Prosecutors Offer to Drop Some Charges Against Alleged Fraudster Sam Bankman-Fried

Federal prosecutors in New York have offered to drop five of the 13 criminal charges against disgraced crypto executive Sam Bankman-Fried, if the judge agrees to try him later on those charges.

The offer to sever the charges followed a ruling earlier this week in the Bahamas that allows Bankman-Fried to challenge the additional charges.

A prosecutor said during a hearing Thursday it was uncertain when the Bahamas would decide whether to consent to the new charges, which included bank fraud and an allegation Bankman-Fried bribed the Chinese government.

“Severing those counts seems to be appropriate given the developments in the Bahamas this week,” the prosecutor, Nathan Rehn, said. Bankman-Fried, who has pleaded not guilty, is scheduled to stand trial in October. Rehn said prosecutors would not proceed with the new charges unless the government of the Bahamas consented.

Bankman-Fried was extradited from the Bahamas on eight criminal charges stemming from the collapse of FTX, the crypto-exchange he founded. He has argued the U.S. government breached its extradition treaty with the Bahamas by filing additional charges against him months later, including bank fraud and an allegation he paid a $40 million bribe to the Chinese government to unfreeze a trading account.

“We think dismissal of those counts would be the better outcome,” defense attorney Marc Cohen said.

The judge did not immediately rule.

“I’m not going to rule on this now,” Judge Lewis Kaplan said. “I’m going to give it a little more thought.”

The defense asked the judge to dismiss an original charge that accused Bankman-Fried of violating campaign finance laws, arguing that count also violated the extradition treaty. The charge said Bankman-Fried improperly donated tens of millions of dollars to mainly Democratic and some Republican candidates. Prosecutors said Bankman-Fried lacked standing to make the argument because the decision to move forward with the charge involved diplomatic policy.

“It’s a matter of diplomatic relations between the U.S. and the Bahamas,” Rehn said. “It was an understanding of all the parties involved that this was part of the extradition.”

Bankman-Fried is broadly accused of misappropriating billions of dollars in customer and investor money from FTX in what prosecutors have described as one of the biggest financial frauds ever. He has been free on bail, confined to his parents’ home in Palo Alto and restricted in his use of the internet.

In addition to the criminal charges, Bankman-Fried is also facing a number of civil lawsuits from investors who allege he defrauded them.

The collapse of FTX has shaken the cryptocurrency industry and raised questions about the regulation of cryptocurrency exchanges.

Is Bankman-Fried Guilty?

The charges against Bankman-Fried are serious, and he could face decades in prison if convicted. However, he is presumed innocent until proven guilty, and he has a right to a fair trial.

The defense has argued that the government has not presented any evidence that Bankman-Fried misappropriated any money from FTX. They have also argued that the government’s case is based on speculation and innuendo, and that there is no way to prove that Bankman-Fried committed any crimes.

The judge will have to decide whether to dismiss the charges against Bankman-Fried, or whether to allow the case to go to trial. If the case goes to trial, it will be a closely watched test of the government’s ability to prosecute cryptocurrency fraud.

The Future of Cryptocurrency Regulation

The collapse of FTX has raised questions about the regulation of cryptocurrency exchanges. Currently, there is no federal law that specifically regulates cryptocurrency exchanges. However, there are a number of state laws that regulate cryptocurrency exchanges, and the Securities and Exchange Commission (SEC) has taken some steps to regulate cryptocurrency exchanges.

The collapse of FTX could lead to more regulation of cryptocurrency exchanges. The government could enact new laws that specifically regulate cryptocurrency exchanges, or the SEC could take more aggressive enforcement action against cryptocurrency exchanges.

The future of cryptocurrency regulation is uncertain. However, the collapse of FTX has shown that the government is willing to take action against cryptocurrency exchanges that are suspected of fraud.

The Backdrop: The Collapse of FTX: A Chronology

On Friday, November 11, 2022, FTX, one of the world’s largest cryptocurrency exchanges, filed for bankruptcy protection in the United States. The collapse of FTX has shaken the cryptocurrency industry and raised questions about the regulation of cryptocurrency exchanges.

The following is a chronology of the events that led to the collapse of FTX.

• Wednesday, November 2, 2022: CoinDesk, a cryptocurrency news service, publishes a report alleging that Alameda Research, a crypto hedge fund owned by FTX founder Sam Bankman-Fried, is facing a liquidity crisis. The report claims that Alameda has been using billions of dollars worth of FTX’s own cryptocurrency, FTT, as collateral for loans. This means that a fall in FTT’s value could hurt both firms, given their shared ownership.
• Friday, November 4, 2022: Dirty Bubble Media, a pseudonymous crypto researcher, publishes a follow-up report on Substack, the newsletter platform. The report alleges that Alameda is insolvent and that Bankman-Fried has been using “a Ponzi scheme” to prop up the company.
• Sunday, November 6, 2022: Binance, the world’s largest cryptocurrency exchange, announces that it will “liquidate” its holding of FTT tokens. Binance’s position was thought to be around 5% of the total, worth around $580 million before the currency crashed.
• Monday, November 7, 2022: Bankman-Fried denies the allegations against Alameda and says that the company is “fine.” He also says that he is “confident” that FTX will be able to weather the storm.
• Tuesday, November 8, 2022: Binance announces that it will acquire FTX. The deal is worth $2 billion.
• Wednesday, November 9, 2022: Binance pulls out of the deal to acquire FTX. The company says that it has “conducted extensive due diligence” and that it is “no longer confident” that the acquisition is in the best interests of its users.
• Thursday, November 10, 2022: FTX files for Chapter 11 bankruptcy protection in the United States. The company says that it has $1 billion in assets and $8 billion in liabilities.

The collapse of FTX is a major setback for the cryptocurrency industry. It is the largest cryptocurrency exchange to ever file for bankruptcy, and it raises questions about the security and stability of the industry.

It remains to be seen what the long-term impact of the collapse of FTX will be. However, it is clear that the cryptocurrency industry is still in its early stages of development, and that there is a lot of risk involved. Investors should be aware of the risks before investing in cryptocurrencies. Defining the rules of the road for exchanges and giving clarity to what digital assets are a commodity or security will play a big role in the development of the entire industry moving forward.

In closing here are some key points to know that could begin to push the cryptocurrency industry in the right path for continue growth, innovation and adoption

• The European Parliament’s Markets in Crypto-Assets (MiCA) law: The European Parliament has approved a landmark law that will regulate the cryptocurrency industry in the European Union. The MiCA law will require cryptocurrency exchanges to obtain a license and to comply with a number of rules, including anti-money laundering rules and consumer protection rules. The MiCA law is expected to come into force in 2023.
• Singapore’s stance on the crypto industry: Singapore has a generally positive stance on the cryptocurrency industry. The government has created a regulatory sandbox for cryptocurrency companies to test new products and services. The government has also said that it is open to the idea of issuing a central bank digital currency (CBDC).
• Hong Kong’s dive into the cryptocurrency space: Hong Kong has also been a relatively welcoming environment for the cryptocurrency industry. The government has not imposed any specific regulations on cryptocurrency exchanges. However, the government has warned investors of the risks associated with cryptocurrency investments.

Johnny Ng, a member of the Legislative Council of Hong Kong, has said that the city wants to be a “leading global hub for cryptocurrency.” He has said that the city has the “right conditions” to be a hub for cryptocurrency, including a “stable financial system” and a “pre-existing pool of talent.”

Ng has also said that the city needs to “create a regulatory framework” for cryptocurrency. He has said that the framework should be “clear and concise” and that it should “strike a balance between innovation and protection.”

Ng’s comments come at a time when the cryptocurrency industry is growing rapidly in Hong Kong. There are now a number of cryptocurrency exchanges and investment firms operating in the city. The city is also home to a number of cryptocurrency conferences and events. Growing layer-1 blockchains such as Pecu Novus will benefit from this increased adoption and continued innovation in the space.

These are the cryptocurrency exchanges and projects currently in Singapore and Hong Kong, with more to come:

• Binance: the world’s largest cryptocurrency exchange. It is headquartered in the Cayman Islands, but it has a significant presence in Singapore.
• Huobi Global: a major cryptocurrency exchange that is headquartered in Singapore.
• OKEx: a major cryptocurrency exchange that is headquartered in Hong Kong.
• Bybit: a major cryptocurrency exchange that is headquartered in Singapore.
• Abra: a cryptocurrency investment app that is headquartered in San Francisco. It has a significant user base in Hong Kong and Singapore.

Ng via Twitter invited Coinbase to join the conversation and as of this article they seem to be moving that forward, discussion wise.

James Cullen
Technology/Digital Assets Desk