a calculated bid to cultivate a false sense of separation between FTX and the hedge fund. But he continued to exercise control, regulators claim.

Bankman-Fried allegedly ordered Alameda to increase its use of customer assets, drawing down massively on its “unlimited” credit line at FTX.

“Alameda was able to rely on its undisclosed ordinary-course access to FTX credit and customer funds to facilitate these large withdrawals, which were several billion dollars in notional value,” the CFTC filing reads.

By the middle of 2022, Alameda owed FTX’s unwitting customers approximately $8 billion. Bankman-Fried had testified before the House that FTX boasted world-class risk management and compliance systems, but in reality, according to the firm’s own bankruptcy filings, it possessed almost nothing in the way of record-keeping.

Then, on Nov. 2, the first domino fell. Crypto trade publication CoinDesk publicized details on Alameda’s balance sheet which showed $14.6 billion in assets. Over $7 billion of those assets were either FTT tokens or Bankman-Fried-backed coins like Solana or Serum. Another $2 billion were locked away in equity investments.

For the first time ever, the secretive inner workings of Alameda Research were revealed to be a modern-day Potemkin village. Investors began to liquidate their FTT tokens and withdraw their holdings from FTX, a potentially calamitous situation for Bankman-Fried.

Alameda still had billions of collateralized loans outstanding — but if the value of their collateral, FTT, fell too far, their lenders would execute further margin calls, demanding full repayment of loans.

Allegedly, Alameda had already been unable to fulfill loan obligations over the summer without accessing customer funds. Now, with money flowing out of the exchange and FTT’s price slipping, Alameda and FTX faced a liquidity crunch.

In a now-deleted tweet, Bankman-Fried continued to claim FTX was fully funded and that customer assets were safe. But on Nov. 6, four days after the CoinDesk article, the crack widened into a chasm, thanks to an old investor-turned-rival, Changpeng “CZ” Zhao.

Zhao founded Binance in 2017, and it was the first outside investor in FTX, funding a Series A round in 2019. It had exited the investment by July 2021, the same year that FTX raised $1 billion from big names like Sequoia Capital and Thoma Bravo.

FTX bought out Binance with a combination of BUSD, BNB, and FTT, according to Zhao.

BUSD is Binance’s exchange-issued stablecoin, pegged to the value of the U.S. dollar. BNB is their exchange token, similar to FTX’s FTT, issued by Binance and used to pay transaction and trading fees on the exchange.

Zhao dropped the hammer with a tweet saying that because of “recent revelations that have came [sic] to light, we have decided to liquidate any remaining FTT on our books.”

FTX executives scrambled to contain potential damage. Ellison responded to Zhao offering to purchase Binance’s remaining FTT position for $22 per token.

Privately, Bankman-Fried ordered Alameda traders to liquidate Alameda’s investments and positions “to rapidly free up capital for FTT buybacks,” the CFTC filing states. Bankman-Fried was preparing to bet the house in an effort to maintain Ellison’s public support level of $22.

Alameda traders managed to fend off outflows for two days, holding the price of FTT at around $22.

Publicly, Bankman-Fried continued to operate as if all was well. “FTX is fine. Assets are fine,” he wrote in a tweet on Nov. 7 that has since been deleted. Bankman-Fried asserted that FTX did not invest client assets and that all redemptions would be processed.

But at the same time Bankman-Fried was tweeting reassurances, internally, executives were growing more and more alarmed at the increasing shortfall, according to prosecutors. It was “not merely a matter of having sufficient liquid funds on hand to cover customer withdrawals,” the CFTC alleges.

Rather, Bankman-Fried and other executives admitted to each other that “FTX customer funds were irrevocably lost because Alameda had appropriated them.”

It was an admission that flew in the face of everything Bankman-Fried would claim publicly up through the day of his arrest, a month later.

By Nov. 8, the shortfall had grown from $1 billion to $8 billion. Bankman-Fried had been courting outside investors for a rescue package. “Numerous parties declined […] regardless of the favorable terms being offered,” the CFTC filing alleges. 

FTX issued a pause on all customer withdrawals that day. FTT’s price plummeted by over 75%. Bankman-Fried was in the midst of a high-tech, decentralized run on the bank. Out of options, he turned to Zhao, who announced that he’d signed a “non-binding” letter of intent to acquire FTX.com.

But just a day later, on Nov. 9, Binance said it would not go through with the acquisition, citing reports of “mishandled customer funds” and federal investigations.

Two days later, Bankman-Fried resigned as CEO of FTX and associated entities. FTX’s longtime attorneys at Sullivan & Cromwell approached John J. Ray, who oversaw Enron through its bankruptcy, to assume Bankman-Fried’s former position.

FTX filed for bankruptcy that same day, on Nov. 11. A month later, Bankman-Fried was arrested by Bahamian authorities, pending extradition on charges of fraud, conspiracy, and money laundering.

Bankman-Fried, a devotee of a philosophy known as “effective altruism,” was apparently driven by an obsessive need to quantify the impact he had on this world, measured in dollars and tokens. He drafted a spreadsheet which measured the influence that Alameda had on the planet (and determined it was nearly a net wash). 

Billions of dollars of customer money are now floating in venture funds, political war chests and charitable coffers — money now at risk of being clawed back, thanks to Bankman-Fried’s alleged crimes.

Almost a decade ago, Bankman-Fried posed a hypothetical question to his friends and family on his personal blog: Waxing poetic on effective altruism, he asked rhetorically, “Just how much impact can a dollar have?”

“Well, if you want a one-sentence answer, here it is: one two thousandth of a life,” he said.

The CFTC alleges that over $8 billion dollars of customer funds are missing. Some customers have doubtless lost their life savings, their kid’s college funds, their future down payments. By Bankman-Fried’s own math, his alleged misdeeds were worth four million lives.

CNBC Pro Exclusive: 30-year-old crypto billionaire shares his unique investing approach

How homeowners can make sense of the climate finance

Solar panels create electricity on the roof of a house in Rockport, Massachusetts, U.S., June 6, 2022. Picture taken with a drone. 

Brian Snyder | Reuters

When Josh Hurwitz decided to put solar power on his Connecticut house, he had three big reasons: To cut his carbon footprint, to eventually store electricity in a solar-powered battery in case of blackouts, and – crucially – to save money.

Now he’s on track to pay for his system in six years, then save tens of thousands of dollars in the 15 years after that, while giving himself a hedge against utility-rate inflation. It’s working so well, he’s preparing to add a Tesla-made battery to let him store the power he makes. Central to the deal: Tax credits and other benefits from both the state of Connecticut and from Washington, D.C., he says.

“You have to make the money work,” Hurwitz said. “You can have the best of intentions, but if the numbers don’t work it doesn’t make sense to do it.” 

Hurwitz’s experience points up one benefit of the Inflation Reduction Act that passed in August: Its extension and expansion of tax credits to promote the spread of home-based solar power systems. Adoption is expected to grow 26 percent faster because of the law, which extends tax credits that had been set to expire by 2024 through 2035, says a report by Wood Mackenzie and the Solar Energy Industry Association. 

Those credits will cover 30 percent of the cost of the system – and, for the first time, there’s a 30 percent credit for batteries that can store newly-produced power for use when it’s needed.

“The main thing the law does is give the industry, and consumers, assurance that the tax credits will be there today, tomorrow and for the next 10 years,” said Warren Leon, executive director of the Clean Energy States Alliance, a bipartisan coalition of state government energy agencies. “Rooftop solar is still expensive enough to require some subsidies.”

California’s solar energy net metering decision

Certainty has been the thing that’s hard to come by in solar, where frequent policy changes make the market a “solar coaster,” as one industry executive put it. Just as the expanded federal tax credits were taking effect, California on Dec. 15 slashed another big incentive allowing homeowners to sell excess solar energy generated by their systems back to the grid at attractive rates, scrambling the math anew in the largest U.S. state and its biggest solar-power market — though the changes do not take effect until next April.

Put the state and federal changes together, and Wood Mackenzie thinks the California solar market will actually shrink sharply in 2024, down by as much as 39%. Before the Inflation Reduction Act incentives were factored in, the consulting firm forecast a 50% drop with the California policy shift. Residential solar is coming off a historic quarter, with 1.57 GW installed, a 43% increase year over year, and California a little over one-third of the total, according to Wood Mackenzie.

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For potential switchers, tax credits can quickly recover part of the up-front cost of going green. Hurwitz took the federal tax credit for his system when he installed it in 2020, and is preparing to add a battery now that it, too, comes with tax credits. Some contractors offer deals where they absorb the upfront cost – and claim the credit – in exchange for agreements to lease back the system. 

Combined with savings on power homeowners don’t  buy from utilities, the tax credits can make rooftop solar systems pay for themselves within as little as five years – and save $25,000 or more, after recovering the initial investment, within two decades.  

“Will this growth have legs? Absolutely,” said Veronica Zhang, portfolio manager of the Van Eck Environmental Sustainability Fund, a green fund not exclusively focused on solar. “With utility rates going up, it’s a good time to move if you were thinking about it in the first place.”

How to calculate installation costs and benefits

Here is how the numbers work.

Nationally, the cost for solar in 2022 ranges from $16,870 to $23,170, after the tax credit, for a 10-kilowatt system, the size for which quotes are sought most often on EnergySage, a Boston-based quote-comparison site for solar panels and batteries. Most households can use a system of six or seven kilowatts, EnergySage spokesman Nick Liberati said. A 10-12 kilowatt battery costs about $13,000 more, he added.

There’s a significant variation in those numbers by region, and by the size and other factors specific to the house, EnergySage CEO Vikram Aggarwal said. In New Jersey, for example, a 7-kilowatt system costs on average $20,510 before the credit and $15,177 after it. In Houston, it’s about $1,000 less. In Chicago, that system is close to $2,000 more than in New Jersey. A more robust 10-kilowatt system costs more than $31,000 before the credit around Chicago, but $26,500 in Tampa, Fla. All of these average prices are as quoted by EnergySage. 

The effectiveness of the system may also vary because of things specific to the house, including the placement of trees on or near the property, as we found out when we asked EnergySage’s online bid-solicitation system to look at specific homes.

The bids for one suburban Chicago house ranged as low as $19,096 after the federal credit and as high as $30,676.

Offsetting those costs are electricity savings and state tax breaks that recover the cost of the system in as little as 4.5 years, according to the bids. Contractors claimed that power savings and state incentives could save as much as another $27,625 over 20 years, on top of the capital cost.

Alternatively, consumers can finance the system but still own it themselves – we were quoted interest rates of 2.99 to 8.99 percent. That eliminates consumers’ up-front cost, but cuts into the savings as some of the avoided utility costs go to pay off interest, Aggarwal said. 

The key to maximizing savings is to know the specific regulations in your state – and get help understanding often-complex contracts, said Hurwitz, who is a physician.

Energy storage and excess power

Some states have more generous subsidies than others, and more pro-consumer rules mandating that utilities pay higher prices for excess power that home solar systems create during peak production hours, or even extract from homeowners’ batteries.

California had among the most generous rules of all until this week. But state utility regulators agreed to let utilities pay much less for excess power they are required to buy, after power companies argued that the rates were too high, and raised power prices for other customers.

Wood Mackenzie said the details of California’s decision made it look less onerous than the firm had expected. EnergySage says the payback period for California systems without a battery will be 10 years instead of six after the new rules take effect in April. Savings in the years afterward will be about 60 percent less, the company estimates. Systems with a battery, which pay for themselves after 10 years, will be little affected because their owners keep most of their excess power instead of selling it to the utility, according to EnergySage. 

“The new [California rules] certainly elongate current payback periods for solar and solar-plus-storage, but not by as much as the previous proposal,” Wood Mackenzie said in the Dec. 16 report. “By 2024, the real impacts of the IRA will begin to come to fruition.”

The more expensive power is from a local utility, the more sense home solar will make. And some contractors will back claims about power savings with agreements to pay part of your utility bill if the systems don’t produce as much energy as promised. 

“You have to do your homework before you sign,” Hurwitz said. “But energy costs always go up. That’s another hidden incentive.”

Mazars suspends all work with crypto clients including Binance, Crypto.com

Accounting firm Mazars Group has suspended all work with its crypto clients. The decision to cut ties with Binance, KuCoin and Crypto.com comes just after the global accounting firm released “proof of reserve” reports for several digital asset exchanges.

The move comes as major cryptocurrency exchanges look to prove their solvency, and show they have enough money to cover customer withdrawals. The CEOs of Binance and Crypto.com have looked to distinguish their own business practices from what happened at FTX, which has been charged with illegally using customer deposits for years before filing for bankruptcy. Its founder, Sam Bankman-Fried, is facing multiple counts of fraud and money laundering.

Mazars fired the Trump Organization as a client in February, citing a lack of reliability in the organization’s financial statements.

Mazars Group said in a statement to CNBC that it had “paused its activity relating to the provision of Proof of Reserves Reports for entities in the cryptocurrency sector due to concerns regarding the way these reports are understood by the public.”

The statement added Mazars’ proof of reserves reports are “performed in accordance with Reporting Standards relevant to an Agreed Upon Procedures report.”

“They do not constitute either an assurance or an audit opinion on subject matter. Instead they report limited findings based on the agreed procedures performed on the subject matter at a historical point in time,” the statement continued.

A spokesperson from Binance, the world’s largest crypto exchange, told CNBC in a statement that, “Mazars has indicated that they will temporarily pause their work with all of their crypto clients globally, which include Crypto.com, KuCoin, and Binance.”

“Unfortunately, this means that we will not be able to work with Mazars for the moment,” Binance said.

Both bitcoin and Binance’s BNB token took a dip on the news, with bitcoin initially dropping nearly 3% and Binance’s native token falling close to 5.5%.

Mazars’ South African branch published a five-page proof of reserves for Binance on Dec. 7, but the report is no longer available on the firm’s website as of Friday morning. Unlike standard audits, the proof of reserves for Binance only accounted for bitcoin. The report did not show liabilities for Binance’s lending arm. Binance CEO Changpeng Zhao has often said that the company itself has no debt.

On Dec. 9, Crypto.com published a proof of reserves audited by Mazars, attesting that customer assets were held on a 1-to-1 basis, meaning that all deposits were 100% backed by Crypto.com’s reserves. A spokesperson for the exchange reiterated that the firm had “successfully” completed its recent proof of reserves in collaboration with Mazars and that the accounting company had “provided independent verification of our secure on-chain digital assets matching our customer balances 1:1.”

Crypto.com added that customers can verify their balance on its website. A spokesperson said the company will “continue to engage with reputable audit firms in 2023 and beyond” as they “seek to increase transparency across the entire industry.”

KuCoin said its proof of reserve report was already delivered by Mazars. “In the future, we are open to work with any leading and reputable audit to provide the third-party verification report,” a KuCoin spokesperson said.

Meanwhile, Ernst & Young, PricewaterhouseCoopers, Deloitte and KPMG — collectively dubbed accounting’s Big Four — haven’t made moves to drop their crypto clients. Coinbase, for example, is a client of Deloitte. Tether uses Moore Cayman.

The Big Four did not immediately respond to CNBC’s request for comment.

In an interview Thursday on CNBC’s “Squawk Box,” Zhao said Binance is working with auditing firms, though he didn’t name which ones. He added that “interestingly, many audit firms are kind of scared to work with crypto businesses.”

“There are a few audit firms that audited FTX and they got burned because they give the stamp of approval, and I don’t know how they did the audits. But audits don’t reveal every problem,” continued Zhao, noting that many of those firms “don’t know how” to audit crypto changes.

“They don’t know how to audit user assets, different blockchains,” he said.

Bill Gates-backed nuclear demonstration delayed by at least 2 years

An artist rendering of the advanced nuclear power reactor demonstration project that Bill Gates’ nuclear innovation company, TerraPower, plans to build in the frontier-era coal town, Kemmerer, Wyoming.

Rendering courtesy TerraPower

TerraPower’s advanced reactor demonstration will face delays of at least two years because its only source of fuel was Russia, and the Ukraine war has closed the door on that trade relationship. The Bill Gates-backed company is planning to build its first reactor in the frontier-era coal town of Kemmerer, Wyoming and had hoped to finish it by 2028.

“In February 2022, Russia’s invasion of Ukraine caused the only commercial source of HALEU fuel to no longer be a viable part of the supply chain for TerraPower, as well as for others in our industry,” Chris Levesque, the CEO of TerraPower, said in a written statement sent to the company’s newsletter recipients on Wednesday.

“Given the lack of fuel availability now, and that there has been no construction started on new fuel enrichment facilities, TerraPower is anticipating a minimum of a two-year delay to being able to bring the Natrium reactor into operation,” Levesque said.

Terrapower’s advanced nuclear plant design, known as Natrium, will be smaller than conventional nuclear reactors, and is slated to cost $4 billion, with half of that money coming from the U.S. Department of Energy. It will offer baseload power of 345 megawatts, with the potential to expand its capacity to 500 megawatts — about half of what is needed to power a mid-size city, according to a rule of thumb Gates provided in his book, “How to Avoid a Climate Disaster.

But the plant depends on high-assay low-enriched uranium, or HALEU. The existing fleet of nuclear reactors in the United States runs uranium-235 fuel enriched up to 5%, the Department of Energy says, while HALEU is enriched between 5% and 20%.

The United States does not have the enrichment capacity to supply commercial amounts of HALEU fuel and so TerraPower had “assumed the use of HALEU from Russia for our first core load,” Levesque wrote.

Since the war broke out in February and it became clear that Russia could no longer be a reliable trade partner, TerraPower, the Department of Energy and other stakeholders have been looking for alternate sources of HALEU fuel. They are also pushing lawmakers to approve $2.1 billion to support HALEU production, according to Levesque.

Wyoming Senator John Barrasso, a Republican, thinks it’s a wake-up call for the U.S.

“America must reestablish itself as the global leader in nuclear energy,” Barrasso said in a written statement. “Instead of relying on our adversaries like Russia for uranium, the United States must produce its own supply of advanced nuclear fuel.”

Barrasso sent a letter to Senate Energy Committee Chairman Joe Manchin, D-W.Va., requesting a hearing about the availability of HALEU. Barrasso also sent a letter to the Energy Secretary Jennifer Granholm to urge the United States to move faster in securing a source of HALEU.

The Department of Energy has “sufficient stockpiles of excess and previously used uranium to meet TerraPower’s needs,” but it has “yet to process sufficient amounts of this excess uranium into HALEU,” Barrasso said in the letter to Granholm. “At this point, no single pathway will likely be sufficient to meet TerraPower’s schedule.”

Currently, 800 engineers are working to complete the plant’s design, and TerraPower expects the project will employ as many as 2,000 workers to build the plant in the mid-2020s.

TerraPower has raised over $830 million in private funding in 2022 and the Congress has appropriated $1.6 billion for the construction of the plant, Levesque said.

How nuclear power is changing

California lowers solar energy incentives for homeowners

Save A Lot Solar contractors install LG Electronics solar panels on a home in Hayward, California, U.S., on Tuesday, Feb. 8, 2022.

David Paul Morris | Bloomberg | Getty Images

The California Public Utilities Commission on Thursday passed a proposal that will reduce compensation provided to households for the surplus electricity their rooftop solar panels contribute to the electric grid.

Utilities and consumer groups have argued the incentive payments have unfairly favored wealthier consumers and harmed poor and low-income households. But solar companies and renewable advocates have said that lowering the compensation would slow solar installations and hinder the state’s goals to address climate change.

The proposal, which California utility regulators unveiled last month, will change a net metering policy by paying solar owners for extra power at a lower rate, which is determined by the cost the utility would need to spend to purchase clean power from an alternative source. The solar industry has said the plan would amount to a 75% cut in average payment rates to customers.

Today’s unanimous vote by the five-member commission was monitored across the country, since California is widely viewed as a leader in the renewable energy buildout. The impact of today’s decision will likely extend beyond the state and have implications for the solar industry nationwide, particularly companies in the residential solar space like Sunrun, SunPower, Sunnova, and Tesla.

More than 1.5 million homes, businesses and other utility customers in California have rooftop solar panels. The utilities commission estimates that these installations can collectively produce 12 gigawatts of electricity.

The proposal would have no impact on existing rooftop solar customers and would maintain their current compensation rates, and would also encourage consumers to install batteries with their solar panels, the commission said.

Affordable Clean Energy For All, a nonprofit funded by California’s utilities, has argued that the rooftop solar program is outdated and that utilities have to pass along the costs of subsidies, creating higher bills for millions of customers who don’t install solar, including those least able to pay for electricity costs.

However, solar companies have argued that the existing net metering system is necessary to spur people to choose rooftop solar.

The changes to the state’s solar incentive program could cut California’s solar market in half by 2024, according to a report released earlier this year from energy research firm Wood Mackenzie.

“This misguided decision, which undervalues solar’s numerous benefits for all Californians, will dim the lights on the growth of solar in the Golden State,” said Laura Deehan, state director for Environment California, following the vote.

Roger Lin, an attorney at the Center for Biological Diversity’s energy justice program, said in a statement that the commission “has taken a step backward by widening the divide between those who can afford solar and those who can’t.”

“It’s an affront to low-income communities who are hit by the climate crisis first and worst, and we’ll do everything we can to convince the commission to fix the deep flaws in its proposal,” Lin said.

California, which is grappling with wildfires and drought fueled by climate change, has a goal to transition to 100% renewable energy by 2045.

Solar stock surge after California lessens its subsidy rollback

Wind farm will need to shut down five months a year to protect parrots

An Orange-Bellied Parrot perched on the edge of a feeding bowl. The species is listed as being critically endangered.

Margot Kiesskalt | Istock | Getty Images

Plans for a major new wind farm in Australia were given the thumbs up this month — on the provision its turbines go offline for five months a year to protect a parrot species.

In an environmental assessment report of the Robbins Island Renewable Energy Park, Tasmania’s Environment Protection Authority said its board had “determined to approve the proposal” for the project, which could have as many as 122 wind turbines and is overseen by ACEN Australia.

One of the approval conditions relates to the Orange-bellied parrot, which the Australian government says is critically endangered.

“Unless otherwise approved in writing by the EPA Board, all WTG [wind turbine generators] must be shut down during the northern OBP migration period (1 March to 31 May inclusive) and the southern OBP migration period (15 September to 15 November inclusive),” the EPA document says.

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In a statement last week, EPA board chair Andrew Paul said the organization had concluded that “significant mitigation measures” were needed in relation to “potential impacts on the orange-bellied parrot population.”

This was due to “the limited knowledge about the importance of Robbins Island in the annual northern and southern migrations” as well as a need to account for a National Recovery Plan for the species.

“This has led to the inclusion of [project approval] condition FF6 which imposes shutdown periods during the migrations totaling five months when the turbines cannot operate,” Paul added.

Robbins Island is located in waters off the northwest coast of Tasmania, a large island and Australian state. If all goes to plan, the total capacity of the proposed wind farm could be as much as 900 megawatts.

CNBC contacted ACEN Australia via the Robbins Island project’s website, but did not receive a response prior to publication. The Ayala Corporation, parent company of ACEN Australia majority-owner ACEN Corporation, did not respond to a CNBC request for comment.

In a Facebook post, project developers said they welcomed approval from the EPA, adding that further approvals were needed from the Circular Head Council and the Commonwealth Government’s Department of Climate Change, Energy, the Environment and Water. These were expected in early 2023, they said.

In comments reported by the Australian Broadcasting Corporation, ACEN Australia Chief Operating Officer David Pollington described the switch-off condition as “completely unexpected.”

The firm would “need to consider our options going forward,” the ABC report quoted Pollington as saying.

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Amid global plans to ramp up wind power capacity in the years ahead, the interaction of wind turbines with the natural world — including marine and bird life — is likely to become a key area of debate.

The U.K.-based Royal Society for the Protection of Birds warns that wind farms “can harm birds through disturbance, displacement, acting as barriers, habitat loss and collision,” adding that “impacts can arise from a single development and cumulatively multiple projects.”

The U.S. Energy Information Administration has said that some wind projects and turbines can result in bat and bird casualties.

“These deaths may contribute to declines in the population of species also affected by other human-related impacts,” it notes. “The wind energy industry and the U.S. government are researching ways to reduce the effect of wind turbines on birds and bats.”

Brussels-based industry body WindEurope says the effects of projects can be prevented “by adequately planning, siting, and designing wind farms.”

“The impact of wind farms on birds and bats is extremely low compared to the impact of climate change and other human activity,” it adds.

California, Midwest, at high risk of electricity shortages: NERC

Wind turbines and power transmission lines at a wind farm near Highway 12 in Rio Vista, California, on Tuesday, March 30, 2021.

David Paul Morris | Bloomberg | Getty Images

America’s electrical grid is being pushed to the breaking point, and California, parts of the Midwest and parts of the South Central United States are at “high risk” for energy shortfalls, says the not-for-profit organization charged with managing and evaluating the grid.

“High risk” regions, marked in red on the map, may see shortfalls at “normal peak conditions,” according to the 54th annual assessment from the North American Electric Reliability Corporation released Thursday.

The reasons for the shortfalls vary.

In the Midwestern states and Ontario, more power generation is being retired than is being added back online, NERC’s Mark Olson told reporters Thursday. Projected energy shortfalls have been projected in that region since 2018, Olson said.

In California, the risk is due to a “variable resource mix” and “demand variability,” Olson said. That means there’s a lot of renewable energy in the state, and its generation is not coordinated with the times people need the most energy. NERC predicts that demand could fall below supply for 10 hours during peak summer months in 2024.

Much of the rest of the Midwest and the rest of the Western part of the United States are at “elevated risk” (yellow on the map), which means shortfalls may occur in extreme conditions, like during severe weather or hot spells where everyone is running air conditioners. In New England, the elevated risk comes in the winter when people use generators that depend on natural gas.

“The natural gas capacity can be insufficient for generators, leading to use of backup fuels, stored liquid fuels, and there are risks to being able to maintain sufficient fuel storage during long duration events,” Olson said.

The Southwest could also suffer when demand is high and wind energy generation is low in the region.

Why the U.S. power grid has become unreliable

‘Extraordinary times’

“We are living in extraordinary times from an electric industry perspective,” John Moura, the director of reliability assessment at NERC, said on Thursday.

Increasing awareness of climate change is pushing utilities to phase out fossil fuel-based sources of energy that generate carbon emissions. Renewables like wind and solar don’t contribute to climate change, but have period where they don’t generate any energy (when the sky is dark or the wind is still).

Renewables also don’t necessarily map to where demand is, unlike fossil fuels, which can be transported and burned near where they’re consumed. That means more transmission lines are needed, and building them can take from seven to 15 years, Moura says.

Another area of note, according to NERC, is the increased power demand of cryptocurrency mining and the need to plan for energy usage there.

Then there’s the weather. It’s tricky to tie particular extreme weather events to climate change, but it’s generally true that a warmer world is a wetter one, according to NASA climate scientists.

“Year after year, we’ve seen extreme weather leading to increased reliability impacts. And so when we look at events over the last several years, it’s clear that the bulk power system is impacted by extreme weather more than it ever has,” Moura told reporters on the media call.

These factors are placing increased strain on the grid, and NERC representatives urge grid operators to be conservative in their planning.

“Managing the pace of our generation retirement and our resource mix changes to ensure we have enough energy and essential services are an absolute necessity,” Moura told reporters on the call. “We need to work with the entire ecosystem to make sure we’re managing that base, and to be very clear that we’re not retiring generation prematurely — that is done in an orderly fashion and especially in areas that are right on the edge.”

For its annual long-term electricity security assessment, NERC looks at the coming decade, but energy and capacity risk assessment goes out for the coming five years, from 2023 to 2027. There are too many moving parts and uncertainties for a risk assessment past the next five years to be worthwhile, according to NERC.

The Federal Energy Regulatory Commission certified NERC to measure and enforce safety standards for the energy grid in the United States in 2006. NERC is subject to the oversight of FERC, which is the federal governmental agency in charge of regulating interstate electricity transmission.

How nuclear power is changing

Ex-FTX exec Salame alerted Bahamas regulators to SBF potential fraud

FTX founder Sam Bankman-Fried (2nd L) is led away handcuffed by officers of the Royal Bahamas Police Force in Nassau, Bahamas on December 13, 2022. 

Mario Duncanson | AFP | Getty Images

Days before FTX’s bankruptcy filing last month, co-CEO Ryan Salame told Bahamian authorities that founder Sam Bankman-Fried may have committed fraud by sending customer money from the crypto exchange to his other firm, Alameda Research.

According to a filing on Wednesday tied to FTX’s bankruptcy proceedings, Salame disclosed “possible mishandling of clients’ assets” by Bankman-Fried. The letter included in the filing was dated Nov. 9, and was sent from the Securities Commission of the Bahamas to the commissioner of police. FTX declared bankruptcy on Nov. 11.

The disclosure on Wednesday marks the first public acknowledgement of an insider turning on Bankman-Fried, who was arrested in the Bahamas on Monday after the U.S. Attorney for the Southern District of New York shared a sealed indictment with the Bahamian government. The indictment, unsealed on Tuesday, charged Bankman-Fried with eight criminal counts related to fraud, money laundering and improper use of customer funds.

Salame told regulators that only three individuals at FTX — Bankman-Fried, Nishad Singh and Gary Wang — had the kind of access and authority to engineer the possibly fraudulent transfers to Alameda, a hedge fund and trading firm. Salame said he advised Bankman-Fried and Alameda executives that the possible mishandling of customer funds, which were commingled with Alameda, was contrary to “normal corporate governance.”

Salame’s LinkedIn profile says he’s based in the Bahamas. He also has multiple residences in the U.S., with homes in Massachusetts, Washington, D.C., and New Jersey. He had departed the Bahamas for the U.S. by Nov. 9, according to the letter.

Like Bankman-Fried, Salame was a significant political donor, donating $20 million to Republican causes.

CNBC’s Brian Schwartz contributed to this report.

Sam Bankman-Fried in jail in the Bahamas till February as Senate FTX hearing kicks off