Sam Bankman-Fried’s case is a new version of the old one and it may start a change
A story about bank fraudsters: How Bankman-Fried found his innocence when FTX collapsed in November 1873 and the end of the Great Depression
There is a author and investigative journalist who is covering dark money networks and kleptocracy across the globe. He is a writer and the author of “American Kleptocracy: how the US created the World’s greatest Money Laundering Scheme in History.” He is also investigating foreign lobbying in Washington, DC. The opinions expressed in this article are his own. CNN has more opinion.
Officials say Bankman-Fried lied for years about the finances of FTX, a digital currency exchange which collapsed in November in one of the most spectacular financial implosions. Bankman-Fried is in the Bahamas, waiting for a chance to argue his innocence in the case of FTX.
It’s completely unsurprising that the entire debacle could have been foreseen. After all, this is hardly the first case of alleged fraud we’ve seen from a figure like Bankman-Fried. And, as opposed to what any lawyer would advise, SBF, as he is commonly known, didn’t remain silent. He went on an apology tour and spoke to reporters while he was in New York last month where he denied ever attempting to commit fraud on anyone.
These kinds of cases are very similar to traditional Ponzi schemes and American capitalism itself. They almost always pair a lack of regulation and oversight with promises of easy wealth schemes, all predicated on some kind of proprietary technology that seems to generate returns out of thin air.
You can look through American history and see the same thing time and time again. The American economy was destroyed in the initial Great Depression of 1873, when speculative investors operating without any oversight in the railroad industry caused a cascade of bank failures.
He presented himself as a cautious and conservative face of the chaotic industry when he claimed that FTX maintained a specific risk engine that would keep its finances healthy. But as one SEC official said, “That veneer wasn’t just thin, it was fraudulent.”
Bankman-Fried may be the same as his predecessors. Given the continued lack of regulation and oversight in the crypto industry, Bankman-Fried is not only a new version of an old story, but hopefully the start of long-overdue change in the industry, with the kinds of regulations and transparency needed to prevent other scammers, fraudsters and criminals from simply stepping in to replace Bankman-Fried.
Ms. Ellison and Mr. Wang contradicted Mr. Bankman-Fried’s defense. While Mr. Bankman-Fried has said repeatedly — including at the DealBook Summit last month — that he wasn’t aware of what was happening at Alameda, the exchange’s trading affiliate, documents filed yesterday by the authorities claim otherwise.
According to Acheson, the action against the issuer should be unsurprising because the SEC has said before that some stable coins should be considered securities. Acheson imagines the regulator will argue that stablecoins like BUSD, backed by their issuer’s holdings of established securities such as government and corporate bonds, are by extension securities themselves and must be regulated accordingly.
Stable coins are designed to keep their value in a specific range. Cash and bonds are used to anchor the token in circulation to the desired value.
Do crypto tokens really need to be securities? The case of Ripple, an XRP-based hedge fund with a public stake in the Southern District of New York
After more than two years of protracted legal conflict, all of the evidence has been heard, and there remains nothing left but for Judge Analisa Torres of the Southern District of New York to issue a verdict. Those with a stake in the outcome, which will reverberate throughout the crypto sector, have been attempting to divine when a judgment might land, based on the judge’s past ruling patterns. A resolution is only days away, according to some.
If the court rules that XRP is a security, it would follow that almost all other crypto tokens are too, making them subject to the SEC’s supervision. It would impose burdensome registration and reporting requirements on firms that trade in cryptocurrencies, as well as have legal consequences for entities that helped people to trade them without SEC approval. Even large US based exchanges may find themselves under scrutiny.
That, says defense lawyer John Deaton, who supplied expert testimony on the case on behalf of holders of XRP, would be “very bad news” for crypto businesses.
In the absence of legislation that makes clear the classification of crypto assets in the US, the question of whether they should be treated as securities has to be assessed on a case-by-case basis through the application of the Howey test. Under the test, an investment contract (in this context, a security) is defined as “an investment of money, in a common enterprise, with a reasonable expectation of profits, to be derived from the efforts of others.”
Although Ripple is not itself the issuer of XRP, which sits atop the open source XRP Ledger, some of its executives were part of the group that developed the token. The firm received around $30 billion in donations, 80 billion of which were given to develop use cases, in the early 2010s.
