Luc Cohen and Chris Prentice
NEW YORK (Reuters) – When he takes over as Manhattan’s top federal prosecutor in late 2021, Damien Williams has promised his priority will be “to eradicate corruption in the financial markets.”
Fraud charges filed earlier this week against bankrupt FTX exchange founder Sam Bankman-Fried, according to interviews with six former prosecutors, have led Williams to a cryptocurrency-related arsenal. He further cemented his office’s expanded role in prosecuting financial crimes committed against the United States.
“All U.S. attorneys are defined in the public eye by some of the biggest cases they bring,” said Harry Sandick, a partner at law firm Patterson Belknap and former Manhattan federal prosecutor. This will forever connect us with our current U.S. Attorney.”
Indictment against Bankman-Fried charged with using billions of dollars of stolen client money to buy properties, pay debts to his hedge fund Alameda Research, and donate to political campaigns ranks Williams as the main enemy of prominent entrepreneurs. Its downfall drew public attention and led to calls for greater regulation of cryptocurrency platforms.
Bankman-Fried, 30, has admitted to failing to manage risk at FTX but holds no criminal charges. His attorney said he was evaluating his legal options. On Tuesday, a Bahamas judge ordered him to be detained there while he challenged a U.S. extradition request.
Williams led the Securities and Commodities Task Force for the Southern District of New York (SDNY) before being named the district’s chief prosecutor by President Joe Biden. SDNY’s first black U.S. attorney, Williams earned a law degree from Yale University and served as clerk to former Supreme Court Justice John Paul Stevens and current Attorney General Merrick Garland when they were appellate judges. served.
Earlier this year, Williams filed the first ever insider trading lawsuit involving digital assets, accusing a former employee of irreplaceable token trading platform OpenSea and a former product manager of FTX rival Coinbase Global Inc. indicted.
Both defendants have pleaded not guilty.
The SDNY has long been known as one of the strongest enforcers of financial crimes, and some former prosecutors have accused Williams of a series of crypto-related indictments, having served as U.S. Attorney from 2009 to 2017. We compared it to one focused on insider trading by protected Preet Bharara. Fund his manager convictions such as Raj Rajaratnam.
Williams served as prosecutor in several high-profile financial crime cases during Barrara’s tenure. This includes the insider trading conviction of former Goldman Sachs director Rajat Gupta and the fraud conviction of his former portfolio manager at Visium Asset Management LP.
“Cryptocurrency is a western, but a scam is a scam after all,” said Mike Ferrara, a former prosecutor and now an attorney at Kaplan Hecker & Fink LLP in New York. “Damien does a good job of saying, ‘We’re going to push the boundaries of cryptocurrency,’ just as Priet was active in insider trading.”
A spokesman for Williams’ office declined to comment.
“Come see us before we come see you”
Pursuing cryptocurrency-related prosecutions is not without its challenges. Defense attorneys say the field is relatively new and the question of how it will be regulated has not yet been resolved, so clients should be aware of how the laws created for traditional finance apply. It may be argued that it is not clear whether
“Governments are having trouble understanding and clarifying what industry participants should do,” said Ellis Meisel, a New York University law school professor and former white-collar attorney. In criminal cases, they often regulate through enforcement.”
In one of the prosecution’s setbacks, the three former founders of cryptocurrency exchange Bitmex and its first employee, Williams’ predecessor, pleaded guilty to charges of failing to establish an anti-money laundering program. ) was given a lighter sentence than prosecutors demanded earlier this year.
The judge in that case said that although the crime was serious, prosecutors had not filed more serious charges of money laundering or fraud, and there were no identifiable victims.
Indeed, Williams’ office has also pursued more traditional financial crime cases, with the founder of Archigos Capital Management earlier this year accused of lying to a bank to obtain a loan before the company’s demise. Indicted, even against the former chief investment officer. A unit of Allianz SE in Germany to inflate the fund’s performance.
Both pleaded not guilty.
Following Bankman-Fried’s arrest, Williams has revealed that he will work on cryptocurrency enforcement. On Wednesday, he announced conspiracy charges in wire fraud against the founders of two separate cryptocurrency mining and trading firms called Ponzi schemes.
Five persons indicted in one case have pleaded not guilty, while three in the other case have not yet filed charges.
Williams told reporters on Tuesday that the FTX investigation could lead to more charges.
“This investigation is very ongoing and moving very quickly,” Williams said. We strongly recommend that you come see us before we meet you.”
(Reporting by Luc Cohen and Chris Prentice in New York; Editing by Noeleen Walder, Amy Stevens and Matthew Lewis)