NEW YORK (Reuters) – Sam Bankman-Fried said: fraud Like other high-profile defendants in criminal cases involving digital assets, lawsuits should be thrown against him due to uncertainty about how US law will treat cryptocurrencies.
That’s because Manhattan federal prosecutors’ indictment against the founder of bankrupt crypto exchange FTX largely sidestepped the ongoing debate over whether cryptocurrencies should be regulated as securities or commodities, legal experts say. told Reuters.
Bankman-Fried, 30, was accused last month of stealing FTX customer deposits to pay a debt from his hedge fund, Alameda Research, and lying to equity investors about FTX’s financial health. He was indicted in Manhattan federal court on wire fraud and six counts of conspiracy. He pleaded not guilty.
“It’s a pretty simple deception,” said Shane Stansbury, a Duke University Law School professor and former Manhattan federal prosecutor. “We don’t have to get into the weeds of how we look at cryptocurrencies.”
The question of whether cryptocurrencies are considered securities, such as stocks and bonds, or commodities (in the United States, a category that encapsulates foreign exchange or raw materials such as crude oil) has largely been resolved. not yet.
But this uncertainty is irrelevant to most of the charges against Bankman-Fried, according to experts. He faces one count of his for conspiracy to commit securities fraud, which alleges he deceived investors in his FTX stock, which is traded on the exchange. It does not address the nature of assets.
He also faces two wire fraud charges and two related conspiracy charges for allegedly providing false information to Alameda lenders about the financial health of the hedge fund, and for allegedly theft of client assets.
“You don’t have to prove that what the client ultimately purchased with fiat currency was a security, commodity, or whatever,” said Mark Kasten, an attorney at Buchanan, Ingersoll & Rooney in Philadelphia. “Customers put money into the platform and that money was to be used in certain ways, which the indictment alleges was not.”
A spokesman for the federal attorney’s office in Manhattan declined to comment.
Bankman-Fried’s legal team did not respond to a request for comment. The former billionaire has previously acknowledged shortcomings in FTX’s risk management practices, but believes there is no criminal liability.
Debates May Determine Regulation
U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler has said that while Bitcoin is a commodity, other digital assets behave like securities.
This debate is important for cryptocurrency companies as it may determine the bodies that regulate the trading of digital assets. The US Commodity Futures Trading Commission (CFTC) is seen by many cryptocurrency players as potentially friendlier than the more well-funded SEC.
San Francisco-based blockchain payment company Ripple Disputing the 2020 SEC Litigation It accuses it of conducting an unregistered securities offering, arguing that the XRP token is not a security and therefore not subject to SEC oversight. Lawsuits are ongoing.
Damien Williams, Manhattan’s top federal prosecutor, who took office in 2021, will seek to enforce cryptocurrency-related financial crimes. highlights of his tenure.
Last year, in the first-ever insider trading case involving digital assets, his office Nathaniel Chastaina former employee of non-fungible token (NFT) marketplace OpenSea, and Ishan WahiFormer Manager of Cryptocurrency Exchange Coinbase Global Inc (COIN.O).
Both pleaded not guilty and argued that the charges should be dismissed because insider trading charges must involve securities or commodities. , prosecutors avoided taking a position on how cryptocurrencies or NFTs should be classified.
A judge denied Chastain’s attorneys’ motion to dismiss the charges in October.
Bankman-Fried’s lawyers are unlikely to attempt a similar allegation, Kasten said.
He said the Massachusetts Institute of Technology (MIT) graduate’s defense alleges that he had no intention of committing fraud, that other FTX and Alameda executives were responsible, and that he was involved in his daily life. He said it would likely focus on the argument that there wasn’t. company’s day-to-day business.
But prosecutors can also prove wire fraud guilt by establishing that a defendant willfully blinded the consequences of his or her actions, said Cleary Gottlieb’s partner and former Manhattan federal prosecutor. Official Victor Hou said.
“Telegraphic fraud captures such a wide range of illegal activity that it is a powerful and frequently used weapon in the prosecutor’s arsenal,” Hou said.
Reported by Luc Cohen, New York.Edited by Daniel Wallis
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