Jailed Cryptocurrency Mogul Sam Bankman-Fried Is Trading A New Alternative Currency In Federal Prison

Few people in modern history have fallen faster than FTX Trading Ltd. Founder Sam Bankman-Fried, who went from a financial genius to a federal prisoner when his cryptocurrency exchange failed. Perhaps the most obvious reminder of that for Bankman-Fried is the alternative currency he has been reduced to trading in the federal penitentiary: canned mackerels.

From Cryptocurrency To Canned Fish: A New Kind Of Alternative Economy

Microeconomies exist everywhere, even in places where legal tender is not allowed. This is true for places like New York's Metropolitan Detention Center, which currently houses Bankman-Fried. All you need for a microeconomy to flourish is a universally agreed-upon unit of currency that can be exchanged for services. Since the days of Al Capone and the Alcatraz Federal Penitentiary, cigarettes have functioned as the unofficial alternative currency in the federal prison system.

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However, they were banned for health reasons in 2004 and canned mackerels or "macks" as they are known on the inside, became the currency of choice among federal prisoners. Macks can be traded for a variety of services, including but not limited to:

•  Haircuts
•  Laundry services
•  Legal brief preparation from prison lawyers
•  Shoe shines and shoe repair

Canned Mackerels Even Have a Benchmark

It might be tempting to think of the mack trade inside federal prison as one lacking in any sophistication or regulation, but you would be wrong. As is the case with cryptocurrency, the value of macks even has its own benchmark: the U.S. dollar. Their value can rise or fluctuate, but the thing that makes macks so useful as an alternative currency is their shelf-life, their universal popularity and their ease of transport.

It's a bitter irony that the same skills Bankman-Fried acquired as a cryptocurrency trader while building his criminal empire would prepare him for life as a federal inmate. Unfortunately for FTX clients left holding the bag when Bankman-Fried's criminality was discovered, macks can't be used to cover their losses.

A Cryptocurrency Superstar's Meteoric Rise

Bankman-Fried's investing career began with an internship at Jane Street Capital in 2013, where he worked with exchange-traded funds (ETFs). He would go on to cofound his own crypto-trading company Alameda Research in 2017. Shortly after that, he discovered a novel way to profit from cryptocurrency by arbitraging Bitcoin between the U.S. and Japanese markets before relocating to Hong Kong in 2018.

In 2018, Bankman-Fried founded the FTX exchange and found himself in the perfect position to take advantage of the surge in cryptocurrency value that took place during the COVID-19 pandemic. FTX's worth shot through the roof and Bankman-Fried became a billionaire who espoused viewpoints on everything from government regulation to "effective altruism." He even started his own cryptocurrency FTT. No one could have imagined his star would fall as quickly as it rose.

A Hard Fall For FTX And Its Account Holders

It’s perhaps more than incidental that this is about the same time Bankman-Fried moved FTX from Hong Kong to the Bahamas and cited the "regulatory environment" of the island nation as a reason. While in the Bahamas, Bankman-Fried and his executives lived a lifestyle of luxury while he made riskier and riskier bets through Alameda Trading, all out of the sight of U.S. regulators who would likely have uncovered this scheme before it got so out of hand.

He even went so far as to surreptitiously use FTX client funds to cover Alameda Trading's losses. Bankman-Fried's indiscretions may have never come to light if not for a failed deal with Binance, which backed out of a deal to acquire FTX once it discovered numerous irregularities in FTX's handling of client funds. This led to FTT losing an estimated 80% of its value and a shocking chain of events.

Within the span of a few chaotic days in November 2022, Bankman-Fried resigned, lost his status as a billionaire and FTX went bankrupt. Most of FTX's client holdings were wiped out along with it. Once the Securities and Exchange Commission got involved, Bankman-Fried could no longer hide the fact that he was illegally using FTX client funds to prop up Alameda Research.

A Lifetime Of Mack Trading For Sam Bankman-Fried

Bankman-Fried was arrested in the Bahamas in December 2022 and extradited to the U.S. where a jury found him guilty on seven counts of fraud and conspiracy in November 2023. On March 28, 2024, Bankman-Fried will face a sentence of up to 110 years on those counts. It remains to be seen whether he can develop an "arbitrage" scheme for "macks". He will certainly have enough time on his hands to do so.

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