Close Menu
Crypto

SBF Trial Could Set Precedent For Crypto Industry

Delbert Williams IIBy No Comments6 Mins Read

[ad_1]

Former CEO Sam “SBF” Bankman-Fried was arrested by Bahamian authorities on December 12 after the collapse of major cryptocurrency exchange FTX in November 2022. Just one day after that he filed an indictment with the US Securities and Exchange Commission and the Commodity Futures Trading Commission. He went against him on charges of defrauding investors and violating securities laws.

On Dec. 22, Bankman-Fried was granted bail on the $250 million bond his parents paid for the home equity. The bail order added that he would require “rigorous pretrial supervision,” including mental health treatment and evaluation. 115 years imprisonment may be imposed.

Bankman-Fried has been under house arrest in his parents’ home in California since December 22, but has returned to New York for judicial questioning. Later, at a court hearing on January 3, he pleaded not guilty to all criminal charges related to the collapse of the cryptocurrency exchange. The charges included wire fraud, securities fraud and campaign finance violations.

Separate from Bankman-Fried, Caroline Ellison, former CEO of FTX’s bankrupt sister company, Alameda Research, and former FTX co-founder Gary Wang were slapped on fraud charges. The SEC alleged that Ellison manipulated the price of her FTX token (FTT). This manipulation was done by “buying in bulk on the open market to drive up prices” which was carried out from 2019 to 2022.

Ellison and Wang later pleaded guilty to fraud and were cooperating with the Justice Department’s investigation into Bankman-Fried. Ellison also took a plea bargain that she would be indicted for criminal tax violations.

Recent: Navigating the Crypto World: Tips to Avoid Scams

Doug Brooks, Senior Advisor at XinFin, told Cointelegraph that Ellison had already given evidence to prosecutors, suggesting she would be a strong witness in the case against Bankman-Fried. said there is. Brooks added:

“It is a common strategy for U.S. prosecutors in high-profile cases to build cases from the bottom up. Given that Ellison had already pleaded guilty and offered to cooperate after stating that she was “really sorry”, she was relatively unscathed. And it wouldn’t be surprising if she got away with less punishment for less charges — the evidence she provided against SBF is as explosive as we’d already expected. ”

With the involvement of US authorities and Bankman-Fried’s arrest, many FTX users and investors were hoping there would be concrete actions and plans to get some of their funds back. bail, his plea of ​​not guilty, and Ellison’s plea bargain have raised questions in the minds of many. However, Richard Mico, chief legal officer of crypto infrastructure service provider Banxa, told Cointelegraph that prosecutors are very serious about his Bankman-Fried.

“The amount of bail he had to post — a staggering $250 million — alone shows just how badly the prosecutors are in trouble with this case. Authorities do not shield Sam from potential consequences: both the CFTC and the SEC filed civil lawsuits against him, even though the SBF had settled with regulators before he was ousted. rice field.”

Noting that there is mounting evidence that SBF mismanaged client funds, Mico said, “It’s unfortunate that SBF has been released on bail, but the crypto community will see justice in the end.” I am convinced.”

Cryptocurrency community confused by movement of funds

Days after Bankman-Fried was released on bail, investor uncertainty grew when Alameda-linked wallets began raking in millions of dollars. A total of $1.7 million was moved, but what raised many eyebrows was how these deals were made. Funds were routed using decentralized exchanges and mixer services, obscuring the origin of transactions.

Some of these funds were later reportedly traced back to Bankman-Fried himself. He allegedly cashed out $684,000 of his cryptocurrency on a Seychelles exchange during his house arrest, according to an on-chain investigation by his BowTiedIguana, a decentralized finance educator.

According to BowTiedIguana’s analysis, on December 28, Bankman-Fried’s public Ethereum address sent all remaining Ethereum (ETH) to the newly created address. BowTiedIguana claimed that SBF agreed to take over the address formerly owned by his SushiSwap creator, Chef Nomi, in August 2020.

Within hours, the new address received transfers totaling $367,000 from 32 addresses identified as Alameda Research wallets, with an additional $322,000 coming from other wallets. All funds were sent to the Seychelles crypto exchange and crypto bridge RenBridge.

Richard Gardner, CEO of fintech infrastructure firm Modulus, told Cointelegraph that the post-bail events should have been taken into account, explaining:

“He was the very definition of escape risk, and bail should have been a non-starter. I think there is an overwhelming sense that the public wants justice for the FTX debacle. But his political friends may help him weigh the scales. I can’t.”

As rumors spread that Bankman-Fried was behind the money transfer, the former CEO tweeted that he had nothing to do with it.

Will the FTX incident set a precedent for the cryptocurrency ecosystem?

Bankman-Fried will face a four-week trial starting October 2nd, and the outcome could have a lasting impact on the crypto ecosystem. A trial focused on one of the largest cryptocurrency exchanges at the time could be a defining moment, at least for centralized entities and service providers.

Some observers believe Bankman-Fried’s desire to help himself rather than prioritize the goals of the crypto community, combined with leverage over him, makes him the perfect puppet for prosecutors. I’m here.

Recent: Aftermath of LBRY: Consequences of Cryptocurrency’s Ongoing Regulatory Process

Ari Redbord, head of legal and government affairs at digital asset risk management firm TRM Labs, told Cointelegraph that FTX represents a failure of centralized institutions, not cryptocurrencies, stating: explained.

“For FTX, it is important to remember that this is about corporate fraud and corporate misconduct, not cryptocurrency. It’s similar: the fraud here is not on the blockchain, but in opaque centralized financial institutions, and it’s important to separate the technology from the business.”

RA Wilson, chief technology officer of crypto exchange 1GCX, told Cointelegraph about the possible impact of Bankman-Fried’s indictment, saying FTX’s impact only affects centralized organizations. But it will start a slippery slope that sets a precedent for future regulations.

“In the best-case scenario, regulation would be held back for as long as possible in favor of the free market and only applied to truly protect investors. In practice, I think that scenario probably doesn’t apply, given that we’ve been looking for avenues to acquire .”