Global Aspirations of Crypto Meet the Hard Reality of Law
The predicted legal mess over FTX has exploded in Global Clashes Over FTX Bankruptcy
- In Cyprus, the country’s securities regulator is complaining that Mr. Ray’s decision to place FTX in bankruptcy has stymied investigations and is preventing European customers from getting their money back.
- Officials in the Bahamas, where FTX moved its headquarters last year, are accusing Mr. Ray of making false statements and suggesting that his team is motivated by the prospects of earning hefty legal fees.
- On Nov. 10, the Securities Commission of the Bahamas began steps to liquidate FTX Digital Markets, the unit controlling the company’s international exchange. The liquidators later ordered the transfer of the unit’s crypto assets to a digital wallet controlled by the Bahamian government.
- In response to the Bahamas seizure, Mr. Ray lawyers effectively accused officials in the Bahamas of theft.
- In Turkey, authorities have seized the assets of FTX’s local subsidiary, an affront to Mr. Ray’s efforts to sweep FTX’s assets into the chapter 11 process in Delaware. Turkey found nearly $3.1 million in assets in FTX Turkey Teknoloji Ve Ticaret AS.
- The company’s initial bankruptcy petition listed more than 130 affiliates in countries ranging from Canada to Ghana to Japan.
Bankrupt BlockFi
BlockFi was one of the big causalities of the FTX bankruptcy as noted in BlockFi Bites the Dust, Hundreds of Thousands of Customer Assets Wiped Out
Hoot of the Day
Bankrupt BlockFi said it will focus its attention on getting assets from bankrupt FTX.
Bankman-Fried‘s Effort to Vindicate Himself
FTX founder Sam Bankman-Fried is on a whirlwind speaking tour seeking to vindicate himself.
Mr. Bankman-Fried has said he didn’t intend to commit any fraud, emphasis mine.
Mr. Bankman-Fried, speaking at the New York Times DealBook Summit in New York, denied knowingly commingling customer funds to back his crypto trading operation and tried to deflect some of the blame for FTX’s collapse away from himself, saying he was surprised at the size of Alameda’s bets that went wrong.
“I didn’t know exactly what was going on,” Mr. Bankman-Fried said via livestream from the Bahamas. “I learned a lot of these things as they were going on.”
Bankman-Fried’s Legal Defense Underway
Please consider Justice.Gov archives on Intent to Commit Fraud.
The government must prove that the defendant had the specific intent to defraud. See United States v. Diggs, 613 F.2d 988, 997 (D.C. Cir. 1979) (“Because only ‘a scheme to defraud’ and not actual fraud is required, proof of fraudulent intent is critical.”), cert. denied, 446 U.S. 982 (1980); see also United States v. Costanzo, 4 F.3d 658, 664 (8th Cir. 1993) (intent is an essential element, inquiry is whether defendants intended to defraud); United States v. Porcelli, 865 F.2d 1352, 1358 (2d Cir.) (specific intent requires intent to defraud, not intent to violate the statute), cert. denied, 493 U.S. 810 (1989); cf. United States v. Reid, 533 F.2d 1255, 1264 n. 34 (D.C. Cir. 1976) (“Proof that someone was actually defrauded is unnecessary simply because the critical element in a ‘scheme to defraud’ is ‘fraudulent intent,’ Durland v. United States, 161 U.S. 306 . . . (1896), and therefore the accused need not have succeeded in his scheme to be guilty of the crime.”); United States v. Bailey, 859 F.2d 1265, 1273 (7th Cir. 1988) (court held that there must be sufficient evidence that the defendant acted with intent to defraud, that is, “willful participation in [the] scheme with knowledge of its fraudulent nature and with intent that these illicit objectives be achieved.” (quoting United States v. Price, 623 F.2d 587, 591 (9th Cir. 1980), cert. denied, 449 U.S. 1016 (1980), overruled on other grounds by, United States v. DeBright, 730 F.2d 1255 (9th Cir. 1984)), cert denied, 488 U.S. 1010 (1989).
Sam Bankman-Fried’s Defense Underway
By stressing lack of intent, it’s pretty clear SBF’s legal defense is underway.
However, if you read the above paragraph carefully, it does not really apply. The rulings say someone can be convicted of fraud based on intent even if the fraudulent attempt was unsuccessful.
Lack of Intent Can Still Result in a Conviction
Instead, please consider Lack of Intent Can Still Result in a Conviction
When a defrauding a bank occurs, the person does not need to intend to actually cause this to occur. This may lead to anyone involved to include someone with no knowledge of what he or she becomes entangled in to face charges of bank fraud.
That paragraph pertains to defrauding a bank. I suspect it might apply if any bank lost money in this mess.
Gross Negligence
Gross negligence is a heightened degree of negligence representing an extreme departure from the ordinary standard of care. Falling between intent to do wrongful harm and ordinary negligence, gross negligence is defined as willful, wanton, and reckless conduct affecting the life or property or another.
Even if fraud is not in play, Gross Negligence might be.
The problem is gross negligence penalties typically are financial. SBF is bankrupt.
Investigators have their work cut out for them unless this next item does him in.
SBF’s $16.4M Bahamas House in Mom’s Name
The New York Post reports Sam Bankman-Fried said Parents’ $16.4M Bahamas House was Meant for FTX Staff.
Sam Bankman-Fried claimed he didn’t know how a $16.4 million Bahamas mansion got listed under his parents’ names, insisting that it was meant to house staffers at his now-defunct FTX cryptocurrency exchange.
“I don’t know the details of the house for my parents,” Bankman-Fried told the New York Times’ Andrew Ross Sorkin via Zoom at the newspaper’s DealBook summit event in New York City on Wednesday.
Summarizing SBF’s Defense
I Know Nothing, I See Nothing.
Meet Queen Caroline and Other Characters in the Stunning Collapse of FTX
For more background on the FTX mess, please see my November 19 column, Meet Queen Caroline and Other Characters in the Stunning Collapse of FTX
My call at the time looks pretty good. “Whatever remains of the FTX mess, if anything, the attorneys handling the bankruptcy claims will get it all.”
Meanwhile, it remains to be seen how far the “I know nothing” defense goes. The most damaging evidence is a title of a house in SBF’s parent’s name.
“I don’t know how it got there.” Yeah, right.
This post originated at MishTalk.Com.
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