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FTX Founder Samuel Bankman-Fried Indicted on Eight Criminal Charges; Millions from Texas to Mississippi Under Threat of Severe Storms; Biden to Sign Bill Protecting Same-Sex and Interracial Marriages. Aired 10-10:30a ET

Aired December 13, 2022 - 10:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

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JIM SCIUTTO, CNN ANCHOR: A very good Tuesday morning, I'm Jim Sciutto.

ERICA HILL, CNN ANCHOR: And I'm Erica Hill.

Any moment now, President Biden set to speak from the White House, this on the heels of that positive report showing inflation cooling considerably in November. We'll break down those numbers for you. We're also going to bring you the president's remarks when he makes his way to that podium there.

SCIUTTO: Yes, the market jumping on this news.

Also, this just in, and the founder of the failed crypto giant, FTX, Sam Bankman-Fried has now been indicted on eight criminal charges, including wire fraud and conspiracy. He's set to make his first court appearance this morning just hours after he was arrested in the Bahamas. The SEC is also charging the 30-year-old with fraud. All of this as the company's new CEO is set to be grilled on Capitol Hill this hour. It is a remarkable story of lost of tens of billions.

And right now a tornado warning is in effect near Dallas, Texas, after a massive winter storm is slamming into states from coast to coast. This morning, new video of suspected tornado damage just into CNN, this is from Parker County, Texas, millions are bracing for dangerous winds and blizzard conditions at the same time. We're going to have a live update in just the moment.

HILL: Look at that destruction.

We do begin, though, this hour with that failed cryptocurrency exchange. Its founder, Sam Bankman-Fried, arrested overnight in the Bahamas, indicted on eight criminal charges.

SCIUTTO: Our reporters and correspondents are following every angle of this developing story. CNN Correspondent Kara Scannell joins us now. Kara, running into this, there have been a lot of questions about was this just a mistake, was he in over his head or was this fraud. Now, we know that U.S. prosecutors very much believe this is criminal, this is fraud. Tell us about the charges they're bringing.

KARA SCANNELL, CNN CORRESPONDENT: Yes, Jim and Erica, good morning. This indictment was just unsealed moments ago. And what federal prosecutors are charging here at eight criminal counts, multiple counts of conspiracy and counts of wire fraud.

What they allege here were several different schemes, one these schemes they say that Bankman-Fried had defrauded customers in this account using customer assets in the trading platform but then transferring it illegally into a hedge fund called Alameda Research that Bankman-Fried also ran.

Now, this is, of course, what prosecutors say was a fraudulent scheme because the customers in the FTX trading platform did not know that their money could be used in this other way. That is one of these elements.

Another allegation here is that they had defrauded lenders to that hedge fund Alameda Research by giving these lenders false information about the financial condition of that hedge fund. And they're also charged with crimes related to campaign financing, that they exceeded federal limits on how much individuals or companies could contribute to politicians and political parties, saying that they exceeded these limits and that they also had made donations in others' names, so just a real bare bones indictment, 14 counts.

But what we also learned earlier today was a lot of information about what authorities think went on inside this company. We look at the civil charges brought by the Securities and Exchange Commission, and they get into more details of what happened with this money. They say that the investors in both FTX, the company, as well as the trading platform customers were defrauded.

And just to sum up what the SEC said, they said Bankman-Fried promoted FTX as a safe, responsible crypto asset trading platform, specifically touting FTX's sophisticated, automated risk measures to protect customer assets. In reality, Bankman-Fried orchestrated a year's long fraud to conceal from FTX investors. And they say that the money that he allegedly stole from investors was used for these political donations to buy luxury real estate in the Bahamas and also $1.3 billion in loans were taken out by Bankman-Fried personally. Jim, Erica?

SCIUTTO: Goodness, I mean, the dollar figures just themselves are remarkable. Kara Scannell, thanks so much.

HILL: Yes, also remarkable that SEC filing basically says he knew exactly what he was doing the whole time, which was the opposite of what he was promising.

Now, you'll remember, Sam Bankman-Fried, we were actually expecting him to testify this hour before the House committee on financial services. That hearing is set to move forward with testimony from the company's new CEO, John Jay Ray.

CNN's Matt Egan following this angle for us. What are we expecting Ray will say this morning, Matt?

MATT EGAN, CNN REPORTER: Well, Erica and Jim, it is a little bit of a letdown that we're not going to get to see Sam Bankman-Fried get grilled by lawmakers, as was originally planned, but in John Ray, we are hearing from someone who has spent the last month basically digging through the rubble, trying to understand what went wrong, how FTX went from an industry leader to basically a poster child for what can go wrong.

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And in his prepared remarks, John Ray paints the picture of a company that is basically a dumpster fire. Let me read you a key line from the statement. He wrote, quote, never in my career have I seen such an utter failure of corporate controls at every level of organization, from the lack of financial statements to a complete failure of any internal controls or governance whatsoever. The company's control is in the hands of a very small group of grossly inexperienced and unsophisticated individuals.

Now, this statement is particularly damning coming from John Ray because he is best known for leading another infamous company through bankruptcy, and that company is Enron.

Now, he stopped short of outright calling FTX a fraud but he does make a series of allegations about just what happened here. He says that customer funds weren't mixed with assets of FTX hedge fund, that backs up some of the allegations that Kara just talked about from the SEC and from federal prosecutors. He says the hedge funds made risky bets. The FTX went on a $5 billion spending spree on investments and businesses. And he also says that the company had loans and payments to insiders of excess of $1 billion. Lawmakers are going to question him today about how much responsibility Sam Bankman-Fried gets here and who else may have done things wrong here.

HILL: Yes, we will be watching for that. And it would be interesting to see what we get in terms of answers. Matt, I appreciate it. Thank you.

SCIUTTO: All right. Well, the fallout from the demise of FTX has wide-ranging impact. Investors of all sizes were misled. We're talking about the very rich down to people who might have just had a thousand bucks in with him. They were all told this was a legitimate platform. Now, the question is will they get some, any of their money back.

CNN Chief Business Correspondent Christine Romans is with us now. And, Christine, as you well know, there have been massive frauds before. We have got Enron, we have got Madoff, we have got Theranos. But what strikes me about this one was just the total lack of oversight. Not only do you have a virtual kid here, right, who so many people entrusted themselves with, but they didn't have a board of directors. I mean, they were sort of doing things that should have been obvious, at least required someone to be watching.

CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: I mean, what I see, it doesn't even look like they were pretending to be a legitimate grown up company yet they are marketing themselves to the world as a safe entry level place for regular investors to buy, sell and hold their crypto assets, right? And in reality, it was anything but that safe place.

It is a reminder, you guys, I think the fallout here is that it is still the Wild West in crypto, right? I mean, it is buyer beware. You don't have the alphabet soup of banking regulators who could go in there and inspect, really, a trading platform like this. It's not a bank necessarily. It's not a securities dealer necessarily. There are laws, though, the Securities and Exchange Commission using some really important investor production laws to civilly charge this company.

But it is a reminder here that Congress might have to come in here and start to talk about how you're going to regulate this part of the world because real investors got hurt and may not be made hold here.

HILL: There's also had been a lot of focus, Christine, on -- as we started to see issues with crypto, there was a spotlight on celebrities that had endorsed different companies. There is also a spotlight now when we talk specifically about FTX on Sam Bankman- Fried's parents.

ROMANS: This is so interesting. His parents are both well liked law professors at Stanford Law School. That gave him sort of a veneer of credibility a bit here too. If you watch the Super Bowl, you saw some of your favorite people talking about crypto as if you're missing out on the next big thing. It was a little bit get rich quick feeling. Didn't it feel that way to you?

HILL: It did.

ROMANS: And this is usually how those things turn out.

The government is alleging fraud, that he is essentially a modern crypto snake oil salesman. We've heard a lot from him. We haven't heard what he is going to say to the charges when he's arraigned later this morning. But this is just one of those stories, if you wrote it as a script, you know, the Hollywood producers would say that is too outrageous but this is happening.

HILL: Right. Often real life is stranger than fiction, as we know. All right, Christine, I appreciate it.

We're getting some new accounts this morning from folks who survived tornados overnight. Of course, most concerning when they happen overnight. We're talking about these in Texas and Oklahoma.

SCIUTTO: This storm is incredible because there is a lot of snow, it's also a lot of tornados. And the threat of more tornados expected to increase as this storm continues to move east. You are looking at damage from Wayne, Oklahoma, where a reported tornado tore apart homes, toppled trees. This is about three hours south, also of Parker County, Texas. Here is what one man told our affiliate KTVT about the damage in his neighborhood.

(BEGIN VIDEO CLIP) MICHAEL LOPEZ, WITNESSED TORNADO: I literally opened the door to go and look outside.

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And I noticed the tornado was literally passing right next to us. So, I got my phone out. I decided to film it. And I saw all of the power lines exploding and everything and after that it happened. All of the cars passing by on the road started to stop. So, I decided to come and check on my neighbors and my front neighbors. So, whenever I came out here, yes, I just noticed everything was destroyed.

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SCIUTTO: Goodness. I mean, looking at that picture, there is metal wrapped around the tree. It gives you a sense of the force of the wind.

CNN's Ed Lavendera, you may remember, he is at the airport in Dallas, where they just lifted a shelter-in-place order due to a tornado warning. We also have Chad Myers tracking the storm.

Ed, first to you. Has the threat passed there?

ED LAVANDERA, CNN SENIOR NATIONAL CORRESPONDENT: Yes. Actually, just a few moments ago, officials here at airport at DFW International Airport lifted that severe weather emergency. The alarms have been blaring here for almost an hour. Everyone urged to stay away from the windows as this line of severe weather blew through this area. And the airport sits half way between Fort Worth and Dallas. And this is a system that has spawned a number of tornados west of where we are. So, that threat here was very real. And it blew through very quickly.

Just a few moments ago, you could barely see out of the windows and see the planes out there on the tarmac. It got so dark here. But that storm system has moved through the area. Officials here at the airport now saying that the severe weather emergency here at the airport location has lifted but there are still a number of severe weather emergencies and warnings around the Dallas-Fort Worth of North Texas area, as well as a number of tornado warnings as well.

So, this line of storms continues to move through here and it has caused some damage in areas around North Texas. But just to give you a sense of how quickly things are moving through here, our flight, which has been delayed, is already now starting to board. Jim and Erica, back to you.

HILL: And we're going to -- so we should let you get on that flight, my friend. I appreciate the update, though. Ed Lavendera there live for us from the airport.

Chad, what else is this system bringing, not only to areas of Texas but to the rest of the country?

CHAD MYERS, CNN METEOROLOGIST: Absolutely. Snow to the north, blizzard warnings, some lightning in Nebraska, which is on the back side, which is an either ice and sleet event there, so thunder sleet and then snow and blizzard conditions to the west of that.

Here is Dallas. Here is Ed Lavendera right there. And the tornado that he was talking about was a small tornado but it did make damage at the Sam's Club at 26th and 114th, moved about a mile just to the northwest of that airport. The bigger storm that had all of the damage that we were showing you in Parker County, that was to the west here, quite a few miles near Decatur, Texas.

But this is a mess. Dallas, you're about to get it with this severe thunderstorm warning here, severe thunderstorm warning here. We don't have rotation at this point but these storms have been rotating. So, do not let your guard down. When you get the warning on your phone or you just stay away from windows, anyway, get to your safe place until this is all gone. You have got 45 minutes and this literally is over. Still a tornado watch, in effect, so these storms could spin.

When they get closer to where our Derek Van Dam is right here later in the day, right there through Shreveport, that is where we are going to see the storms possibly even after dark. Days are very short this time of the year so we don't get a lot of light in the afternoon.

There is the snowstorm. Here is the ice. And then this is the severe weather on the tail end of this storm. There is your blizzard warning. And it is a blizzard. I guarantee it. 39-mile-per-hour at Scottsbluff, 46 in Sidney, 46 in Rapid City. Look at the visibilities. The visibilities are in a quarter mile range, a quarter mile in Sidney, a quarter mile in Akron. Interstates are closed here. Things aren't moving at all because of this almost zero visibility at times. So, lots going on, big storm moving to the east.

HILL: Yes, certainly keeping you busy.

SCIUTTO: It is a big storm. You might call it a perfect storm. Not in a good way.

Chad Myers, Ed Lavendera boarded a flight, thanks so much to both of you.

HILL: Any minute now, President Biden is set to speak on the heels of this positive inflation report. We're standing by for those remarks. We'll bring them to you live.

Plus, lawmakers scrambling to reach an agreement to fund the government before that looming shutdown. The deadline, of course, is the end of this week. We'll take you live to Capitol Hill.

SCIUTTO: Yes, just for a week. That's as much as they're going to manage.

And later, for the first time in history, U.S. scientists produced a nuclear fusion reaction resulting in a net energy gain. What does this all mean? Well, there is talk here of a virtually limitless green energy supply. It is a long way off, but, man, this is a big step. We'll talk about it more.

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SCIUTTO: Today, President Biden will host a ceremony at the White House where he's expected to sign what is known as the Respect for Marriage Act. That bipartisan bill protects the rights for Americans in same-sex and interracial marriages.

HILL: CNN Senior White House Correspondent M.J. Lee joining us now. The president also now going to speak about that inflation report any minute.

M.J. LEE, CNN SENIOR WHITE HOUSE CORRESPONDENT: That is right. We are waiting for the president to take the podium any minute now to talk about the latest inflation data. We'll bring that to you as soon as he begins speaking.

But let's talk about the same-sex marriage bill that he's going to be signing into law later this afternoon. Obviously, this is going to be such a historic moment for the country, but it is also noting how significant this is in terms of the personal evolution for President Biden on this issue over the decades. Just keep in mind that as senator, he had voted to reject federal recognition of same-sex marriage. He had said for years that marriage should be between a man and a woman.

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And then there was this moment from May of 2012 when Vice President Joe Biden said this and surprised many across the country.

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UNIDENTIFIED MALE: You're comfortable with same-sex marriage now?

JOE BIDEN, U.S. PRESIDENT: Look, I am vice president of the United States of America. The president sets the policy. I am absolutely comfortable with the fact that men marrying men, women marrying women and heterosexual, men and women marrying, are entitled to the same exact rights, all of the civil rights, all of the civil liberties.

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LEE: Now, I know that in the year 2022, this might sound like nothing. But just keep in mind just what a big moment this was ten years ago when Biden said this. He was expressing support for same-sex marriage publicly for the first time in that interview. He also got ahead, remember, of then-President Barack Obama sort of forcing him to come out and take the same position a few days later and really was seen as this watershed moment in modern American politics around the issue of same-sex marriage.

So, just worth keeping that context in mind as we watch the president sign this into law. We do expect this to be a big and celebratory event on the south lawn with thousands of guests that were invited to attend this event. Guys? SCIUTTO: Yes. I believe at the time Obama said that Biden got over his skis on that issue and then you think all you have to do is go back to 1996 when there was bipartisan legislation pass to define marriages only between a man and a woman. The stories move quickly. M.J. Lee, thanks so much.

HILL: Well, with just four days now to act, don't worry, we're keeping track for you, lawmakers on Capitol Hill are expected to pass a short-term extension before government funding runs out on Friday. The one-week stop gap bill would give negotiators more time to try to secure a broader full year funding deal.

SCIUTTO: CNN Chief Congressional Correspondent Manu Raju joins us now. As you know, Manu, you've covered this a million times. This has become a yearly ritual here. So, they're going to get a week here, it looks like. Is that week going to be enough to negotiate a longer term deal?

MANU RAJU, CNN CHIEF CONGRESSIONAL CORRESPONDENT: It is really an open question here, still, Jim. They do expect to pass the week-long stopgap measure in the House. They will have to pass the Senate by the end of the week. They will need cooperation from all 100 senators to schedule a vote, and still uncertain exactly the timing of that. But then that would give more time for negotiations to reach a large scale funding agreement, something they've been haggling over for the past several months and that they're nowhere near and well past the initial deadline of September 30th to try to get a deal by sometime next week.

Now, the concern among Democrats and some Republicans is that they don't get a deal now, it will be kicked into the new Congress with a narrowly divided House and also a narrowly divided Senate and force them to get a deal. That is something that Senator Dick Durbin, the number two Democrat, warned about earlier this morning.

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RAJU: Senator McConnell has been threatening that this could go into next year. I'm wondering how concerned you are if there is a continuing resolution that kicks it to the divided Congress and the new Republican majority.

SEN. DICK DURBIN (D-IL): That would just invite more negotiating and obstruction. We're long overdue. This fiscal year began October 1st. Let's get this job done this year and do it before Christmas.

RAJU: Are you worried that it could lead to a potential shutdown if that happens?

DURBIN: Listen, why tempt fate? Let's do our job and get it done quickly.

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RAJU: And in a sign of the challenges ahead, if it does get kicked into next year, Kevin mc McCarthy, who wants to be the next speaker of the House, said he's, quote, a hell no on voting for this bill when he met behind closed doors with House Republicans today, even as Senate Republicans are trying to get a deal on this. That is where the Republican leadership in the House is. So, they'll have to resolve all of those differences if it does get kicked into next year, the Republicans are in charge. Jim and Erica?

HILL: Manu Raju live for us on the Hill, I appreciate it, my friend, thank you.

Still to come here, a nuclear energy breakthrough this hour, the Department of Energy making the announcement. This is a massive step in the quest to unleash in an infinite source of clean energy. So, just how soon could that happen? Stay with us.

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[10:25:00]

SCIUTTO: So, this could be really important. Energy Secretary Jennifer Granholm just announced a breakthrough that could change the way we power everything. For the first time in history, U.S. scientists have successfully produced a nuclear fusion reaction gaining energy. That is getting more energy out than the energy they put in.

HILL: So, there is a lot of excitement here because it could potentially impact the nation's dependence on fossil fuels.

CNN's Rene Marsh joining us with more, including the layman's version of this, Rene.

RENE MARSH, CNN CORRESPONDENT: Yes, we all need the layman's version. Well, the layman version, to put it in Department of Energy's Secretary Jennifer Granholm's own words is, she quoted the president and said this is a BFD. So, this is a big deal today, not just in the scientific community but also just for mankind. Because as you guys just hit on at the top, it is a game-changer for the way we consume energy, it is a game changer for the way that we use energy.

So, what is she announcing today? We touched on this yesterday. We have a scientific breakthrough where they're using two hydrogen atoms and 192 lasers to fire upon the two hydrogen atoms to fuse them together. That process alone causes this energy. And that part sounds wonderful and interesting and very cool, but the breakthrough is that they were able to produce more energy on the output than they actually put into the process. And the reason why that is so important is if you're going to have a viable source of energy, you have to have more energy on the output than on the input for creating or generating that energy. And they were able to do this at a Department of Energy lab in California.

And the reason why this is so important is because this is no longer a hypothetical. This is now proving -- this discovery now proves that this is a viable energy source.

SCIUTTO: That is how the sun makes energy. It would be pretty cool if we could figure out how to do it down here on Earth. Rene Marsh, thanks so much. We'll keep following.

MARSH: Sure.

HILL: And joining us now to dig a little deeper, Dr. Michio Kaku, he's a professor of theoretical physics at the City University of New York. Always good to see you.

So, as Rene pointed for us there, the big breakthrough is that they made more energy in the output than there was in the input.

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In practical terms, how big is this when you look at it, what could it mean for us?