Bankman-Fried Allegations Remain Unconnected to Lack of United States Crypto Laws, DOJ Explains

4 October 2023, Wednesday
Bankman-Fried Allegations Remain Unconnected to Lack of United States Crypto Laws, DOJ Explains

The Department of Justice Stands Firm in Fraud Charges Against FTX Founder


The Department of Justice (DOJ) has stated that the absence of clear regulations in the United States regarding cryptocurrency does not prevent them from pursuing fraud charges against Sam Bankman-Fried, the founder of FTX. Bankman-Fried’s trial began on Tuesday, and he has pleaded not guilty to allegations of misappropriating customer funds from FTX.


Legal Arguments


Lawyers from both sides are currently debating the admissibility of evidence for the jury. Bankman-Fried and the prosecutors are at odds over whether the regulatory status of crypto exchanges is relevant to the case. The DOJ argues that the absence of regulation does not impact whether money was entrusted to Bankman-Fried by his victims. They assert that existing criminal laws are sufficient to address the charges against him.


The prosecutors also reject Bankman-Fried’s claim that pooling and reallocating customer funds was a common practice in the crypto industry at the time. They argue that this defense only holds if he believed the practice was lawful.


Consideration of Philanthropy and Charity Work


The DOJ acknowledges that Bankman-Fried can present his philanthropy and charity work to the jury. However, he must first discuss his plans with the court to ensure that he is not attempting to manipulate his character portrayal.


Congress’s Failure to Regulate Crypto


The lack of specific regulations for cryptocurrencies has been a contentious issue in the industry. Without tailored laws, federal regulators have argued that crypto should be treated like traditional securities trading. However, major players in the industry, such as Ripple, Binance, and Coinbase, oppose this legal claim.


Handling of Allegations


The government clarified its approach to allegations that Bankman-Fried orchestrated illegitimate and indirect donations to political candidates. These allegations were not included in the original extradition deal with the Bahamas, where Bankman-Fried was arrested. The DOJ stated that they will not argue that this straw donor scheme is unlawful under election laws. Instead, they will use this topic to demonstrate that Bankman-Fried spent the funds in a manner inconsistent with his representations to customers and took steps to conceal his actions.