23 Burst results for "Carolyn Ellison"

"carolyn ellison" Discussed on CoinDesk Podcast Network

CoinDesk Podcast Network

04:43 min | 3 d ago

"carolyn ellison" Discussed on CoinDesk Podcast Network

"Looking to venture into the world of stablecoins? Explore the open source Stablecoin Studio Toolkit on Hedera. Whether you're building the next big thing in Web3 or an enterprise banking and payment provider, Stablecoin Studio simplifies stablecoin issuance and management, keeping you at the forefront of on-chain finance. With seamless integration into commercial custody providers and KYC services and built in proof of reserve functionality, Stablecoin Studio streamlines development and time to market. Harness the power of stablecoins by visiting Hedera.com slash Unchained. Back to my conversation with Nick. Recently, the defense did propose a number of witnesses, but the judge denied most of them. Who were these proposed witnesses and why were they denied? Yeah, so the DOJ and defense both had a number of proposed expert witnesses. The defense in particular had a number of individuals that they said could speak to everything from the terms of service that FTX operated under, to the FTX software, to just rebutting certain DOJ witnesses. The judge basically said he agreed with the DOJ in rejecting all of these proposed witnesses. There were seven. He did allow the defense to call for four of them later on, but they have to meet certain requirements and fill out certain disclosure forms first. A big part of the judge's reasoning was the witnesses had just not adequately explained what they wanted to testify about or what they would say. And so they didn't have or he didn't have enough information to allow them to testify, which was functionally the DOJ's argument as well. That being said, some of these proposed witnesses are intended to act as rebuttal witnesses to DOJ's witnesses. I know we're saying the word witnesses a lot, but that's what it comes down to is four of these witnesses could come back and respond to, you know, either FTX inner circle members who are testifying on behalf of the DOJ. One of the potential witnesses that the defense can call forward is someone who can speak to the actual technical software underlying the, you know, FTX program. Again, in response to DOJ witnesses, the judge did completely ban, for example, a British barrister who was supposed to explain the FTX terms of service, as well as someone who is supposed to speak to kind of the crypto industry at large, saying that, you know, those witnesses and that proposed testimony seemed a bit too far afield from what the case would be about and could probably do more to confuse the jury than to clarify anything. And SPF's team also wanted to block a proposed government witness that was also denied. Who was that? And why did the judge deny that motion? The DOJ proposed a University of Notre Dame professor to testify about some forensic analysis he did on FTX financials. The defense objected. They said that this witness would basically just reiterate the DOJ's claims, the allegations, but the DOJ argued that he was doing his own analysis of the data he had access to. And so it wouldn't just be stating the DOJ's claim. He would be providing his own expert insight based on his own work, you know, examining the databases that he had access to. And the judge agreed with that and said that based on what he'd saw and based on what the witness disclosure had provided, the witness was likely just speaking to his own expertise and looking at the actual data as a third party expert witness might do. And so that, you know, those witnesses are allowed right now. We're still waiting on the full and final witness list, but we now know that there are probably at least a dozen witnesses that we're going to hear from over the next six weeks. And who are the ones that stick out to you on that list? I think the cooperating witnesses. So the FTX inner circle, that's former Alameda Research CEO, Carolyn Ellison, former FTX director of engineering Nishant Singh and Gary Wang. I forget which one of them was the director of engineering. The other one was a fellow executive, but you know, these are the three individuals. I think we're going to hear from probably first, maybe might hear from them as soon as next week. If not, certainly the week after they're the ones who were in it, right. They were involved in this. They were part of FTX. They were part of the highs. I think we're going to probably hear from them, you know, how FTX might've fallen apart. I know from court filings, we know that DOJ wants to ask Carolyn Ellison about the FTT token and allegations that Sandbank & Freed was directly involved in trying to, you know, argue for Alameda to take a large sum of it and to potentially allegedly manipulate the price. So I think that testimony is going to be really interesting just because, again, it's the firsthand account of what happened. We're also probably going to see the defense try and discredit these witnesses to the extent possible, right. Straight out of the gate saying, well, you know, you weren't threatened with jail if you didn't testify and turn against your former boss.

"carolyn ellison" Discussed on Unchained

Unchained

24:11 min | 3 d ago

"carolyn ellison" Discussed on Unchained

"Even though each of these charges, if you look at the DOJ press release says, oh, it contains a maximum sentence of 20 years or five years, whatever, it's not going to be consecutive. It'll be concurrent. So the estimate I'm getting from various attorneys that I've spoken to over the past few weeks is it'll probably be somewhere in the, you know, 10 to 20 year range. Hi everyone. Welcome to Unchained, your no hype resource for all things crypto. I'm your host, Laura Shin, author of The Cryptopians. I started covering crypto eight years ago, and as a senior editor at Forbes was the first mainstream media reporter to cover cryptocurrency full time. This is the September 29th, 2023 episode of Unchained. Thinking of launching your own stable coin? Start with the open source stable coin studio toolkit on Hedera. Start your journey at Hedera.com slash Unchained. Shape tomorrow today. With the crypto.com app, you can buy, trade and spend crypto in one place. Download and get $25 with the code Laura. Link in the description. Arbitrum's leading layer two scaling solution offers you ultra cheap and lightning fast transactions, all with security rooted on Ethereum. Visit arbitrum.io today. Toku makes implementing global token compensation and incentive awards simple. With Toku, you get unmatched legal and tax tech support to grant and administer your global team's tokens. Make it simple today with Toku. Today's guest is Nick Day, Coindesk's managing editor for global policy and regulation. Welcome, Nick. Thanks for having me. The trial for former FTX CEO Sam Bankman-Fried starts next Tuesday, October 3rd. There's been a lot happening pre-trial. For instance, Sam has requested release from jail multiple times and repeatedly been denied, including as recently as Thursday morning. My personal thought was that it seemed like all these requests that the defense was putting in at this critical juncture right before the trial was supposed to begin was maybe not the best use of their time, but that's just my personal opinion. I'm not a lawyer. Why do you think they made this such a point of focus in the last few days? Yeah, so I'm actually coming, you know, I was in the courthouse just a few hours ago where this very issue was brought up and the defense's arguments were, well, the first time we asked, it was for pre-trial release. You know, this was right after Bankman-Fried was remanded into custody in mid-August. The second time was, you know, they were asking the appeals court to overrule the judge's decision to remand him. And they lost that as well. In court today, the defense said, well, you know, now we want to ask for during trial, which is why we waited until this week to make that request. And they say that they want to, you know, the circumstances are different. They're not asking for Bankman-Fried to be released from jail in the weeks leading up to trial. Now they're saying, well, you know, during the trial, we're going to have to talk to him and check with him about defense witness testimony and cross-examination and things like that. So that's why we're making this request. And the judge didn't really find that compelling. And why do you think the judge has stuck to this position of keeping Bankman-Fried in jail? So in the judge's words, there's a couple of different reasons. One being that Bankman-Fried has had ample time to look at the defense materials. You know, one of the arguments was there are something like 1300 exhibits expected over the course of the trial. And the judge asked today, you know, were these all prepared and shared with you before, I think he said September 8th, so earlier this month. And the defense, they said, yes, we've seen all of this. We've had access to all of this. Bankman-Fried was out on bail for about seven and a half months. And so the judge's argument is, well, he's had time to look at this. You know, there's no surprises here. And he said that the defense has the chance to talk with Bankman-Fried in the Metropolitan Detention Center, where he's currently being housed weekends during days that there are no trials. So, you know, the trial is not every weekday. It's going to be most weekdays. And he said, you know, you have the time, you have the opportunity, you are able to talk to your client. You're not really losing a whole lot. But he added kind of a, you know, made this ruling where Bankman-Fried will even be presented to the courthouse early on trial days where there's certain witness testimony that has to be discussed and let the attorneys just talk to him before the trial begins on those days. So he's saying basically, you know, you have opportunities to talk to your client and I'm going to give you, you know, more time to do so, but I'm not going to let Bankman-Fried out of jail. So the main focus next week as the trial begins will be jury selection. Tell us what you think that process will be like. It definitely will be interesting. I think it's probably going to be very boring from just kind of an observer perspective because it's a long process and we're going to be just sitting there watching this judge ask each individual, you know, have you heard of FTX? Have you heard of Bankman-Fried? What do you think about cryptocurrencies? But it's going to be very interesting because this is the part where we're 12 or so people who are going to determine whether or not Bankman-Fried spends the next, you know, 10 to 20 years of his life behind bars. And so I'm expecting to see maybe as mixed selection. I think if you pluck a random group of New Yorkers off the streets, some of them may have heard of cryptocurrency, most of them probably will not have, and they're going to be tasked with deciding whether or not one of the biggest figures in crypto committed fraud on the way up and on the way down. Something that was interesting to me was the prosecution said that they expected jury selection to take the better part of a day. I've seen some legal opinions that it will take longer than that. What do you think could potentially happen there and why do you think some analysts are saying that it would take longer? Yeah, no, I've spoken to a number of lawyers as well ahead of the trial, you know, where at Coindes we're trying to do a lot of kind of preview coverage, basically saying here's how it might go down. Everyone I spoke to said it will probably take a couple of days. Part of that is because this is a fairly notorious case. A lot of people will have heard about Bankman Fried and presumably formed some kind of opinion that would, you know, disqualify them from being a juror on the trial. I'm not sure where the DOJ is getting their estimate from. It's very possible that, you know, through the questionnaires that the jury pool is sent through the, you know, the kind of the mass selection process or deselection process that the judge engages in, maybe that streamlines a big part of it by kind of, you know, reducing or like immediately filtering out the people who are most blatantly, you know, either knowledgeable or biased or otherwise have their own preformed viewpoints about the case. And so the jury selection might just be focused on, you know, those individuals who have made it through those initial filtering processes. But that's speculation on my part. I honestly am not sure if it is a better part of the day that we could see opening statements as soon as, you know, next Wednesday, October 4th, which would be a pretty rapid start to the trial. And Coindesk did some work to try to suss out what it is that lower Manhattan New Yorkers might say if they were randomly picked for a jury. What did you discover there? Yeah, no, so Coindesk's Dylan and Victor went to Manhattan, downtown Manhattan to the financial district, and literally just went up to people and said, hey, we're with Coindesk. Have you heard of FTX? Have you heard of Sam Bankman-Fried? And a fairly large part of this group just hadn't heard about it. You know, they weren't familiar with it. They weren't comfortable talking about crypto. They weren't familiar with crypto. And of those who were, you know, I think they found a fairly even mix. There were some individuals who had heard about Bankman-Fried, some individuals who had only heard about crypto, some individuals who were very knowledgeable. They actually found a, you know, a Yahoo anchor who was the most knowledgeable about it naturally as, you know, order covering the financial space. But they also found people who were looking for jobs in crypto, people who were investors in the space. By and large, it seems to, you know, a lot of the people they spoke to just weren't interested or talking, interested in talking about crypto or in, you know, being part of this, being part of crypto. So if that is a representative sample of who we'll see next week at the jury pool, it'll be interesting because we'll see a large, potentially large, jury pool of people who aren't familiar with crypto. Again, on one of the biggest, you know, bang in on one of the biggest figures in the space. Recently, the defense proposed certain questions that it would ask the jurors and the government said that they felt these were quote unquote intrusive. What were some of the questions that were proposed and what was the government's response? Yeah. So, you know, the background here is both the DOJ and the defense team filed their proposed jury questions to help filter potential jurors. The defense team in particular had a number of questions about, you know, how these potential jurors felt about things like effective altruism, about political donations, about ADHD and people who have ADHD. And the DOJ response was really, you know, they felt that some of these questions, for example, about effective altruism and about political donations seemed kind of primed to, or designed to prime the potential jurors to think, oh, well, Bankman Fried was trying to do all of this in service of this effective altruism philosophy. Therefore, he was trying to raise money to donate to better the world or designed to try and prime the jury to think, okay, well, you know, political donations is fine. So these allegations about breaking the law in the way he tried to donate funds maybe is, you know, overreach or whatever. And in the intrusive part, you know, treating just kind of this question of ADHD and whether or not people were, you know, involved with individuals who had it or the DOJ just felt that these questions were really designed to try and shape how the jury would see Bankman Fried as opposed to just kind of gauge their existing biases. And so the DOJ opposed these questions and I think we're still waiting to see for sure if there's any public response on the judge prior to jury selection on Tuesday. All right. So in a moment, we're going to talk about different legal strategies that the defense might pursue. But first, a quick word from the sponsors who make this show possible. 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With Toku, you get unmatched legal and tax tech support to grant and administer your global team's easy-to-use token grant award templates, vesting tracking via online dashboard, tax withholding integration with payroll, automated distributions, great employee experience. Make it simple with Toku. Learn more at toku.com. Looking to venture into the world of stablecoins? Explore the open-source stablecoin studio toolkit on Hedera. Whether you're building the next big thing in Web3 or an enterprise banking and payment provider, Stablecoin Studio simplifies stablecoin issuance and management, keeping you at the forefront of on-chain finance. With seamless integration into commercial custody providers and KYC services and built-in proof of reserve functionality, Stablecoin Studio streamlines development and time to market. Harness the power of stablecoins by visiting hedera.com slash unchained. Back to my conversation with Nick. Recently, the defense did propose a number of witnesses, but the judge denied most of them. Who were these proposed witnesses and why were they denied? Yeah, so the DOJ and defense both had a number of proposed expert witnesses. The defense in particular had a number of individuals that they said could speak to everything from the terms of service that FTX operated under to the FTX software to just rebutting certain DOJ witnesses. The judge basically said he agreed with the DOJ in rejecting all of these proposed witnesses. There were seven. He did allow the defense to call for four of them later on, but they have to meet certain requirements and fill out certain disclosure forms first. A big part of the judge's reasoning was the witnesses had just not adequately explained what they wanted to testify about or what they would say, and so they didn't have or he didn't have enough information to allow them to testify, which was functionally the DOJ's argument as well. That being said, some of these proposed witnesses are intended to act as rebuttal witnesses to DOJ's witnesses. I know we're saying the word witnesses a lot, but that's what it comes down to is four of these witnesses could come back and respond to, you know, either FTX intercircle members who are testifying on behalf of the DOJ. One of the potential witnesses that the defense can call forward is someone who can speak to the actual technical software underlying the, you know, FTX program, again, in response to DOJ witnesses. The judge did completely ban, for example, a British barrister who was supposed to explain the FTX terms of service as well as someone who was supposed to speak to kind of the crypto industry at large, saying that, you know, those witnesses and that proposed testimony seemed a bit too far afield from what the case would be about and could probably do more to confuse the jury than to clarify anything. And SPF's team also wanted to block a proposed government witness that was also denied. Who was that and why did the judge deny that motion? The DOJ proposed a University of Notre Dame professor to testify about some forensic analysis he did on FTX financials. The defense objected. They said that this witness would basically just reiterate the DOJ's claims, the allegations, but the DOJ argued that he was doing his own analysis of the data he had access to. And so it wouldn't just be stating the DOJ's claim. He would be providing his own expert insight based on his own work, you know, examining the databases that he had access to. And the judge agreed with that and said that based on what he'd saw and based on what the witness disclosure had provided, the witness was likely just speaking to his own expertise and looking at actual data as a third-party expert witness might do. And so those witnesses are allowed right now. We're still waiting on the full and final witness list, but we now know that there are probably at least a dozen witnesses that we're going to hear from over the next six weeks. And who are the ones that stick out to you on that list? I think the cooperating witnesses, so the FTX inner circle, that's former Alameda Research CEO Carolyn Ellison, former FTX director for engineering Nishat Singh and Gary Wang. I forget which one of them was the director of engineering. The other one was a fellow executive, but you know, these are the three individuals I think we're going to hear from probably first, maybe. Might hear from them as soon as next week, not certainly the week after. They're the ones who were in it, right? They were involved in this. They were part of FTX. They were part of the highs. I think we're going to probably hear from them, you know, how FTX might've fallen apart. I know from court filings, we know that DOJ wants to ask Carolyn Ellison about the FTT token and allegations that Sandbank and Freed was directly involved in trying to argue for Alameda to take a large sum of it and to potentially allegedly manipulate the price. So I think that testimony is going to be really interesting just because, again, it's the firsthand account of what happened. We're also probably going to see the defense try and discredit these witnesses to the extent possible, right? Straight out of the gate saying, well, you know, you weren't threatened with jail if you didn't testify in turn against your former boss. So I imagine we're just going to hear arguments like that from the defense during cross-examination, but either way, I think this is going to, you know, those are the three witnesses I think we're looking forward to most right now. And then once we're past that kind of initial surge of FTX insiders, that's when we'll get to kind of more, I don't because I don't think that is the right word for it, but, you know, people who are looking at it from kind of the, you know, again, forensic analysis perspective, people who are going to be able to kind of dig through and say, all right, well, you know, we've looked through the smoking remains and here's what we found. And I think that will also be interesting because it'll be really a third-party perspective on, you know, here's how this thing was set up and here's where things may have gone wrong or here's where things may have fallen apart. And getting a third-party perspective on that I think is going to be really fascinating because there'll be, I assume, a bit more objective about it than, you know, people who built it and worked on it maybe could be. One other kind of motion that happened this week that was pretty interesting or development, I should say, is that the judge did allow SPF's team to ask some of the witnesses about their drug use. What do you think will be the significance of that line of questioning? I think that goes back to, you know, a cooperating witness, FTX inner circle member saying, while we were at FTX, Sam directed us to manipulate FTT, whatever, you know, just speculating what someone could say. And the defense comes back and says, well, you know, are you sure that's what he said? Were you high at the time of these conversations or were you engaged in recreational drug use during the time you were running this company? You know, if I'm a member of the jury and I hear, okay, well, everyone was partying and on drugs and doing weird stuff or, you know, potentially, you know, in an altered state of mind, that might shape how I view the, you know, the defendant, the verdict, the whole case. So the judge did say that prior to making those, you know, kind of questions, the defense has to notify the prosecution and the judge about it. So it's not going to be a case of like they'll blindside the witnesses about this, but I imagine that's going to kind of go back to this effort to try and say like, okay, you know, Bankman Fried wasn't doing something wrong on his own or intentionally, it's just that things fell apart, but they were well-intentioned. The defense is going to attempt to, I think, pin some of the blame on legal advice that Bankman Fried received. How effective do you think that argument will be at trial? That's a really hard question to answer. I think the problem that the defense has is there's really no denying that FTX fell apart and it fell apart in like a very dramatic fashion, right? The day it filed for bankruptcy that evening, what, a couple hundred million dollars or tens of millions of dollars worth of crypto was stolen, I think. I forgot the exact amount, but you know, it was a pretty dramatic way to cap off what was already a chaotic week. So the problem the defense has is they can't say, well, FTX is fine. And so they're leaning on this advice of counsel defense. Their argument is going to be, you know, Bankman Fried was well-intentioned. He told his lawyers everything he wanted to do, and he did everything they told him to do. And so because it all fell apart, you can't really pin that on Bankman Fried. You have to look at the advice he was given and the information he was acting on. And so I guess part of the problem that the defense might have here is did they share or did Bankman Fried share everything he wanted to do with his attorneys? Did the attorneys have all the information and did he do everything exactly the way his attorneys told him to? And I don't know, you know, I'm sure we'll see answers to those questions over the next, you know, six weeks or so, but that seems to be kind of how that might play out. And it's going to be an interesting argument for sure. But again, I think it goes down to the central problem of FTX for sure collapsed and how you respond to that. One other issue is that the judge did rule that the prosecution could mention SPF's political donations. And there are charges specifically related to that that will be tried in a separate trial next year. So why were those allowed in this case? So this is where we get into what has become one of the new fun parts of being a court reporter in this case is Bahamas extradition treaties. So the original indictment that Bankman Fried was charged with back in December of 2022 did include campaign finance violations as one of the charges. But because it did not appear in the charging document that the Bahamas Police Department had, there's a Bahamas National Police, something like that, Bankman Fried's defense team successfully argued that they could not bring that charge right now because he had agreed to be extradited on the first seven charges, which were wire fraud and conspiracy to commit wire fraud and conspiracy to commit securities and bodies fraud, et cetera. So what it seems like is going to happen is the prosecution is going to try and fold all of that into all the political donation stuff into the other charges, into the wire fraud charges, and say, well, you know, we have the evidence, we have the allegations, and here's what you have to look at what that means for the next trial. And, you know, you're absolutely correct. There is another trial currently tentatively scheduled for either March or April 2024, next spring, either way, where we will be going through all of this again. But a lot of that is dependent on the Bahamas. And yeah, we could probably talk about that for another hour if you wanted to. All right. Well, we'll leave that for another episode. But one thing I did want to ask about is earlier in this interview, you said that his sentence was likely to be in the range of 10 to 20 years. And obviously, you know, there's many charges and we don't know which ones he'll be found guilty of and which ones he won't. But how are you coming up with that estimate? So yeah, I should definitely be more precise there. So I personally am not a lawyer or an expert in this. I have spoken to a number of lawyers about this. And what they said is, if you have a defendant who is found guilty, so these assumption here is that he is convicted on at least one of these charges. But if he's found guilty on even several of the charges, because all of the conduct is similar, because it's all kind of identical conduct at the core, a judge, when making a sentencing determination, will basically fold all the charges into each other, right? All the conduct. And so even though each of these charges, if you look at the DOJ, press release says, oh, it contains a maximum sentence of 20 years or five years, whatever. It's not going to be consecutive. It'll be concurrent. So the estimate I'm getting from various attorneys that I've spoken to over the past few weeks is probably be somewhere in the, you know, 10 to 20 year range. Some estimates came down as low as five years, some as many as 36 years. But they all seem to base that on just kind of the allegations, the charges themselves combined with the amount of money allegedly lost, which is more than 50 million, combined with the severity and all of that. Yeah. And so 50 million is sort of like some thresholds because I think it goes in levels of severity. Yeah. And the higher the number goes, the longer the sentence. However, that's the largest threshold, obviously. Yeah. I literally looked up the federal sentencing guidelines, which by the way, is a very confusing document. I did not understand it. So I asked someone else to explain it to me, but yeah, it's the different thresholds that you mentioned. And it starts with the, I think the thousands range and then just kind of escalates up and 50 million seems to have been the uppermost that they had. So it's 50 million plus. I think the allegation is something like 10 billion loss from FTX. So 10 billions, a hair more than 50 million. Just as many multiples. So that will probably be kind of the way they calculate it, probably. And again, this is dependent on if he's convicted on one or more charges and all sorts of stuff. Yeah. Okay. Well, we will have to see how all that plays out. Thank you so much for explaining all of this on Unchained. Thanks for having me again. Always great to talk to you. Yes. Same here. Don't forget next up is the weekly news recap today presented by veteran crypto reporter and Columbia University night budget fellow, Michael Del Castillo. Stick around for this week in crypto after this short break. Join over 80 million people using crypto.com. One of the easiest places to buy, trade and spend over 250 cryptocurrencies.

A highlight from Heres How Sam Bankman-Frieds High-Stakes Trial Could Play Out - Ep 549

Unchained

24:11 min | 3 d ago

A highlight from Heres How Sam Bankman-Frieds High-Stakes Trial Could Play Out - Ep 549

"Even though each of these charges, if you look at the DOJ press release says, oh, it contains a maximum sentence of 20 years or five years, whatever, it's not going to be consecutive. It'll be concurrent. So the estimate I'm getting from various attorneys that I've spoken to over the past few weeks is it'll probably be somewhere in the, you know, 10 to 20 year range. Hi everyone. Welcome to Unchained, your no hype resource for all things crypto. I'm your host, Laura Shin, author of The Cryptopians. I started covering crypto eight years ago, and as a senior editor at Forbes was the first mainstream media reporter to cover cryptocurrency full time. This is the September 29th, 2023 episode of Unchained. Thinking of launching your own stable coin? Start with the open source stable coin studio toolkit on Hedera. Start your journey at Hedera .com slash Unchained. Shape tomorrow today. With the crypto .com app, you can buy, trade and spend crypto in one place. Download and get $25 with the code Laura. Link in the description. Arbitrum's leading layer two scaling solution offers you ultra cheap and lightning fast transactions, all with security rooted on Ethereum. Visit arbitrum .io today. Toku makes implementing global token compensation and incentive awards simple. With Toku, you get unmatched legal and tax tech support to grant and administer your global team's tokens. Make it simple today with Toku. Today's guest is Nick Day, Coindesk's managing editor for global policy and regulation. Welcome, Nick. Thanks for having me. The trial for former FTX CEO Sam Bankman -Fried starts next Tuesday, October 3rd. There's been a lot happening pre -trial. For instance, Sam has requested release from jail multiple times and repeatedly been denied, including as recently as Thursday morning. My personal thought was that it seemed like all these requests that the defense was putting in at this critical juncture right before the trial was supposed to begin was maybe not the best use of their time, but that's just my personal opinion. I'm not a lawyer. Why do you think they made this such a point of focus in the last few days? Yeah, so I'm actually coming, you know, I was in the courthouse just a few hours ago where this very issue was brought up and the defense's arguments were, well, the first time we asked, it was for pre -trial release. You know, this was right after Bankman -Fried was remanded into custody in mid -August. The second time was, you know, they were asking the appeals court to overrule the judge's decision to remand him. And they lost that as well. In court today, the defense said, well, you know, now we want to ask for during trial, which is why we waited until this week to make that request. And they say that they want to, you know, the circumstances are different. They're not asking for Bankman -Fried to be released from jail in the weeks leading up to trial. Now they're saying, well, you know, during the trial, we're going to have to talk to him and check with him about defense witness testimony and cross -examination and things like that. So that's why we're making this request. And the judge didn't really find that compelling. And why do you think the judge has stuck to this position of keeping Bankman -Fried in jail? So in the judge's words, there's a couple of different reasons. One being that Bankman -Fried has had ample time to look at the defense materials. You know, one of the arguments was there are something like 1300 exhibits expected over the course of the trial. And the judge asked today, you know, were these all prepared and shared with you before, I think he said September 8th, so earlier this month. And the defense, they said, yes, we've seen all of this. We've had access to all of this. Bankman -Fried was out on bail for about seven and a half months. And so the judge's argument is, well, he's had time to look at this. You know, there's no surprises here. And he said that the defense has the chance to talk with Bankman -Fried in the Metropolitan Detention Center, where he's currently being housed weekends during days that there are no trials. So, you know, the trial is not every weekday. It's going to be most weekdays. And he said, you know, you have the time, you have the opportunity, you are able to talk to your client. You're not really losing a whole lot. But he added kind of a, you know, made this ruling where Bankman -Fried will even be presented to the courthouse early on trial days where there's certain witness testimony that has to be discussed and let the attorneys just talk to him before the trial begins on those days. So he's saying basically, you know, you have opportunities to talk to your client and I'm going to give you, you know, more time to do so, but I'm not going to let Bankman -Fried out of jail. So the main focus next week as the trial begins will be jury selection. Tell us what you think that process will be like. It definitely will be interesting. I think it's probably going to be very boring from just kind of an observer perspective because it's a long process and we're going to be just sitting there watching this judge ask each individual, you know, have you heard of FTX? Have you heard of Bankman -Fried? What do you think about cryptocurrencies? But it's going to be very interesting because this is the part where we're 12 or so people who are going to determine whether or not Bankman -Fried spends the next, you know, 10 to 20 years of his life behind bars. And so I'm expecting to see maybe as mixed selection. I think if you pluck a random group of New Yorkers off the streets, some of them may have heard of cryptocurrency, most of them probably will not have, and they're going to be tasked with deciding whether or not one of the biggest figures in crypto committed fraud on the way up and on the way down. Something that was interesting to me was the prosecution said that they expected jury selection to take the better part of a day. I've seen some legal opinions that it will take longer than that. What do you think could potentially happen there and why do you think some analysts are saying that it would take longer? Yeah, no, I've spoken to a number of lawyers as well ahead of the trial, you know, where at Coindes we're trying to do a lot of kind of preview coverage, basically saying here's how it might go down. Everyone I spoke to said it will probably take a couple of days. Part of that is because this is a fairly notorious case. A lot of people will have heard about Bankman Fried and presumably formed some kind of opinion that would, you know, disqualify them from being a juror on the trial. I'm not sure where the DOJ is getting their estimate from. It's very possible that, you know, through the questionnaires that the jury pool is sent through the, you know, the kind of the mass selection process or deselection process that the judge engages in, maybe that streamlines a big part of it by kind of, you know, reducing or like immediately filtering out the people who are most blatantly, you know, either knowledgeable or biased or otherwise have their own preformed viewpoints about the case. And so the jury selection might just be focused on, you know, those individuals who have made it through those initial filtering processes. But that's speculation on my part. I honestly am not sure if it is a better part of the day that we could see opening statements as soon as, you know, next Wednesday, October 4th, which would be a pretty rapid start to the trial. And Coindesk did some work to try to suss out what it is that lower Manhattan New Yorkers might say if they were randomly picked for a jury. What did you discover there? Yeah, no, so Coindesk's Dylan and Victor went to Manhattan, downtown Manhattan to the financial district, and literally just went up to people and said, hey, we're with Coindesk. Have you heard of FTX? Have you heard of Sam Bankman -Fried? And a fairly large part of this group just hadn't heard about it. You know, they weren't familiar with it. They weren't comfortable talking about crypto. They weren't familiar with crypto. And of those who were, you know, I think they found a fairly even mix. There were some individuals who had heard about Bankman -Fried, some individuals who had only heard about crypto, some individuals who were very knowledgeable. They actually found a, you know, a Yahoo anchor who was the most knowledgeable about it naturally as, you know, order covering the financial space. But they also found people who were looking for jobs in crypto, people who were investors in the space. By and large, it seems to, you know, a lot of the people they spoke to just weren't interested or talking, interested in talking about crypto or in, you know, being part of this, being part of crypto. So if that is a representative sample of who we'll see next week at the jury pool, it'll be interesting because we'll see a large, potentially large, jury pool of people who aren't familiar with crypto. Again, on one of the biggest, you know, bang in on one of the biggest figures in the space. Recently, the defense proposed certain questions that it would ask the jurors and the government said that they felt these were quote unquote intrusive. What were some of the questions that were proposed and what was the government's response? Yeah. So, you know, the background here is both the DOJ and the defense team filed their proposed jury questions to help filter potential jurors. The defense team in particular had a number of questions about, you know, how these potential jurors felt about things like effective altruism, about political donations, about ADHD and people who have ADHD. And the DOJ response was really, you know, they felt that some of these questions, for example, about effective altruism and about political donations seemed kind of primed to, or designed to prime the potential jurors to think, oh, well, Bankman Fried was trying to do all of this in service of this effective altruism philosophy. Therefore, he was trying to raise money to donate to better the world or designed to try and prime the jury to think, okay, well, you know, political donations is fine. So these allegations about breaking the law in the way he tried to donate funds maybe is, you know, overreach or whatever. And in the intrusive part, you know, treating just kind of this question of ADHD and whether or not people were, you know, involved with individuals who had it or the DOJ just felt that these questions were really designed to try and shape how the jury would see Bankman Fried as opposed to just kind of gauge their existing biases. And so the DOJ opposed these questions and I think we're still waiting to see for sure if there's any public response on the judge prior to jury selection on Tuesday. All right. So in a moment, we're going to talk about different legal strategies that the defense might pursue. But first, a quick word from the sponsors who make this show possible. 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Recently, the defense did propose a number of witnesses, but the judge denied most of them. Who were these proposed witnesses and why were they denied? Yeah, so the DOJ and defense both had a number of proposed expert witnesses. The defense in particular had a number of individuals that they said could speak to everything from the terms of service that FTX operated under to the FTX software to just rebutting certain DOJ witnesses. The judge basically said he agreed with the DOJ in rejecting all of these proposed witnesses. There were seven. He did allow the defense to call for four of them later on, but they have to meet certain requirements and fill out certain disclosure forms first. A big part of the judge's reasoning was the witnesses had just not adequately explained what they wanted to testify about or what they would say, and so they didn't have or he didn't have enough information to allow them to testify, which was functionally the DOJ's argument as well. That being said, some of these proposed witnesses are intended to act as rebuttal witnesses to DOJ's witnesses. I know we're saying the word witnesses a lot, but that's what it comes down to is four of these witnesses could come back and respond to, you know, either FTX intercircle members who are testifying on behalf of the DOJ. One of the potential witnesses that the defense can call forward is someone who can speak to the actual technical software underlying the, you know, FTX program, again, in response to DOJ witnesses. The judge did completely ban, for example, a British barrister who was supposed to explain the FTX terms of service as well as someone who was supposed to speak to kind of the crypto industry at large, saying that, you know, those witnesses and that proposed testimony seemed a bit too far afield from what the case would be about and could probably do more to confuse the jury than to clarify anything. And SPF's team also wanted to block a proposed government witness that was also denied. Who was that and why did the judge deny that motion? The DOJ proposed a University of Notre Dame professor to testify about some forensic analysis he did on FTX financials. The defense objected. They said that this witness would basically just reiterate the DOJ's claims, the allegations, but the DOJ argued that he was doing his own analysis of the data he had access to. And so it wouldn't just be stating the DOJ's claim. He would be providing his own expert insight based on his own work, you know, examining the databases that he had access to. And the judge agreed with that and said that based on what he'd saw and based on what the witness disclosure had provided, the witness was likely just speaking to his own expertise and looking at actual data as a third -party expert witness might do. And so those witnesses are allowed right now. We're still waiting on the full and final witness list, but we now know that there are probably at least a dozen witnesses that we're going to hear from over the next six weeks. And who are the ones that stick out to you on that list? I think the cooperating witnesses, so the FTX inner circle, that's former Alameda Research CEO Carolyn Ellison, former FTX director for engineering Nishat Singh and Gary Wang. I forget which one of them was the director of engineering. The other one was a fellow executive, but you know, these are the three individuals I think we're going to hear from probably first, maybe. Might hear from them as soon as next week, not certainly the week after. They're the ones who were in it, right? They were involved in this. They were part of FTX. They were part of the highs. I think we're going to probably hear from them, you know, how FTX might've fallen apart. I know from court filings, we know that DOJ wants to ask Carolyn Ellison about the FTT token and allegations that Sandbank and Freed was directly involved in trying to argue for Alameda to take a large sum of it and to potentially allegedly manipulate the price. So I think that testimony is going to be really interesting just because, again, it's the firsthand account of what happened. We're also probably going to see the defense try and discredit these witnesses to the extent possible, right? Straight out of the gate saying, well, you know, you weren't threatened with jail if you didn't testify in turn against your former boss. So I imagine we're just going to hear arguments like that from the defense during cross -examination, but either way, I think this is going to, you know, those are the three witnesses I think we're looking forward to most right now. And then once we're past that kind of initial surge of FTX insiders, that's when we'll get to kind of more, I don't because I don't think that is the right word for it, but, you know, people who are looking at it from kind of the, you know, again, forensic analysis perspective, people who are going to be able to kind of dig through and say, all right, well, you know, we've looked through the smoking remains and here's what we found. And I think that will also be interesting because it'll be really a third -party perspective on, you know, here's how this thing was set up and here's where things may have gone wrong or here's where things may have fallen apart. And getting a third -party perspective on that I think is going to be really fascinating because there'll be, I assume, a bit more objective about it than, you know, people who built it and worked on it maybe could be. One other kind of motion that happened this week that was pretty interesting or development, I should say, is that the judge did allow SPF's team to ask some of the witnesses about their drug use. What do you think will be the significance of that line of questioning? I think that goes back to, you know, a witness, cooperating FTX inner circle member saying, while we were at FTX, Sam directed us to manipulate FTT, whatever, you know, just speculating what someone could say. And the defense comes back and says, well, you know, are you sure that's what he said? Were you high at the time of these conversations or were you engaged in recreational drug use during the time you were running this company? You know, if I'm a member of the jury and I hear, okay, well, everyone was partying and on drugs and doing weird stuff or, you know, potentially, you know, in an altered state of mind, that might shape how I view the, you know, the defendant, the verdict, the whole case. So the judge did say that prior to making those, you know, kind of questions, the defense has to notify the prosecution and the judge about it. So it's not going to be a case of like they'll blindside the witnesses about this, but I imagine that's going to kind of go back to this effort to try and say like, okay, you know, Bankman Fried wasn't doing something wrong on his own or intentionally, it's just that things fell apart, but they were well -intentioned. The defense is going to attempt to, I think, pin some of the blame on legal advice that Bankman Fried received. How effective do you think that argument will be at trial? That's a really hard question to answer. I think the problem that the defense has is there's really no denying that FTX fell apart and it fell apart in like a very dramatic fashion, right? The day it filed for bankruptcy that evening, what, a couple hundred million dollars or tens of millions of dollars worth of crypto was stolen, I think. I forgot the exact amount, but you know, it was a pretty dramatic way to cap off what was already a chaotic week. So the problem the defense has is they can't say, well, FTX is fine. And so they're leaning on this advice of counsel defense. Their argument is going to be, you know, Bankman Fried was well -intentioned. He told his lawyers everything he wanted to do, and he did everything they told him to do. And so because it all fell apart, you can't really pin that on Bankman Fried. You have to look at the advice he was given and the information he was acting on. And so I guess part of the problem that the defense might have here is did they share or did Bankman Fried share everything he wanted to do with his attorneys? Did the attorneys have all the information and did he do exactly everything the way his attorneys told him to? And I don't know, you know, I'm sure we'll see answers to those questions over the next, you know, six weeks or so, but that seems to be kind of how that might play out. And it's going to be an interesting argument for sure. But again, I think it goes down to the central problem of FTX for sure collapsed and how you respond to that. One other issue is that the judge did rule that the prosecution could mention SPF's political donations. And there are charges specifically related to that that will be tried in a separate trial next year. So why were those allowed in this case? So this is where we get into what has become one of the new fun parts of being a court reporter in this case is Bahamas extradition treaties. So the original indictment that Bankman Fried was charged with back in December of 2022 did include campaign finance violations as one of the charges. But because it did not appear in the charging document that the Bahamas Police Department had, there's a Bahamas National Police, something like that, Bankman Fried's defense team successfully argued that they could not bring that charge right now because he had agreed to be extradited on the first seven charges, which were wire fraud and conspiracy to commit wire fraud and conspiracy to commit securities and bodies fraud, et cetera. So what it seems like is going to happen is the prosecution is going to try and fold all of that into all the political donation stuff into the other charges, into the wire fraud charges, and say, well, you know, we have the evidence, we have the allegations, and here's what you have to look at what that means for the next trial. And, you know, you're absolutely correct. There is another trial currently tentatively scheduled for either March or April 2024, next spring, either way, where we will be going through all of this again. But a lot of that is dependent on the Bahamas. And yeah, we could probably talk about that for another hour if you wanted to. All right. Well, we'll leave that for another episode. But one thing I did want to ask about is earlier in this interview, you said that his sentence was likely to be in the range of 10 to 20 years. And obviously, you know, there's many charges and we don't know which ones he'll be found guilty of and which ones he won't. But how are you coming up with that estimate? So yeah, I should definitely be more precise there. So I personally am not a lawyer or an expert in this. I have spoken to a number of lawyers about this. And what they said is, if you have a defendant who is found guilty, so these assumption here is that he is convicted on at least one of these charges. But if he's found guilty on even several of the charges, because all of the conduct is similar, because it's all kind of identical conduct at the core, a judge, when making a sentencing determination, will basically fold all the charges into each other, right? All the conduct. And so even though each of these charges, if you look at the DOJ, press release says, oh, it contains a maximum sentence of 20 years or five years, whatever. It's not going to be consecutive. It'll be concurrent. So the estimate I'm getting from various attorneys that I've spoken to over the past few weeks is probably be somewhere in the, you know, 10 to 20 year range. Some estimates came down as low as five years, some as many as 36 years. But they all seem to base that on just kind of the allegations, the charges themselves combined with the amount of money allegedly lost, which is more than 50 million, combined with the severity and all of that. Yeah. And so 50 million is sort of like some thresholds because I think it goes in levels of severity. Yeah. And the higher the number goes, the longer the sentence. However, that's the largest threshold, obviously. Yeah. I literally looked up the federal sentencing guidelines, which by the way, is a very confusing document. I did not understand it. So I asked someone else to explain it to me, but yeah, it's the different thresholds that you mentioned. And it starts with the, I think the thousands range and then just kind of escalates up and 50 million seems to have been the uppermost that they had. So it's 50 million plus. I think the allegation is something like 10 billion loss from FTX. So 10 billions, a hair more than 50 million. Just as many multiples. So that will probably be kind of the way they calculate it, probably. And again, this is dependent on if he's convicted on one or more charges and all sorts of stuff. Yeah. Okay. Well, we will have to see how all that plays out. Thank you so much for explaining all of this on Unchained. Thanks for having me again. Always great to talk to you. Yes. Same here. Don't forget next up is the weekly news recap today presented by veteran crypto reporter and Columbia University night budget fellow, Michael Del Castillo. Stick around for this week in crypto after this short break. Join over 80 million people using crypto .com. One of the easiest places to buy, trade and spend over 250 cryptocurrencies.

Laura Shin December Of 2022 Michael Del Castillo 12 Alameda $25 September 8Th Tuesday Nick March Thursday Morning Nick Day Carolyn Ellison FTT 10 20 Years September 29Th, 2023 Gary Wang Seven 10 Billions
"carolyn ellison" Discussed on CoinDesk Podcast Network

CoinDesk Podcast Network

11:18 min | 3 d ago

"carolyn ellison" Discussed on CoinDesk Podcast Network

"And you're his defense attorney in this little role-playing thing that we've conducted here, and I think if I were you, that would be tough for me. Yeah, I get the sense that the judge is very patient, but his patience isn't unlimited, and his patience has certainly been tested by SPF's repeated mischief over the course of the lead-up to the trial. But I do get the sense that Judge Kaplan does want to ensure that SPF is adequately prepared for the trial, not just because that's what we do in our justice system, but because I'm sure he wants to ward off any appeals or any claims of a mistrial based on him not having enough time to review discovery materials or prepare with his lawyers or anything like that. If I were Judge Kaplan, I would be trying to work as carefully as possible to prevent any obvious appeals, because dragging out this case, I think, it's just... In a sense, as an observer, as a journalist, I really want this case to happen and I want to watch it, and then I want the verdict to come out and feel definitive. I'd rather not have years of appeals and cross litigation, but that's unfortunately what we're subject to a lot of the time in these cases. That's kind of how the justice system works, but I do think, you know, it's an element that a lot of people, unless you've been in the courtroom or even know kind of who this judge is, it's discussed in crypto circles all the time, right, in the Ripple case and in that judge's ruling, and you know, it really does depend on kind of what the judge has seen from the case, what he's witnessed in the courtroom and activities outside the courtroom and how he wants to rule on certain things. I think the examples of Judge Kaplan's patience running thin is so long that we could probably talk about it for the rest of this podcast, and it's become very obvious that he's kind of at that point. And was when he put Sam behind bars. And so, you know, that's tough. And at the end of the day, it does come down to the jury, but something I've learned from following this case so closely is what the jury hears, who they hear from, exactly what the prosecution and the defense are allowed to discuss, a lot of that is up to Judge Kaplan. So while the jury makes the decision at the end of the day, Judge Kaplan helps decide, you know, after filings from the defense and the prosecution, exactly what can be discussed at the trial. So it's an interesting relationship. He's the referee, and he's setting the rules of the game as we have basically highlighted in this pregame show. As we head into the actual game itself, most of that's been set, and Judge Kaplan has certainly warned both sides enough about things and has already declared what is going to be permissible in trial and what won't be. And so I think it'll be interesting to watch all of that stuff play out in real time. Looking back on it, though, I wanted to ask you this, too. What kind of has stood out to you the most in pouring through all these documents? We asked the same question of Mark Litt in terms of, is anything here unique? Has anything struck you as interesting or weird, strange? And of course, he's seen a lot of this before. We have not, at least from a legal perspective. But no one can say that they've seen crypto cases like these before because they're kind of a new thing in their own right. So I don't feel too far outside of our respective fields to ask and answer these questions of, has anything struck you as strange when you dug through either the documents that SBF gave us or kind of just seeing what's played out since? I will say Sam's narrative about Carolyn Ellison is very interesting to me because he's attempting to portray her as very in over her head, unable to run the business Alameda Research that he set her up to run as co-CEO and then later as full CEO. He complains that she lost, you know, Alameda, he claims at its peak, had a net asset value of around $70 billion. And then a year later, it would be effectively zero, effectively negative $8 billion. And he places a lot of the blame on Carolyn Ellison for failing to hedge against a series of crypto crashes. Maybe it was pivoting the strategy, maybe the answer. And I think the simple story behind a lot of the most recent wave of crypto that began in 2021 is just that it was really easy to make a crypto business, a crypto hedge fund, Celsius, Voyager, BlockFi, when prices went up and up and up and up. And when the prices started to turn around and go down, you could see exactly which businesses had prepared for it versus which businesses just thought the prices would keep going up forever. And so if Sam Bankman-Fried is telling the truth that Carolyn Ellison lost all of his money, all of Alameda's money, failed to hedge, didn't tell him about the hole, that I think is really damning conduct for her to have committed. And again, she has already pleaded guilty to all of this. The thing that just I can't get past is he placed her in that position. He appointed her. He said before, you know, I could make recommendations to Alameda as its manager. I could have replaced leadership. And then other people, or at least in other documents, have told a slightly different story about exactly how much control SPF had over Alameda, exactly how involved he was in those decisions. So in a sense, I think a lot of these SPF docs, you read through them and you just read his narrative and it starts to make a bit of sense. Like what I'm saying here, I think you read these documents and you come away saying, Carolyn Ellison was really not cut out for this job. But the other pieces of evidence that this was his money, he owned 90% of Alameda Research and Gary Wang owned the other 10%, you know, he was involved in the Alameda group chats, all the employees worked together, and Carolyn Ellison was majorly underpaid compared to everybody else. You look at all these things and you start to wonder like, was Carolyn Ellison evil or did SPF just set up somebody, not even to mention his ex-girlfriend, did he set her up to fail? And so that's one of the ways in which I can read the docs and start to see his narrative, but it doesn't convince me. And none of the narratives in his docs, I can see where he's coming from, but none of them completely convinced me. Well, did he set her up to fail on purpose, I think is the other question that would be posed by the prosecution as a fall girl and an ex-fall girl. That I think is going to be an important piece of this. And again, I think it's why we saw kind of the calculated moves that we did see play out in terms of what was leaked to the New York Times and the risk reward of that potentially maybe paying off and the punishment that then Sam had to face in being thrown behind bars in the final weeks preparing for his trial. I do think that all that stuff is incredibly important, and I do feel like there was one other element that I wanted to ask you about when it comes to some of that in terms of the takeaways and the most interesting pieces of it, because I do think that that is the piece that I'm most interested in watching play out. What are we going to hear? In a sense, it's the emotional core of the story too. What were these two top people who were on-again-off-again relationship, business partners, what was happening between them? And I think it's almost the most Hollywood version of this is the story of Sam and Caroline. So let's wrap this up, because at the end of the day, the juror is going to have to deliver a verdict. And as we said, the most important one is wire fraud on the customers of FTX. The question is, guilty or not guilty? My prediction, if I'm going out on a limb, it'll be a mixed verdict, but SPF will be found guilty on at least some of these seven counts. I don't think that the prosecution has a slam dunk on each of the counts, but again, there's another trial in March. I'm not sure what the sentencing will look like. Again, we've talked about a maximum of 115 years. I don't know what that maximum sentence looks like, if he's only sentenced to two, three or four out of the seven, but I see a mixed verdict coming down here. If I were to weigh in on one of these things, I would say, having been in the courtroom seeing these prosecutors in other cases, by the way, and taking into account what Mark Litt has said about their job to keep it as simple as possible, presenting the facts to the jurors who are going to weigh in on not a crypto case, not crypto fraud, but just fraud. And what exactly was known and when, they've done it before. Nicholas Rudes, the attorney, was also the one that convicted the first ever quote unquote felon in the realm of NFT trading, insider trading. And I think with this case as well, as we've seen, these prosecutors are incredibly adept at just highlighting not crypto fraud, but just fraud and what happened. And I think given that fact and given the idea that this legal team and SDNY has been all over all of this since even before SPF went down, FTX went down, I don't think they're going to make what Mark Litt said was the easiest mistake to make here in over-complicating this case. And for that reason, and what we've already seen from the defense in terms of trying to keep their client out of jail even before the trial began, I think the writing's on the wall on this one. And I don't think it's necessarily super surprising to say odds are in the prosecution's favor to deliver a conviction. That being said, I do think there's a greater chance at acquittal than a lot of casual observers of this case may be expecting, or there's a greater chance of a mixed verdict than a lot of the observers of this case may be expecting. It's more complex than you might think. It might not be a black and white case of fraud, and it might not point completely to his innocence, but there's a lot of complexity here. There's room for a gray understanding. And it's unclear exactly how far Judge Kaplan might allow either the defense or the prosecution to have some wiggle room when it comes to maybe stretching what that understanding might be in presenting the facts to the jurors. But Abrams, I got to say, it's been incredibly helpful to have you on this case, Detective Abrams. It's been a pleasure, and I've got to say, at the end of this series, I think we have turned over every stone available to us at this moment. I'm feeling like we did our homework, and I'm very much looking forward to making a big tub of popcorn on October 3rd. And there is only one outlet that could say that we got these documents before the trial even began, and that is Coinage. For Coinage head writer Zach Abrams, and for myself, appreciate you looking into the facts with us and exploring what Sam Bankman-Fried's defense is as he heads to trial. I'm Zach Ousman, and that was Zach Abrams. This was the fourth part of Coinage's investigative series covering SPF's defense.As a community-owned Web3 media outlet, Coinage will be breaking down everything we learn at trial at coinage.media. As always, stay safe out there. You've been listening to The SPF Defense on the CoinDesk Podcast Network. Follow the CoinDesk Podcast Network to get all the CoinDesk shows in one place, and head over to coindesk.com for all the Sam Bankman-Fried coverage. Thanks for listening.

"carolyn ellison" Discussed on CoinDesk Podcast Network

CoinDesk Podcast Network

30:17 min | 3 d ago

"carolyn ellison" Discussed on CoinDesk Podcast Network

"I'm Coinage host Zach Ousman and I'm Zach Abrams, head writer. And we've spent the last few weeks digging through thousands of documents, digging into SPF's proposed defense and lawsuits against not just FTX Abrams, but also Binance. Also Binance, also the debtor's reports, affidavits from lawyers. There's truly so much documentation in this case. This is all pretrial, whereas we've been seeing in all these documents, the defense and the prosecution are fighting over millions and millions of documents that are going to be the core of this case from FTX's Google Drive. It's one of the most document heavy cases, I believe, the legal system has ever seen, according to some reports. And it's also even separate from the bankruptcy that FTX is going through, which also we've been digging through those. So it's document hell we've been in for the last, I don't know, more than a month now at this point. And it's been interesting because as we prepare for what's going to happen in SPF's trial, as you said, there's also this kind of pre-show going on in terms of the back and forth between the defense and prosecution around what can be allowed at trial. And also, I guess, the way that the media has been covering it with us and how Coinage has done this a little bit differently is basically getting documents from SPF himself saying, here's my defense, and here's what I'm prepared to say at trial. Right, the televised portion, if it will be televised, or at least the publicized portion of the trial in the courtroom, defense prosecution arguments, isn't set to begin for a little over a month on October 3rd. But the legal battle has been happening since almost the opening moments when SPF was charged over the bail conditions, as you may have seen last month, SPF was remanded to jail. I guess this past month, right? And recently there are even more motions flying back and forth about what exactly the defense and prosecution are allowed to present at court. SPF faced a bit of a challenge today over some of his motions being denied over what he could present, but truly a complex trial and we've done our best to dig into every aspect of it. So let me just ask you, how are you feeling about the case at this moment? It's been nuts. It has been wild even by the measure of everyone who, you know, you and I were both in the courtroom talking to a bunch of reporters who don't even cover crypto, they cover crimes and have seen a lot more of this than both you and I have, and even by their standards of having been in courtrooms for years, decades even, they're saying this is some wild stuff that they've seen. Mostly the idea of, you know, the guy we're talking about before the trial even starts has now been thrown in jail. SPF is just a couple blocks from our studio where we're recording this podcast right now. So it has been wild to think about kind of where this all started since you and I have been digging into all this when I flew out to Palo Alto to meet with Sam in his parents' home to fast forward to where, you know, I'm sitting behind his mom and his dad as he's put in handcuffs and marched away. It's been, you know, just a matter of weeks that we've seen that play out and you're right, we've kind of highlighted what are these pieces of his defense and now the big question as we've been exploring with Mark Litt, Bernie Madoff's former prosecutor, is how real is it that those points are going to hold any water when it comes to trial? And so, I don't know, to answer your question, Abrams, how am I feeling about everything? I'm a little confused to be honest with you. I'm a little torn and I think that that's the feeling that some of these jurors are going to feel when they actually go and say, wait, who's telling the truth on this? Is it the prosecution or is it the defense? We'll say more about that because I think if you're coming into this case with not a huge understanding, you've seen SBF's face plastered all over the news, you see him as the biggest fraudster since Bernie Madoff, the billion dollar fraudster. The average person must be thinking they're going to throw this guy in jail for a long time. What have you learned in the last few weeks that have left you torn? Because I'm also, I've gone through my own journey of sometimes I believe SBF more, sometimes I believe him less. How would you describe your, why are you torn? I guess I'm torn because what we've been trying to do is find the real facts, right? We were presented with a defense, as a juror is going to be presented with, 12 jurors are going to say, is this real or is it not? I'm torn because you've got facts on both sides. You've got some real, quote unquote, misreporting from a lot of people just because of the news cycle and the way that it was conveyed in that huge collapse of, oh, he's a criminal kind of guilty before innocent, which is not usually how you think, how the justice system works. So yeah, I guess I would describe torn in the sense of you have someone who is going to trial and trying to say I'm innocent and you have certain facts that don't match up with that, but then you also on the side of the prosecution have certain things that are being misrepresented almost just as well in terms of what actually played out. So I don't know, I guess that's how these games are played. You're not a lawyer, I'm not a lawyer. That's why we had Mark Lick come in and say, look, as a lawyer, here's what's going on and I think he's been super helpful as we've covered this in episode one, two, and three thus far for what exactly is going on. But you wouldn't describe yourself equally as torn? Maybe not torn, but I'd say my understanding of the case has evolved a lot from the early reporting. I mean, back in the day, it felt like a massive fraud. There were polycules and drug use and nobody really knew what was going on and all of these early reports coming out alleging different things about Alameda and money losing and the different chats that were being held. And now that we have more of a holistic view of the story, we're separated from the collapse by almost a year at this point, we've learned that some of the allegations, some of the more colorful ones around polycules were probably overstated. And we've learned that, look, I don't think that FTX at its core was a fraudulent business. I think that starting a crypto company at the time they started a crypto company is very challenging and that's why I think it's useful to look at Binance because they face a lot of the same problems with jurisdictional and regulation uncertainty, trying to build up reputation in crypto, but also launching an exchange token and doing some things that may use cryptoeconomics, may use pozzonomics in ways that are okay, maybe not okay. Binance obviously is still here, FTX has collapsed. So I think understanding exactly what led to that collapse, and it wasn't anything like SBF taking the money and running, it wasn't anything like that their volumes were fake from the beginning or the deposits were fake from the beginning. It really was a critical oversight that led to a cascading effect that took down the exchange. And the main question here is, was that oversight criminal? Was it the intent to defraud? And I go back and forth, but it's a much more complex story than I think that early story that the media was telling. Well, it's tough to communicate this in a headline, but you're teasing it out of me. You're pulling it out of me right now in terms of why I am torn. And I think that what you just said is pretty important. I'm torn because looking at it through the lens of a crypto founder, it is something that you can sympathize with, that if banks don't let crypto companies sign up the right way or as easily as any other business, what do you do if you actually want to get started? And that is something that is true. And even tracking some of these things, how do you track crypto plus bank transactions if you struggle to even get a bank account? And so there are certain elements that once you're in it and you know it, there are complexities that are different than almost any other business. So like I'm torn in the sense of that some of this is not being judged fairly off the get go. And of course, I don't want to go too far in that extreme and say, yeah, crypto is hard, so fraud's fine. I'm not saying that, but I am saying that there is some truth to all this. And I think even since we've been covering this, another huge case also went to or got to sentencing Nate Chastain, the first person who had been charged with quote unquote insider trading in the realm of NFTs, you had the judge in that case basically pointing out maybe that case would not have been brought if the government didn't want to go after NFTs. And he kind of got caught up in that. And so, I don't know, there is an element of that, of course, fraud's fraud as we've discussed in multiple episodes here, but it is interesting. And so, I guess that brings us to, as we are discussing, come the beginning of this trial, jurors will have to weigh not whether SPF is just ephemerally guilty or innocent. They're going to be judging on seven counts, seven charges specifically, if SPF is guilty. Importantly, they all kind of stem from a lot of the same things, like we said. FTX and Alameda, what was that relationship? What did SPF direct? And what exactly happened with the funds involved? So, just going through these, you and I have read a lot of this and heard a lot of people say these charges before, but to go through them once more. Seven counts now, used to be more, but for this particular trial, we're looking at seven counts. SPF is going to have to defend himself on these seven counts. Number one, wire fraud on the customers of FTX and conspiracy to commit wire fraud on the customers of FTX, wire fraud on lenders to Alameda Research and conspiracy to commit wire fraud on those lenders, conspiracy to commit securities fraud on investors in FTX, conspiracy to commit commodities fraud on customers of FTX in connection with purchase and sales of cryptocurrencies and swaps, and seven, conspiracy to commit money laundering. That's a lot of charges. And he'll face even more at his second trial in March, which I believe is scheduled. And that deals with the foreign corrupt practices charge, right? But these seven charges deal, as we've said before, not necessarily with the collapse of FTX, but the behavior that may have led to the collapse, or at least that's the narrative that prosecutors are going to try to argue. Yes. And if you ask SPF, as he kind of lays out in his documents, they all stem from the first count, which is the fact that, okay, did Sam have an intent to defraud? And as we covered from the very first episode in this series, the intent to defraud is interesting because you can't really hold him guilty if he didn't know what was going on at Alameda Research, which is why we covered it first as kind of the most important piece of his defense. Right. And Sam, look, in these documents, he points to his years-long commitment towards effective altruism, which is a philosophical movement that seeks to do the most good with every dollar you spend. Now I've seen, I personally have some experience researching this movement for stories, and I've seen some people misinterpret what it means. There are definitely different factions of the movement. Some of them, and the parts I personally empathize the most with, simply argue, hey, instead of donating to a politician here so they could run an extra ad, why don't you donate towards distributing malarial nets in Africa that could actually save people's lives? Something simple like that. When you start expanding those conclusions, you can start getting into tricky situations, one of which is the idea behind earning to give. The idea is, I could work as a pro bono lawyer my whole life helping a few clients, or I could start a crypto exchange, make billions of dollars, and then pay to completely revolutionize the justice system, or I could hire free lawyers, or I could lobby politics, and this is when it starts getting confusing, but Sam's stated goal, as he's always kept to, is he wants to do the most good for the most people. That's what the defense is going to portray. The prosecution, and I think the reason why one of the first things they did was lock down his deputies, get them to flip, get them on their side, they're the only ones, according to what Mark Litt told us, that are going to be able to say, really, definitively, this was Sam's intent, or at least, I think, point to doubts in how he presents his intent, and I do think that's going to be the crux, the relationship between Sam and his three top deputies who are testifying for the prosecution, Carolyn Ellison, Nishad Singh, and Gary Wang. Yeah, to go up against, as we highlighted before, to go up against three of your quote co-conspirators is a bit of a tricky thing, a three-on-one that you kind of got to overcome. Not always the easiest task at hand, but you're right to point out, I think, the idea of the government's case, and the defense's case, in terms of what happened, what is true, what is objective fact. And inevitably, that's where we're going to land at the end of this trial, is objective fact in the middle here. I don't know if you want to take the side of walking through what the defense might say happened here, in our little summary of the game, but the defense is going to go out there and say, look, our client is not guilty on any of these counts, because he didn't know what was going on. Essentially, yeah. I think the defense is going to argue that SPF placed too much trust in these deputies, and also, I'm really interested in hearing from Gary Wang, because from all the people in the FTX fiasco, he's one of the most mysterious. He was also friends with SPF for years. I believe they were college roommates, or he was friends with his brother in high school, something like that. They've known each other for a very long time, and to see this relationship come to a head in court might be really exciting. But yes, let's put you in the courtroom. Zach Abrams walks in. You've morphed bodies into the body of Mark Cohen. You're now Sam's defense attorney. You're sitting before Judge Kaplan, come the trial beginning. Your opening statements to the court are? Well, you didn't give me any time to reply, but it would be something along the lines of SPF has always tried to do the right thing, and he did it incredibly well. He built an incredibly powerful business that was only taken down when he placed too much faith in the wrong people, the wrong deputies, the wrong lawyers. Did he make mistakes? Yes. Has SPF admitted that over and over repeatedly? Did he plan on telling Congress I fucked up in the first line of his testimony? Yes. However, he doesn't see himself as the mustache-twiddling villain that a lot of people choose to see him as, who started out with the intent to create a fraud, instead through circumstances that perhaps he could have controlled, and he admits, look, I should have been running my company more instead of trying to lobby for crypto on Capitol Hill. But they might argue that FTX could have paid back the creditors had Sam remained in power. But at the end of the day, Sam didn't set out here to steal people's money and make their lives miserable. He set out to try to make the world better, and he messed up along the way. But he should not be thrown in prison for the rest of his life because of that. And that will be a tough case to be made if you believe kind of the news reports that have thus far come out, I suppose, about all of this. And I, on the other side, as the government, as the prosecutors in this podcast, would probably look at the facts quite differently than what you just outlined. I would say, if I was, I suppose, the leading attorney on this one, Danielle Sassoon, I would come out and I would say, well, we have a different way to paint the facts here. Basically, from the very beginning, from the very idea of FTX being created in its relationship with Alameda Research, this defendant, Sam Bankman-Fried, had always wanted to commit fraud and never, in any dealings with his alleged co-conspirators here, had any other plan other than defrauding customers out of their money, is what I'm going to show. And the way I'm going to show it is digging into a bunch of different problematic things that we've already kind of heard from John Ray out of the bankruptcy summation of what exactly happened and where funds went, which was Alameda was taking in customer deposits through a shady web of bank accounts and basically doing whatever they wanted to do with those funds and you had a bunch of problems then hit last year and you had the thing collapse and that was because of all the crimes that they committed and we will go one through one or one by one on how exactly that happened and oh yes, by the way, I have all the co-conspirators saying that the guy who's guilty of this is Sam Bankman-Fried. That's generally what I would do and I don't know, maybe it's going to work, maybe it's not. Well, I guess we'll find out come trial time. Well, so let me ask you, what do you think now is the best point that the defense has? As make believe prosecutor, what do I think is the best point that the defense has? Right. I'll say I think the best point that the prosecution has against my defense, well, what I thought was interesting was Sam plans to call an expert witness that says, look in the financial services industry, the co-mingling of funds is common, backdating agreements and signing them because they were verbal agreements made in the startup that didn't have great documentation is common, crypto is hard with regulation. This expert witness is going to argue that SPF was doing his best to navigate an incredibly difficult landscape. However, I feel like the prosecution's best point has to do with a lot of the ways that Sam presented his business. For example, there is a statement that John Ray, I believe, included in one of his debtor's reports, and that we included in one of our videos as well, where Sam Bankman-Fried said, look, the reason why I named my firm Alameda Research is that if you name your company, we do multinational crypto arbitrage, no bank is going to work with you, but everybody wants to work with a research institute. So he named his firm Alameda Research in order to escape the enhanced due diligence proposals. That to me is maybe not a smoking gun of evidence, but it certainly points to a philosophy that's towards cutting corners rather than doing everything the right way. And I think that that mindset is going to be incredibly difficult if the prosecution can create a narrative that shows a lot of backing to that thinking. Well, I think that is where the prosecution has a bunch of layups to make, because as I said, most importantly, they have Caroline Allison sitting there already who has pled guilty along with two others who have already pled guilty about what exactly happened. And in that sworn testimony that we've already seen, and again, who does what's going to happen once they take the stand, but essentially saying we did all of this at Sam's direction. And who knows, again, what kind of documents or what kind of pieces of information will pop up at trial to say that is the truth. And that could be pretty damning for the 12 jurors who will be in that jurors box, jury box to say, yeah, I think that's probably what happened here. So, again, I feel like a lot of the theatrics that we all see on Law & Order SVU, shout out Dick Wolf for what you've done for TV and courtrooms everywhere, but I don't necessarily think it's going to be like that in this trial since, as you said, we've already poured through all the documents and know who's going to say what here. And if you think about a three-on-one, as we've covered, it's not easy. Because I would say that it's a pretty big slam dunk for the prosecution to have some of the filings, and again, so much of what Sam has said on the record in terms of even setting up Alameda's accounts, obviously not good. If you're a defense attorney, you don't want them saying all of these things out there in the public, and you don't want a paper trail of all this. And I think that's what the prosecution has already showed that they have, which is you signed up for this bank account, you weren't truthful then, look at what it led to. But you say you're torn, so what do you think are the biggest points the defense has? If they somehow get Sam Bankman free to quit it, what will have done it? I still think the most important witness here, and I think his actions show why and reveal that this is true, is that Caroline Ellison is the government's strongest witness. And I think that's why they reacted so strongly since we started talking about it in episode one of this series, that as soon as he started to maybe, potentially, all you need is probable cause that what he was doing was witness tampering. The second that was there, the government swept in and said, we have to put Sam Bankman freed behind bars because he's intimidating our witnesses. And I think, you might debate me on this, but I think if it was anyone else, they wouldn't have cared so much because Ryan Miller, one of the other witnesses here, basically was the second example the judge used to put Sam Bankman freed behind bars. And that happened back in January. So call it strike one if you want, but I just think it's a weaker pitch essentially is why it took Caroline Ellison being quote unquote targeted here because the government knows how important that testimony is and have seen what she's prepared to admit to. And if she says, we did all of this, that's not disputed, definitely Alameda and definitely the $8 billion gap between Alameda and FTX exists. That's the one piece of Sam's story that matches with the government story. What doesn't match is who knew what and when, and if you have Caroline Ellison with proof saying, now Sam knew and he directed it to us, that would be the most damning thing for the defense, I would say. Yeah, that's certainly, well, in regards to what you were saying about Caroline, I think that's possible though. It's also true that that attempted witness tampering was in the New York Times, whereas with Ryan Miller, it was a telegram message to him that he notified the public of, but it didn't become a huge news story. But yeah, when the judge explained it, I believe in the courtroom, or maybe it was the prosecution's lawyers, but if I'm somebody else who's considering testifying against SBF, and I see that he's willing to publicize our private correspondences to embarrass me, even correspondences that don't relate strictly to the business, which was the case with the Caroline Ellison New York Times leaks, seeing that he has the willingness to do that might affect my decision to testify. So I think that justification for locking him up to keep a closer eye on him does ring true to me, though as we've discussed before, it seems like such a win for the prosecution, if they're still trying to get a plea deal out of this, trying to avoid going to trial, is putting him in a much less hospitable situation, a situation where he's much more likely to say, get me out of here, I'll sign whatever confession you want. And that brings us to, I suppose, Bernie Madoff, because as everyone's always talked about, and to answer your question about what is the biggest thing to highlight here, I think maybe as a contrarian, watching all the news coverage and comparisons to Bernie Madoff, my gut made me say, hold up now, SBF isn't Bernie Madoff, and of course I think you would agree, even coming into this kind of not having met Sam before, you would also say that the facts do stipulate that FTX was a real business, even Mark Litt, Bernie Madoff's former prosecutor said, he's no Bernie Madoff, this is not a Ponzi scheme. But fraud is fraud, and it'll have to show, this case will show what he knew and what he said and may have misrepresented to customers and or investors. And if we use Bernie Madoff as a jumping off point, as we discussed, Bernie Madoff took a plea deal, and kind of not even a deal, he just pled guilty, and he pled guilty because that was kind of a family affair, and if you're going to be the fall guy, you don't have to give up anybody else, you go to jail, and by not really negotiating at all, the man wound up with 150 years in prison, and died in prison, so that's Bernie Madoff, and that's a Ponzi scheme. Where I look at SBF and kind of why the feeling is being torn is because, if you read the media coverage, it's not presented that way, it's presented as, SBF is Bernie Madoff, he's an evil man, and I don't think that's necessarily where the truth falls in this story. But at the same time, it's a shit ton of money, it's billions of dollars that people have been conned, quote, unquote, conned out of. And- Or at least objectively, they lost it, we've talked to Travis- Yes, but that's what I'm struggling with too, I mean, I'm not even torn about SBF necessarily, as much as I am torn about, I lost money in BlockFi, what about that? People lost money in Voyager. Both companies, by the way, as we covered in episode three, that SBF tried to step in and save, so from where I sat, if he was successful in that, great, you know, but not the case. You don't see Flori Marquez getting charged, Okszmashinsky is facing now charges of fraud from Celsius, but the question there being, 150 years for Bernie Madoff, billions of dollars in, quote, unquote, losses for customers at FTX, billions of losses in people who fell for Madoff's Ponzi scheme, like where does the punishment fall? And what does that look like? And is that justice? Well, that's a big question. I mean, it's tough for me to think that the government spending money to put SBF away for a long time is better than somehow just having him work for restitution, though I know, like, I don't know, I've complicated feelings around the justices. Like building another FTX, making money and then giving it away? Not necessarily building another FTX, but if you take SBF's stated goal as true, if the world would best be served by locking SBF up in a cage. What's interesting is, I guess, what's changed, right, since I visited Sam and he gave me his defense. What's changed a bit is what we've seen with John Ray in the bankruptcy side, because as we've discussed with FTX victims, you know, their claims have technically risen. People are getting a little bit more optimistic that FTX might come back and start making money to where they get paid back, not just pennies on the dollar, but maybe closer to a dollar, not super far away. And you also have, I guess, this idea of if that were to happen, doesn't it also prove that FTX maybe could have not been a fraud? Like that it could have existed in a way that if there weren't a liquidity crisis, maybe again because as we highlighted in episode three, because Binance and CZ saw a chance to strike, could it have survived and could we be looking at this entirely differently and Sam's life would be entirely different as well? And those are weird things because there's not really an apples to apples, certainly in looking at Bernie Madoff, but even other crimes. There's not a scenario in which you murder someone and maybe if things had gone differently, you didn't murder him, I don't think. Like it's kind of a binary, maybe a manslaughter situation, but you're still acting with intent. And I think that that's at the heart of kind of what his defense is. At no point was my intent, I'm just going to run away with a ton of money. I find this interesting. In the docs, he talks about something that happened this past year at the London Metal Exchange. I don't know if you saw this at all, but for some reason, the price of nickel had begun to shoot up and there was a big seller that was caught in a short squeeze and basically this trade was about to blow up and it would have caused a lot of problems and instead of doing the right thing and carrying out the trade as it would have happened, they shut down the entire London Metal Exchange and they basically bailed this one large position holder out at the expense of everybody else. And it is interesting to think about what would have happened if somehow trading on FTT had stopped or if there were more mechanisms to come in and prevent these bank runs, which are so common in crypto. And I think the problem is, crypto has been fighting for the last decade in a sense over how much government regulation is appropriate. You have plenty of people who say there should be absolutely none, there should be only DeFi code is law, it should exist on its own island. And there's plenty of other also really smart people who say that this is the future of finance, but it's important to provide investor protections, it's important to integrate it with the financial system and by doing so, we can really boost the power of crypto. And it is true that governments are willing to step in and do incredibly, you know, sure, we saw that in 08, but does that make its way into a case like this? Does it sway a juror? Well, what I wanted to ask you before, and this is less about the jurors who, who knows how much the jurors will really understand all of this. But what I wanted to ask you was, if SPF is found guilty, what do you think this means for crypto in the United States? Because us as people who know a lot about this case, see it as a case of business fraud that involves a crypto business, but I think there's a chance that if SPF is found guilty, it's seen as much more of a value judgment on the crypto industry as a whole. He's seen as the crypto kingpin who fell rather than just the crypto businessman who happened to run into business issues completely unrelated to whatever the blockchain is. Well, if that's the case, then the defense is doubly screwed in my opinion, because ask any layperson outside of crypto if crypto is a scam. And I think you're probably going to get more of a yes than a no on that one. So if SPF is a lightning rod for all the wrongdoing in crypto, God save the man out there, because yoish, I don't think I would want to be in that seat, quite honestly. But I do think that is kind of one of the elements, right? And like you and I, when we poured over kind of the defense that Sam gave me, the question was like, how much of this is really a legal defense and how much of it is just, hey, is this right? And like, of course, that's what any defendant's going to do is, hey man, do you really think I should go to jail? And I think that, you know, there's a lot of pieces in here once we put them in front of Mark Litt and said, how much of this is going to hold water in the trial? You had him basically by gut reaction throwing out pieces of these, including what we covered in episode two, which is also unclear if it's going to be allowed at the trial, which is advice of counsel, which is my lawyer said I was fine, bro. And I don't know, you know, you start piecing these things together and certainly, sure, I mean, I guess put me in the jurors box, put you in the jurors box, put anyone listening to this in the jurors box, like, will you have at some point during this trial reactions of like, ooh, like, yeah, that's maybe not fair to the guy.

"carolyn ellison" Discussed on Unchained

Unchained

06:20 min | 3 weeks ago

"carolyn ellison" Discussed on Unchained

"Hello and thanks for tuning in to listen to this week's Unchained weekly news cap. I'm Michael Del Castillo, a Knight Badgett fellow at Columbia University. In a recent development in the FTX case, the exchange's former COSIO Ryan Salome has pleaded guilty to federal charges, including conspiracy to make unlawful political contributions and defraud the Federal Election Commission, as well as operating an unlicensed money-transmitting business. This comes confirmed to us by U.S. Attorney Damian Williams. The plea, recorded in the Southern District of New York, comes with an obligation for Salome to forfeit a whopping $1.5 billion with the hearing scheduled for next March 6. Salome, who managed political donations at FTX, is the latest former executive at the exchange to admit to criminal conduct, joining Nishad Singh, Carolyn Ellison and Gary Wang, who are all expected to testify. These are developments, part of a larger case involving FTX's founder Sam Bangman Fried, who is facing multiple charges but has pleaded not guilty. As the legal pressures mount on Sam Bangman Fried, the spotlight this week is on his lawyers' increasingly fervent requests for him to be temporarily released from jail, as they argue, to be able to adequately prepare for his imminent October trial. Despite their client having already been granted access to an air-gapped laptop for extended hours at the Metropolitan Detention Center, Bangman Fried's defense team contends that the current setup falls short of allowing a meaningful opportunity to build a robust defense, citing unreliable internet and insufficient battery life on the laptop provided. Simultaneously, the courtroom is buzzing with debates over the admissibility of evidence concerning FTX's bankruptcy and a controversial ad featuring Seinfeld creator and perennial ludite Larry David. The prosecution insists that the evidence is vital to portraying the complete narrative of Bangman Fried's alleged crimes, including the alleged misappropriation of customer funds. In a related development, the U.S. District Court for the Southern District of New York sanctioned a rare repurchase agreement on October 28 allowing regulated securities trading at Robinhood to buy back some of its own stock worth an estimated $605 million from Bangman Fried. That's according to an SEC filing from last month, reported by CoinDesk late last week. As FTX's bankruptcy hearing nears, recent Solana wallet activities have ignited fears of a potential token dump, with around $10 million in tokens associated with an FTX wallet already moved through the wormhole bridge. Meanwhile, filings show what many might consider extravagant corporate expenditures, including a $2.5 million yacht for former COSEO Samuel Trabuco, among other internal cash transfers to executives. The U.S. Department of Justice has intensified its case against former Celsius CEO Alex Mashinsky, with a federal judge approving a restraining order that freezes his bank accounts and real estate assets, including a residential home in Texas. This move comes as part of an ongoing criminal case where Mashinsky is facing charges of alleged fraud and market manipulation, to which he has pleaded not guilty. U.S. Attorney Damian Williams emphasized the necessity of the asset freeze to prevent what he's concerned might be interference from third parties before the relevant institutions can be notified. The order includes accounts at several financial institutions, including Goldman Sachs, Merrill Lynch and SoFi Bank, mandating the immediate cessation of all transfers from the affected accounts. Also this week, lawyers representing the Celsius cryptocurrency exchange filed a complaint against private lending platform Equities First, seeking to recover assets amounting to approximately $439 million in cash and Bitcoin. They claim they've been owed since July 2022. The filing, which also names Equities First CEO Alexander Christie as a defendant, stems from unreturned collateral from loans initiated in 2019. Bankrupt crypto lender Genesys is suing its parent company Digital Currency Group and its affiliate DCG International Investments, seeking repayment of loans amounting to $600 million. The lawsuit alleges that DCIG failed to fully repay a loan converted to a fixed term due in May 2023 with an outstanding balance of around $116 million. Additionally, Genesys claims DCG attempted to convert four loans worth about $500 million into open loans that don't typically have an end date, a move Genesys rejected. In a related note, Genesys Global Trading is set to voluntarily wind down its U.S.-based spot crypto trading operations later this month, citing quote business reasons end quote in a statement sent to Unchained. The New York subsidiary, holding a bit license and registered with the SEC and FINRA, plans to halt its over-the-counter trading services by September 18, with all open accounts to be closed by the end of the month. This move follows the trend of other market makers like GSR, Wintermute and Jump Crypto reducing their trading activities on U.S. platforms amidst increased regulatory scrutiny. Despite the closure, the company's international subsidiary, GGC International Limited, will continue its spot and derivatives trading services. In related news, federal officials, including FBI agents and SEC staff, met with Gemini co-founder Cameron Winklevoss to discuss his fraud allegations against digital currency group CEO Barry Silbert, according to a Bloomberg report. Despite Silbert's denials and ongoing review into DCG and its subsidiary Genesys Global Capital's financials is being conducted, Silbert has not been charged with any wrongdoing as per a DCG spokesperson.

"carolyn ellison" Discussed on Unchained

Unchained

03:58 min | Last month

"carolyn ellison" Discussed on Unchained

"You got it. Thanks for having me. Happy Friday, and thanks for tuning in to listen to this week's Unchained Weekly News Recap. I'm Michael Del Castillo, a night budget fellow at Columbia University. This week, the legal woes of embattled former CEO of FTX, Sam Bankman-Fried, intensified as the U.S. Department of Justice took multiple actions against him. On Monday, the DOJ attorney in charge of the investigation filed a motion to bar all seven of Bankman-Fried's proposed expert witnesses, citing, quote, an array of deficiencies, end quote. The witnesses include legal and business professionals whose testimonies, according to the DOJ, would, quote, serve no other purpose than to provide an expert patina to inadmissible hearsay testimony about the defendant's supposed lack of criminal knowledge or intent, end quote. Harsh words coming from the DOJ. But making matters worse, in a letter to the judge overseeing the case the following day, the same attorney questioned the adequacy of Sam Bankman-Fried's, quote, advice of counsel, end quote, defense strategy and his upcoming October trial, urging him to provide more details or face limitations on his defense. Bankman-Fried's legal team has also been grappling with what they describe as, quote, inadequate, end quote, prison technology facilities. While he was granted limited computer access, his lawyers argue that the limitations hamper his ability to prepare for trial. They have appealed for more extensive pretrial release measures, stating that the current conditions violate his Sixth Amendment rights. However, the DOJ has argued that his access to technology in pretrial detention goes, quote, above and beyond, end quote, what other defendants have been offered. Adding to the complexity, Bankman-Fried's lawyers objected to four million additional pages of discovery evidence introduced by the DOJ. They argue that the addition of so much evidence so close to the trial is, quote, plainly inadequate and hampers their client's right to defend himself. Bankman-Fried, whose charges include fraud and money laundering, has appealed his jail term for alleged witness tampering when he shared the writings of former colleague Carolyn Ellison, who is expected to testify against him. His lawyers claim he was merely exercising his First Amendment rights. The U.S. Securities and Exchange Commission has filed a sealed motion against cryptocurrency exchange Binance, raising eyebrows across the industry. The confidential filing, which includes over 30 exhibits, has led experts to speculate that the world's largest cryptocurrency exchange by trading volume, conducting more than $6 billion in trades over the past 24 hours, may be under criminal investigation by the U.S. Department of Justice. Former SEC official John Reed Stark proposed in a social media post that the sealed documents likely contain, quote, secret details, end quote, about a DOJ criminal probe, adding that those details could possibly involve money laundering allegations against Binance and linking to a more detailed explanation in his personal LinkedIn profile. Stark, who left the SEC in 2009 and is now a cybersecurity consultant, described the move as a, quote, rare tactic, claiming that SEC usually operates with high transparency.

"carolyn ellison" Discussed on The Breakdown

The Breakdown

14:26 min | Last month

"carolyn ellison" Discussed on The Breakdown

"Welcome back to The Breakdown with me and LW. It's a daily podcast on macro, Bitcoin and the big picture power shifts remaking our world. What's going on, guys? It is Monday, August 14th, and today we are talking about a wild set of amicus briefs filed in the Coinbase against SEC case. Before we get into that, however, if you are enjoying The Breakdown, please go subscribe to it, give it a rating, give it a review. Or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. All right, friends. Well, today, as I said, the main focus of the show is a slew of amicus briefs filed in the Coinbase case at the very end of last week. But first, a quick update in the SPF saga. Now, I'm sure all of you guys are at least a little bit familiar with what happened at this point, but let's present it for completeness. TLDR, after months of playing fast and loose with bail conditions, Sam has been sent to jail to await his trial. Now, the big catalyst for this was, of course, last month's leaking parts of former Alameda CEO Carolyn Ellison's journal to The New York Times. Carolyn was the CEO of Alameda during the final months of operations, was at times Sam's girlfriend, and will also be a key witness in Sam's trial. Now, SPF had said through lawyers that he was merely trying to, quote, give his side of the story. This is something that he has done a lot of, apparently. Indeed, he has notched up over 100 phone calls with one New York Times journalist in particular, and that's just one of the many reporters that he has been in touch with. The prosecutor argued effectively that this was indirect witness tampering. They said that even though there hadn't been an overt communication with Ellison, the intention was clear, stating, I think the fact the defendant was more subtle in his methods than a mobster doesn't mean it was benign. Now, the judge ultimately sided with the DOJ, finding that Sam's conduct was closer to witness intimidation than constitutionally protected public defense. During the hearing on Friday, the judge said Sam had been willing to, quote, risk crossing the line in an effort to get right up to the line wherever it is. Of Ellison's writings, which Sam shared, the judge said, The documents are in part personal and intimate. They are personally oriented, not business oriented. They are something that someone who had been in a relationship would be unlikely to share with anyone except to hurt and frighten the subject. Ultimately, the judge said, My conclusion is there is probable cause to believe the defendant has attempted to tamper with witnesses at least twice. There is a reputable presumption that there is no set of conditions that will ensure Bankman-Fried will not be a danger. So the other witness tampering attempt that the judge was referring to came shortly after Sam's arrest and release on bail when he had reached out to former FTX U.S. General Counsel Ryan Miller, suggesting that they stay in touch, coordinate communications, etc. Sam had also previously broken bail conditions when he had used the VPN to access the Internet, something that he claimed was just to watch the NFL playoffs, which very few people bought as totally true. Part of Sam's argument for remaining out of jail had been that incarceration would make it more difficult for him to prepare his defense. Prior to locking Sam up, the judge ensured that he would have access to a laptop to continue his trial preparation, which it seems like is just about the only good thing about the facility that he is on his way to. The judge said, I am focused on the possibility that he will be detained at the MDC, not on anyone's list of five-star facilities. That said, I understand he could have a dedicated laptop at the MDC 9, 10, 11 hours a day. Sam's trial is set to begin on October 2nd. His legal team has, of course, appealed the decision to revoke his bail and requested that he remain on house arrest pending appeal, but were denied on that motion. Former journalist Dan Nguyen really captured, I think, the sensibilities of the entire Twitter sphere when he wrote, SPF got one of the sweetest bail deals in history, and all he had to do was chill at his parents' Stanford home, play with the new dog his parents bought for him, and not use a VPN to secretly commit more crimes on the Internet, and yet, clown face emoji. Anyways, guys, just another gross chapter in a bad story. But with that, let's move on to something much more positive. On Friday, Blockchain Association Chief Policy Officer J. Chivinsky wrote, Today is a fun day. The deadline for amicus briefs on Coinbase's motion for judgment on the pleadings of the SEC's enforcement action. I expect to see many excellent briefs on many different issues. They should start hitting the docket soon. And indeed, hit they did. On Friday, a slew of briefs were filed in support of Coinbase's motion to dismiss the SEC's lawsuit. Now, most crypto lawsuits from the SEC have seen numerous amicus or friend-of-the-court briefs filed, but the Coinbase lawsuit attracted more attention from the legal community than usual. The Coinbase motion for judgment on the pleadings was supported by venture firms Paradigm and A16Z, who filed a joint brief, crypto lobbyists including the Blockchain Association, the Chamber for Digital Commerce and the DeFi Education Fund, and perhaps most notable were briefs from Senator Cynthia Lummis, as well as a group of six legal scholars. Coinbase is, of course, being sued for offering the sale of unregistered securities. The SEC's lawsuit hinges on the claim that 13 tokens offered on Coinbase's centralized exchange are securities. In addition to alleging that the main trading venue requires registration as a securities exchange, the SEC also alleges that Coinbase's self-hosted wallet is an unregistered securities brokerage and clearing agency. Finally, the lawsuit also alleged that Coinbase's staking product is a securities offering. As usual, all of these claims rely on the Howey Test, which is a Supreme Court test to determine when a transaction is deemed to be the sale of an investment contract. Coinbase's argument is that none of the tokens they offer fully satisfy the test, and as such, the lawsuit should be thrown out without the court hearing any further facts of the case. In addition, Coinbase is arguing that the SEC has attempted to expand its jurisdiction beyond the authority it was granted by Congress. This argument, as we have discussed, is brought under the Major Questions Doctrine, which is a relatively recent legal doctrine put forward by the Supreme Court. The Major Questions Doctrine holds that administrative agencies must have explicit authority from Congress to oversee an industry which forms a major part of the U.S. economy. So now let's go through the set of different briefs kind of organized in the context that they came in. We'll start with the VC and lobbyist briefs. The joint brief from Paradigm and A16Z focused extensively on the damage that could be done to the industry if the SEC's view of the law was held to be correct. They wrote, The brief noted that the SEC claimed crypto tokens themselves embody the terms of an investment contract, so continued to carry a classification as securities into the secondary markets long after their initial sale. This approach was rejected in the recent Ripple case, but remains contentious among federal court judges. The brief warned that allowing the SEC to take this approach could extend their reach into an endless array of commonly sold assets including fine art, classic cars, and vintage wines. Now, a group of crypto lobbyists led by the Blockchain Association said in their brief that the SEC seeks to cast aside the nearly century-old understanding of an investment contract and usurp Congress's authority to decide how to regulate a burgeoning industry. They claimed that the statutory text, history, precedent, and common sense all foreclosed the SEC's attempt to rewrite the definition of investment contract to reach digital asset sales unaccompanied by any ongoing contractual obligations. In a Twitter thread discussing the joint brief, G. Kim, the General Counsel at the Crypto Council for Innovation, wrote, The SEC is trying to short-circuit the legislative process and seize the power to resolve questions of massive economic and political importance by presenting its flawed interpretation in enforcement actions. The Chamber of Digital Commerce echoed their fellow lobbyists in making the point that the SEC is exceeding their authority and using inappropriate methods to bring the crypto industry to heel. They wrote that the SEC is choosing to use the blunt and unpredictable tool of enforcement proceedings to the exclusion of all other methods. They characterized the lawsuit as Coinbase's turn on the SEC's roulette wheel. Now, the DeFi Education Fund took a different approach, focusing their brief on the technical side of the case and linking the underlying functionality of crypto products to the legal arguments. The DeFi lobbyist explained that both Coinbase's staking service and wallet are software products rather than regulated financial service products. They argued that a decision in favor of the SEC's overly expansive theories related to this software application would have a chilling effect on the developers and service providers that innovate in DeFi and consequently the users of this technology. With regard to the wallet, they pointed out that Coinbase does not route orders nor take control of customer assets, so it's difficult to see how they could be viewed as a broker in that context. In discussing staking, they noted that while Coinbase administers the validators which deliver staking rewards to customers, their, quote, function is squarely ministerial as an IT service provider. Put another way, Coinbase provides an IT product that leads to a financial reward, but that reward stems from the crypto protocols themselves rather than from Coinbase's efforts. Now, maybe the most striking brief in support of Coinbase was co-signed by not one but six law professors with expertise in securities law. This includes experts from UCLA, Boston University, Fordham Law School, Widener University, the University of Chicago Law School, and Yale Law School. And importantly, this isn't a group of outspokenly crypto-friendly professors. Between them, this group has written multiple textbooks and authored countless academic papers. Some of them quite literally wrote the book on securities law. Their brief focuses on the definition of the term investment contract and argues that it has a much more limited scope than the SEC seems to think. A key part of the SEC's crypto lawsuits has been the idea that a crypto token is one part of an overall investment scheme which does not require a formal contract between the parties. This would mean that a token could be considered a security even when the issuer doesn't make any promises to holders and doesn't take any direct investment from purchasers. The professors rejected this as ignorant of the history of securities law. Their opinion is that the Securities Act of 1933 used the very well-established language of investment contract to refer specifically to situations where, quote, the investor receives, in exchange for an investment, a contractual undertaking or right to an enterprise's income, profits, or assets. They argued that this definition of an investment contract had been present in state legislation and cases leading up to the passing of federal regulation in 1933. They added that this definition has been consistently used by the courts to decide lawsuits following Howey to this day. This historical argument flies in the face of SEC briefs, which have often discarded state legislation and cases prior to 1933 as irrelevant. The legal scholars wrote that nowhere in the Howey decision does the Supreme Court, quote, suggest that it was doing away with the court textual and historical anchor of the statutory term investment contract, i.e. contractual undertakings. Rather, Howey's reference to a scheme or transaction simply reflected the instruction that courts should consider the economic reality of a business venture to determine whether an investment contract exists. The law professors suggested that by agreeing with the SEC's definition of an investment contract, the court would be going against almost a century of case law. They urged that, quote, The court should adhere to the settled meaning of the term, consistently applied by the state courts interpreting state blue sky laws, as well as by the federal appellate courts before and since Howey. Under that settled meaning, an investment contract requires contractual undertakings to deliver future value, reflecting the income, profits, or assets of a business. Paradigm policy director Justin Slaughter writes, It takes real skill to so mismanage the situation that you have serious institutionalists like Professors Macy and Hammermesh filing amici briefs against the SEC in an enforcement case. This case is on track to blow up the SEC's powers and maybe weaken agency powers across the board. That people invested in the current securities regime are still siding against the current SEC position speaks volumes. Finally, Senator Cynthia Lummis has also filed an amicus brief addressing the question of whether the SEC has overreached its authority. Lummis began her brief by drawing the court's attention to the numerous bipartisan efforts currently underway in Congress to craft regulations for the crypto industry. She wrote that she, Has a special interest in upholding the Constitution's separation of powers by ensuring that federal administrative agencies do not exceed the authority conferred upon them or encroach upon Congress's ongoing legislative efforts. Amicus believes that the SEC's approach to enforcement in this case, and in the crypto asset industry more broadly, contravenes that separation of powers.Now given that the cornerstone of any major questions doctrine argument is that an administrative agency is exceeding the powers granted to it by Congress, it seems extremely relevant to be told by a sitting US Senator that they believe this to be the case. Lummis continued, When Congress created the SEC to regulate securities markets, it did not grant the SEC power to reimagine the definition of securities to expand the agency's sphere of influence into other asset classes or to encroach on other agencies and regulatory schemes. The SEC's attempt to shoehorn an entire new class of assets into the existing definition of a security and thereby add to the definition enumerated by Congress exceeds the SEC's authority, encroaches on Congress's lawmaking, and contravenes the separation of powers. Put simply, she said, Basically, the brief is an attempt to provide evidence to the court that Congress is not content with the status quo when it comes to crypto regulation. Much of the brief describes the various ongoing legislative efforts. And after outlining these bills, Lummis writes, The multitude of interests at stake require a holistic approach beyond the scope of a single agency. Ultimately, she says, Lummis urged the court to, Now, I think where most of the analysis lands, holding aside deep legal minutiae, which obviously will become very important in terms of how the case actually resolves, is from a sentiment shift it feels to people, of course, outside observers, that this is going to be a hard one for the SEC. Algorithmic trading firm CEO Xi Zhen writes, Now, I would never go that far given that Let's hope that these friends of the court are correct. Appreciate you guys listening as always. Until next time, be safe and take care of each other. Peace.

A highlight from A Flurry of Amicus Briefs in Coinbase vs. SEC

The Breakdown

14:26 min | Last month

A highlight from A Flurry of Amicus Briefs in Coinbase vs. SEC

"Welcome back to The Breakdown with me and LW. It's a daily podcast on macro, Bitcoin and the big picture power shifts remaking our world. What's going on, guys? It is Monday, August 14th, and today we are talking about a wild set of amicus briefs filed in the Coinbase against SEC case. Before we get into that, however, if you are enjoying The Breakdown, please go subscribe to it, give it a rating, give it a review. Or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit .ly slash breakdown pod. All right, friends. Well, today, as I said, the main focus of the show is a slew of amicus briefs filed in the Coinbase case at the very end of last week. But first, a quick update in the SPF saga. Now, I'm sure all of you guys are at least a little bit familiar with what happened at this point, but let's present it for completeness. TLDR, after months of playing fast and loose with bail conditions, Sam has been sent to jail to await his trial. Now, the big catalyst for this was, of course, last month's leaking parts of former Alameda CEO Carolyn Ellison's journal to The New York Times. Carolyn was the CEO of Alameda during the final months of operations, was at times Sam's girlfriend, and will also be a key witness in Sam's trial. Now, SPF had said through lawyers that he was merely trying to, quote, give his side of the story. This is something that he has done a lot of, apparently. Indeed, he has notched up over 100 phone calls with one New York Times journalist in particular, and that's just one of the many reporters that he has been in touch with. The prosecutor argued effectively that this was indirect witness tampering. They said that even though there hadn't been an overt communication with Ellison, the intention was clear, stating, I think the fact the defendant was more subtle in his methods than a mobster doesn't mean it was benign. Now, the judge ultimately sided with the DOJ, finding that Sam's conduct was closer to witness intimidation than constitutionally protected public defense. During the hearing on Friday, the judge said Sam had been willing to, quote, risk crossing the line in an effort to get right up to the line wherever it is. Of Ellison's writings, which Sam shared, the judge said, The documents are in part personal and intimate. They are personally oriented, not business oriented. They are something that someone who had been in a relationship would be unlikely to share with anyone except to hurt and frighten the subject. Ultimately, the judge said, My conclusion is there is probable cause to believe the defendant has attempted to tamper with witnesses at least twice. There is a reputable presumption that there is no set of conditions that will ensure Bankman -Fried will not be a danger. So the other witness tampering attempt that the judge was referring to came shortly after Sam's arrest and release on bail when he had reached out to former FTX U .S. General Counsel Ryan Miller, suggesting that they stay in touch, coordinate communications, etc. Sam had also previously broken bail conditions when he had used the VPN to access the Internet, something that he claimed was just to watch the NFL playoffs, which very few people bought as totally true. Part of Sam's argument for remaining out of jail had been that incarceration would make it more difficult for him to prepare his defense. Prior to locking Sam up, the judge ensured that he would have access to a laptop to continue his trial preparation, which it seems like is just about the only good thing about the facility that he is on his way to. The judge said, I am focused on the possibility that he will be detained at the MDC, not on anyone's list of five -star facilities. That said, I understand he could have a dedicated laptop at the MDC 9, 10, 11 hours a day. Sam's trial is set to begin on October 2nd. His legal team has, of course, appealed the decision to revoke his bail and requested that he remain on house arrest pending appeal, but were denied on that motion. Former journalist Dan Nguyen really captured, I think, the sensibilities of the entire Twitter sphere when he wrote, SPF got one of the sweetest bail deals in history, and all he had to do was chill at his parents' Stanford home, play with the new dog his parents bought for him, and not use a VPN to secretly commit more crimes on the Internet, and yet, clown face emoji. Anyways, guys, just another gross chapter in a bad story. But with that, let's move on to something much more positive. On Friday, Blockchain Association Chief Policy Officer J. Chivinsky wrote, Today is a fun day. The deadline for amicus briefs on Coinbase's motion for judgment on the pleadings of the SEC's enforcement action. I expect to see many excellent briefs on many different issues. They should start hitting the docket soon. And indeed, hit they did. On Friday, a slew of briefs were filed in support of Coinbase's motion to dismiss the SEC's lawsuit. Now, most crypto lawsuits from the SEC have seen numerous amicus or friend -of -the -court briefs filed, but the Coinbase lawsuit attracted more attention from the legal community than usual. The Coinbase motion for judgment on the pleadings was supported by venture firms Paradigm and A16Z, who filed a joint brief, crypto lobbyists including the Blockchain Association, the Chamber for Digital Commerce and the DeFi Education Fund, and perhaps most notable were briefs from Senator Cynthia Lummis, as well as a group of six legal scholars. Coinbase is, of course, being sued for offering the sale of unregistered securities. The SEC's lawsuit hinges on the claim that 13 tokens offered on Coinbase's centralized exchange are securities. In addition to alleging that the main trading venue requires registration as a securities exchange, the SEC also alleges that Coinbase's self -hosted wallet is an unregistered securities brokerage and clearing agency. Finally, the lawsuit also alleged that Coinbase's staking product is a securities offering. As usual, all of these claims rely on the Howey Test, which is a Supreme Court test to determine when a transaction is deemed to be the sale of an investment contract. Coinbase's argument is that none of the tokens they offer fully satisfy the test, and as such, the lawsuit should be thrown out without the court hearing any further facts of the case. In addition, Coinbase is arguing that the SEC has attempted to expand its jurisdiction beyond the authority it was granted by Congress. This argument, as we have discussed, is brought under the Major Questions Doctrine, which is a relatively recent legal doctrine put forward by the Supreme Court. The Major Questions Doctrine holds that administrative agencies must have explicit authority from Congress to oversee an industry which forms a major part of the U .S. economy. So now let's go through the set of different briefs kind of organized in the context that they came in. We'll start with the VC and lobbyist briefs. The joint brief from Paradigm and A16Z focused extensively on the damage that could be done to the industry if the SEC's view of the law was held to be correct. They wrote, The brief noted that the SEC claimed crypto tokens themselves embody the terms of an investment contract, so continued to carry a classification as securities into the secondary markets long after their initial sale. This approach was rejected in the recent Ripple case, but remains contentious among federal court judges. The brief warned that allowing the SEC to take this approach could extend their reach into an endless array of commonly sold assets including fine art, classic cars, and vintage wines. Now, a group of crypto lobbyists led by the Blockchain Association said in their brief that the SEC seeks to cast aside the nearly century -old understanding of an investment contract and usurp Congress's authority to decide how to regulate a burgeoning industry. They claimed that the statutory text, history, precedent, and common sense all foreclosed the SEC's attempt to rewrite the definition of investment contract to reach digital asset sales unaccompanied by any ongoing contractual obligations. In a Twitter thread discussing the joint brief, G. Kim, the General Counsel at the Crypto Council for Innovation, wrote, The SEC is trying to short -circuit the legislative process and seize the power to resolve questions of massive economic and political importance by presenting its flawed interpretation in enforcement actions. The Chamber of Digital Commerce echoed their fellow lobbyists in making the point that the SEC is exceeding their authority and using inappropriate methods to bring the crypto industry to heel. They wrote that the SEC is choosing to use the blunt and unpredictable tool of enforcement proceedings to the exclusion of all other methods. They characterized the lawsuit as Coinbase's turn on the SEC's roulette wheel. Now, the DeFi Education Fund took a different approach, focusing their brief on the technical side of the case and linking the underlying functionality of crypto products to the legal arguments. The DeFi lobbyist explained that both Coinbase's staking service and wallet are software products rather than regulated financial service products. They argued that a decision in favor of the SEC's overly expansive theories related to this software application would have a chilling effect on the developers and service providers that innovate in DeFi and consequently the users of this technology. With regard to the wallet, they pointed out that Coinbase does not route orders nor take control of customer assets, so it's difficult to see how they could be viewed as a broker in that context. In discussing staking, they noted that while Coinbase administers the validators which deliver staking rewards to customers, their, quote, function is squarely ministerial as an IT service provider. Put another way, Coinbase provides an IT product that leads to a financial reward, but that reward stems from the crypto protocols themselves rather than from Coinbase's efforts. Now, maybe the most striking brief in support of Coinbase was co -signed by not one but six law professors with expertise in securities law. This includes experts from UCLA, Boston University, Fordham Law School, Widener University, the University of Chicago Law School, and Yale Law School. And importantly, this isn't a group of outspokenly crypto -friendly professors. Between them, this group has written multiple textbooks and authored countless academic papers. Some of them quite literally wrote the book on securities law. Their brief focuses on the definition of the term investment contract and argues that it has a much more limited scope than the SEC seems to think. A key part of the SEC's crypto lawsuits has been the idea that a crypto token is one part of an overall investment scheme which does not require a formal contract between the parties. This would mean that a token could be considered a security even when the issuer doesn't make any promises to holders and doesn't take any direct investment from purchasers. The professors rejected this as ignorant of the history of securities law. Their opinion is that the Securities Act of 1933 used the very well -established language of investment contract to refer specifically to situations where, quote, the investor receives, in exchange for an investment, a contractual undertaking or right to an enterprise's income, profits, or assets. They argued that this definition of an investment contract had been present in state legislation and cases leading up to the passing of federal regulation in 1933. They added that this definition has been consistently used by the courts to decide lawsuits following Howey to this day. This historical argument flies in the face of SEC briefs, which have often discarded state legislation and cases prior to 1933 as irrelevant. The legal scholars wrote that nowhere in the Howey decision does the Supreme Court, quote, suggest that it was doing away with the court textual and historical anchor of the statutory term investment contract, i .e. contractual undertakings. Rather, Howey's reference to a scheme or transaction simply reflected the instruction that courts should consider the economic reality of a business venture to determine whether an investment contract exists. The law professors suggested that by agreeing with the SEC's definition of an investment contract, the court would be going against almost a century of case law. They urged that, quote, The court should adhere to the settled meaning of the term, consistently applied by the state courts interpreting state blue sky laws, as well as by the federal appellate courts before and since Howey. Under that settled meaning, an investment contract requires contractual undertakings to deliver future value, reflecting the income, profits, or assets of a business. Paradigm policy director Justin Slaughter writes, It takes real skill to so mismanage the situation that you have serious institutionalists like Professors Macy and Hammermesh filing amici briefs against the SEC in an enforcement case. This case is on track to blow up the SEC's powers and maybe weaken agency powers across the board. That people invested in the current securities regime are still siding against the current SEC position speaks volumes. Finally, Senator Cynthia Lummis has also filed an amicus brief addressing the question of whether the SEC has overreached its authority. Lummis began her brief by drawing the court's attention to the numerous bipartisan efforts currently underway in Congress to craft regulations for the crypto industry. She wrote that she, Has a special interest in upholding the Constitution's separation of powers by ensuring that federal administrative agencies do not exceed the authority conferred upon them or encroach upon Congress's ongoing legislative efforts. Amicus believes that the SEC's approach to enforcement in this case, and in the crypto asset industry more broadly, contravenes that separation of powers. Now given that the cornerstone of any major questions doctrine argument is that an administrative agency is exceeding the powers granted to it by Congress, it seems extremely relevant to be told by a sitting US Senator that they believe this to be the case. Lummis continued, When Congress created the SEC to regulate securities markets, it did not grant the SEC power to reimagine the definition of securities to expand the agency's sphere of influence into other asset classes or to encroach on other agencies and regulatory schemes. The SEC's attempt to shoehorn an entire new class of assets into the existing definition of a security and thereby add to the definition enumerated by Congress exceeds the SEC's authority, encroaches on Congress's lawmaking, and contravenes the separation of powers. Put simply, she said, Basically, the brief is an attempt to provide evidence to the court that Congress is not content with the status quo when it comes to crypto regulation. Much of the brief describes the various ongoing legislative efforts. And after outlining these bills, Lummis writes, The multitude of interests at stake require a holistic approach beyond the scope of a single agency. Ultimately, she says, Lummis urged the court to, Now, I think where most of the analysis lands, holding aside deep legal minutiae, which obviously will become very important in terms of how the case actually resolves, is from a sentiment shift it feels to people, of course, outside observers, that this is going to be a hard one for the SEC. Algorithmic trading firm CEO Xi Zhen writes, Now, I would never go that far given that Let's hope that these friends of the court are correct. Appreciate you guys listening as always. Until next time, be safe and take care of each other. Peace.

Carolyn Dan Nguyen Chamber For Digital Commerce October 2Nd Justin Slaughter 13 Tokens SAM Friday Lummis Alameda G. Kim Defi Education Fund Congress Five -Star Monday, August 14Th Ellison Paradigm Blockchain Association A16z 1933
"carolyn ellison" Discussed on The Breakdown

The Breakdown

14:20 min | 2 months ago

"carolyn ellison" Discussed on The Breakdown

"Welcome back to The Breakdown, with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Saturday, August 5th, and that means it's time for the weekly recap. Before we get into that, however, if you are enjoying The Breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find the link in the show notes or go to bit.ly slash breakdown pod. All right, friends. Happy weekend. Today, we are doing a full on grab bag. We are going to touch on a bunch of different topics, some updates from stories from earlier in the week or last week, some things we haven't had a chance to cover yet. And where we start is with the latest in Worldcoin, and to kick it off, a quote from Maya Zahavi. On Wednesday, she tweeted the most predictable blowback against crypto colonialism. No government would allow its citizens to risk their biometric data to a company that has shown no remorse in blitz collecting data. So far, France, Germany and Kenya are investigating Worldcoin. Now Maya was far from the only person talking about this. The same day, Mohamed Hersey, the former chairman at the Kenyan Tourism Federation, wrote a foreign firm can just walk in and set up office in Kenya and start harvesting iris scans. The iris is the only unique identity a human has, so with a small token, Kenyans are falling over each other to allow their iris to be scanned. And we think it's just a cool, harmless thing. It's the duty of the state to interrogate such firms, so the desperate Kenyans are not duped into something they hardly understand. Cabinet Secretary, you need to step in. Personal data should be a security concern, and the state must be convinced that it is a good clean thing. These chaps can't just walk in and start scanning the iris of gullible Kenyans. So indeed, Worldcoin operations have been suspended in Kenya. The nation's Ministry of the Interior said in a Facebook post on Wednesday that and how the harvesters intend to use the data. The Ministry added that it was, quote, Now, prior to the shutdown, Kenya's Minister for the Digital Economy, Eliudawalo, defended Worldcoin's practices in a television appearance. He stated that Kenya's data protection regulations may need an overhaul, but that Worldcoin were acting within the law. Of course, since the very early days of Worldcoin before the formal launch, critics had raised concerns that the project would be taking advantage of citizens in Africa and across the global south. Kenya has been one of the largest markets for signups. In December, Worldcoin boasted that over a quarter of a million people in the capital of Nairobi had handed over their eyeball scans to one of the 45 orbs in the city. At launch, Worldcoin claimed to have two million users, primarily made up of residents of the global south. Alfred Matua, the Kenyan Secretary for Foreign and Diaspora Affairs, said, Now, outside of Kenya, several European regulators have also opened investigations into Worldcoin, primarily on data privacy grounds. Last week, the UK's Information Commission's Office, which regulates personal data, said that it would be making further inquiries into the project, but had not yet opened an investigation. It noted that organizations, quote, Now, although investigations into Worldcoin are more widespread, Kenya is the first nation to take the step of shutting down operations within their borders. Kenya's Capital Markets Authority also issued a cautionary statement on Wednesday, stating that neither the project nor the tokens were regulated. The statement warned of, quote, That said, the CMA said it was willing to work with Worldcoin through its regulatory sandbox. Now, Worldcoin said it would pause Kenyan operations in a statement, but appeared to be more concerned with crowd control after one location was shut down by police earlier this week. They said, Now, separately on Wednesday, Reuters reported that Worldcoin intends to allow governments and corporations to use its iris scanning based ID technology. This, of course, raised further concerns regarding the organization's data privacy policies and longer term intentions. Ricardo Masierra, the general manager for Europe at Tools for Humanity, explained, Boy, I got to tell you guys, it is very hard to keep up the normal level of breakdown. objectivity when it comes to this, not because of any big belief that anyone who's at Worldcoin believes anything other than exactly what they're saying, but more because the combination of biometrics and around and find out thinking just seems really, really dangerous. Moving on to our next topic, Coinbase announced a strong earnings beat for the second quarter. The company exceeded analyst revenue estimates by 12.7%. Now, of course, revenue contracted for the quarter, falling by about 18% compared to Q1, but estimates had called for a 22% collapse in revenue. Losses were also significantly less bad than expected, coming in at 42 cents per share compared to analyst estimates of 76 cents per share. This is the sixth straight loss-making quarter for Coinbase, however, the company appears to have stemmed the worst of the bleeding. During the second quarter of last year, for example, Coinbase chalked up a loss of almost $5 per share. Now, the big story was the shift in business model that has taken place during this bear market. Trading volumes on Coinbase continued to collapse. Volume fell by more than a third to hit $92 billion for the quarter after holding steady in Q1. Interest income also fell by 16.5% to reach $201 million. This line item is primarily driven by earnings from an interest sharing agreement on USDC stablecoin holdings, which brought in $151 million for the quarter. However, revenue from blockchain staking services increased by 18% for the quarter and now stands at $87.6 million. Quarterly staking-related revenue has increased by almost 30% compared to last year. In fact, for the first time, Coinbase brought in more revenue from subscriptions and services than it did from trading fees. That means that in aggregate, staking services, custodial fees, earned interest, and subscriptions made a larger contribution to the bottom line than the exchange. There's also the potential for a major tailwind to hit the relatively small custodian arm of the business should BlackRock be successful in its ETF application. Remember, Coinbase will be custody-ing all of the Bitcoin held on behalf of the BlackRock ETF. CEO Brian Armstrong heralded the quarter as a success, but foreshadowed that there was still more work to do, stating that, Q2 was a strong quarter for Coinbase as we executed well and showed resilience in a challenging environment. We've cut costs, are operating efficiently, and remain well positioned to build the future of the crypto economy and help drive regulatory clarity. Coinbase shares were up over 10% in aftermarket trading following the release of earnings. Continuing on to a super weird one. Zach Guzman, the founder of Coinage Media, writes, I don't think I've seen this before. The New York Times just submitted a letter to the court in Sam Bankman-Fried's case about why he was fined to share Carolyn Ellison's diary entries with them and why the judge shouldn't revoke bail and detain him now. So what's going on is that the New York Times has submitted a filing in SPF's criminal case arguing that the court should defend First Amendment rights related to free speech. You will undoubtedly remember that Sam recently came under fire after leaking parts of Carolyn Ellison's journal to the newspaper as part of a story. Ellison was of course the Alameda Research CEO at the time of the FTX collapse and is a material witness in the case. Following that, prosecutors had asked for Sam's bail to be revoked and for the court to issue a gag order, thus preventing him from making public statements or communicating with journalists about the case. Their concern was that Sam had been attempting to intimidate Caroline by releasing her private writings to journalists and would be likely to make further attempts to manipulate public opinion via the media as his trial date approached. Despite those specific concerns, the judge issued a broad gag order rather than one that restricted Sam's communication only in relation to interfering with the trial. This is what provoked the response from the New York Times. After the gag order was issued last week, they wrote a letter to the judge addressing freedom of the press issues. They argued that the public had a right to know details in the case and should not be restricted by the court without due consideration of free speech issues. Their letter claimed that the gag order, quote, However, in a filing late on Thursday, the DOJ reiterated their position that Sam had gone way beyond making, quote, They stated that, quote, Prosecutors pointed out that SBF had created a, quote, What is clear, regardless of whether the defendant was the first source for stories regarding Ellison, is that the defendant, rather than deny his guilt as he correctly now says it is his right to do, shared materials with the press obviously designed to intimidate, harass, and embarrass someone he knows is slated to testify against him and provoke an emotional response and color a potential juror's view of that witness. The DOJ also noted a bizarre fixation with the comments of current FTX CEO John J. Ray III, who took over the firm after bankruptcy. They wrote, In all the years of bail revocation hearings I did, never did anyone or any organization claim a First Amendment right to facilitate witness intimidation. And for good reason. That's not how the First Amendment works. Autism Capital summed up, Not because they feel bad, but because they don't want to scare off their pipeline of juicy leads from other suckers. And now they have to deal with the backlash of the optics of defending SBF. I don't know, man. It seems pretty hard to me to be in the New York Times seat here and actually trying to defend this, especially as the prosecution revealed that there had been something like over a hundred calls between Sam and New York Times reporters. As the prosecution said, that's not just Sam making comment to the effect that he's not guilty. That's an intentional strategy carried out by press, with the press's complicity because they get a juicy story. Now certainly the New York Times is well within its rights to take advantage of a defendant who wants to talk that much. But the idea that that somehow justifies leaking someone's personal journal and trying to pass it off as an essential and material to the case is just ridiculous. Speaking of ridiculous, lastly today, Ilya Dutch Liechtenstein and his wife, Heather Rosilcon Morgan, entered guilty pleas on Thursday in relation to the 2016 Bitfinex hack. Liechtenstein pled guilty to one charge of conspiracy to commit money laundering and, in admitting to the prosecution's facts in the case, identified himself as the Bitfinex hacker for the first time. Liechtenstein had only been charged in relation to the money laundering, not the hack itself, leading some to speculate whether there was an additional unknown person that carried out the hack. Prosecutors said, The stash of nearly 120,000 Bitcoin was worth around $70 million at the time of the hack, but swelled to a value of over $4.5 billion over the years since. This made the Bitfinex seizure the largest ever recovery of stolen cryptocurrency when law enforcement arrested the pair in February of this year. 94,000 Bitcoin are known to be recovered from the heist. Liechtenstein faces a maximum sentence of 20 years in prison, but his assistance in recovering additional funds since his arrest could mitigate that penalty substantially. Now Liechtenstein's wife, Heather, aka Razzle-Kahn, an amateur rapper, also pled guilty to charges of conspiracy to commit money laundering and defrauding the U.S. government. The self-proclaimed Crocodile of Wall Street faces a maximum sentence of five years in prison for her role in the crime. Cleanup year continues, and good lord, we can't get through it fast enough. That is going to do it for today's episode. Thank you for hanging out and listening. Until next time, be safe and take care of each other.

A highlight from Worldcoin Iris Scanning Shut Down in Kenya

The Breakdown

14:20 min | 2 months ago

A highlight from Worldcoin Iris Scanning Shut Down in Kenya

"Welcome back to The Breakdown, with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Saturday, August 5th, and that means it's time for the weekly recap. Before we get into that, however, if you are enjoying The Breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find the link in the show notes or go to bit .ly slash breakdown pod. All right, friends. Happy weekend. Today, we are doing a full on grab bag. We are going to touch on a bunch of different topics, some updates from stories from earlier in the week or last week, some things we haven't had a chance to cover yet. And where we start is with the latest in Worldcoin, and to kick it off, a quote from Maya Zahavi. On Wednesday, she tweeted the most predictable blowback against crypto colonialism. No government would allow its citizens to risk their biometric data to a company that has shown no remorse in blitz collecting data. So far, France, Germany and Kenya are investigating Worldcoin. Now Maya was far from the only person talking about this. The same day, Mohamed Hersey, the former chairman at the Kenyan Tourism Federation, wrote a foreign firm can just walk in and set up office in Kenya and start harvesting iris scans. The iris is the only unique identity a human has, so with a small token, Kenyans are falling over each other to allow their iris to be scanned. And we think it's just a cool, harmless thing. It's the duty of the state to interrogate such firms, so the desperate Kenyans are not duped into something they hardly understand. Cabinet Secretary, you need to step in. Personal data should be a security concern, and the state must be convinced that it is a good clean thing. These chaps can't just walk in and start scanning the iris of gullible Kenyans. So indeed, Worldcoin operations have been suspended in Kenya. The nation's Ministry of the Interior said in a Facebook post on Wednesday that and how the harvesters intend to use the data. The Ministry added that it was, quote, Now, prior to the shutdown, Kenya's Minister for the Digital Economy, Eliudawalo, defended Worldcoin's practices in a television appearance. He stated that Kenya's data protection regulations may need an overhaul, but that Worldcoin were acting within the law. Of course, since the very early days of Worldcoin before the formal launch, critics had raised concerns that the project would be taking advantage of citizens in Africa and across the global south. Kenya has been one of the largest markets for signups. In December, Worldcoin boasted that over a quarter of a million people in the capital of Nairobi had handed over their eyeball scans to one of the 45 orbs in the city. At launch, Worldcoin claimed to have two million users, primarily made up of residents of the global south. Alfred Matua, the Kenyan Secretary for Foreign and Diaspora Affairs, said, Now, outside of Kenya, several European regulators have also opened investigations into Worldcoin, primarily on data privacy grounds. Last week, the UK's Information Commission's Office, which regulates personal data, said that it would be making further inquiries into the project, but had not yet opened an investigation. It noted that organizations, quote, Now, although investigations into Worldcoin are more widespread, Kenya is the first nation to take the step of shutting down operations within their borders. Kenya's Capital Markets Authority also issued a cautionary statement on Wednesday, stating that neither the project nor the tokens were regulated. The statement warned of, quote, That said, the CMA said it was willing to work with Worldcoin through its regulatory sandbox. Now, Worldcoin said it would pause Kenyan operations in a statement, but appeared to be more concerned with crowd control after one location was shut down by police earlier this week. They said, Now, separately on Wednesday, Reuters reported that Worldcoin intends to allow governments and corporations to use its iris scanning based ID technology. This, of course, raised further concerns regarding the organization's data privacy policies and longer term intentions. Ricardo Masierra, the general manager for Europe at Tools for Humanity, explained, Boy, I got to tell you guys, it is very hard to keep up the normal level of breakdown. objectivity when it comes to this, not because of any big belief that anyone who's at Worldcoin believes anything other than exactly what they're saying, but more because the combination of biometrics and around and find out thinking just seems really, really dangerous. Moving on to our next topic, Coinbase announced a strong earnings beat for the second quarter. The company exceeded analyst revenue estimates by 12 .7%. Now, of course, revenue contracted for the quarter, falling by about 18 % compared to Q1, but estimates had called for a 22 % collapse in revenue. Losses were also significantly less bad than expected, coming in at 42 cents per share compared to analyst estimates of 76 cents per share. This is the sixth straight loss -making quarter for Coinbase, however, the company appears to have stemmed the worst of the bleeding. During the second quarter of last year, for example, Coinbase chalked up a loss of almost $5 per share. Now, the big story was the shift in business model that has taken place during this bear market. Trading volumes on Coinbase continued to collapse. Volume fell by more than a third to hit $92 billion for the quarter after holding steady in Q1. Interest income also fell by 16 .5 % to reach $201 million. This line item is primarily driven by earnings from an interest sharing agreement on USDC stablecoin holdings, which brought in $151 million for the quarter. However, revenue from blockchain staking services increased by 18 % for the quarter and now stands at $87 .6 million. Quarterly staking -related revenue has increased by almost 30 % compared to last year. In fact, for the first time, Coinbase brought in more revenue from subscriptions and services than it did from trading fees. That means that in aggregate, staking services, custodial fees, earned interest, and subscriptions made a larger contribution to the bottom line than the exchange. There's also the potential for a major tailwind to hit the relatively small custodian arm of the business should BlackRock be successful in its ETF application. Remember, Coinbase will be custody -ing all of the Bitcoin held on behalf of the BlackRock ETF. CEO Brian Armstrong heralded the quarter as a success, but foreshadowed that there was still more work to do, stating that, Q2 was a strong quarter for Coinbase as we executed well and showed resilience in a challenging environment. We've cut costs, are operating efficiently, and remain well positioned to build the future of the crypto economy and help drive regulatory clarity. Coinbase shares were up over 10 % in aftermarket trading following the release of earnings. Continuing on to a super weird one. Zach Guzman, the founder of Coinage Media, writes, I don't think I've seen this before. The New York Times just submitted a letter to the court in Sam Bankman -Fried's case about why he was fined to share Carolyn Ellison's diary entries with them and why the judge shouldn't revoke bail and detain him now. So what's going on is that the New York Times has submitted a filing in SPF's criminal case arguing that the court should defend First Amendment rights related to free speech. You will undoubtedly remember that Sam recently came under fire after leaking parts of Carolyn Ellison's journal to the newspaper as part of a story. Ellison was of course the Alameda Research CEO at the time of the FTX collapse and is a material witness in the case. Following that, prosecutors had asked for Sam's bail to be revoked and for the court to issue a gag order, thus preventing him from making public statements or communicating with journalists about the case. Their concern was that Sam had been attempting to intimidate Caroline by releasing her private writings to journalists and would be likely to make further attempts to manipulate public opinion via the media as his trial date approached. Despite those specific concerns, the judge issued a broad gag order rather than one that restricted Sam's communication only in relation to interfering with the trial. This is what provoked the response from the New York Times. After the gag order was issued last week, they wrote a letter to the judge addressing freedom of the press issues. They argued that the public had a right to know details in the case and should not be restricted by the court without due consideration of free speech issues. Their letter claimed that the gag order, quote, However, in a filing late on Thursday, the DOJ reiterated their position that Sam had gone way beyond making, quote, They stated that, quote, Prosecutors pointed out that SBF had created a, quote, What is clear, regardless of whether the defendant was the first source for stories regarding Ellison, is that the defendant, rather than deny his guilt as he correctly now says it is his right to do, shared materials with the press obviously designed to intimidate, harass, and embarrass someone he knows is slated to testify against him and provoke an emotional response and color a potential juror's view of that witness. The DOJ also noted a bizarre fixation with the comments of current FTX CEO John J. Ray III, who took over the firm after bankruptcy. They wrote, In all the years of bail revocation hearings I did, never did anyone or any organization claim a First Amendment right to facilitate witness intimidation. And for good reason. That's not how the First Amendment works. Autism Capital summed up, Not because they feel bad, but because they don't want to scare off their pipeline of juicy leads from other suckers. And now they have to deal with the backlash of the optics of defending SBF. I don't know, man. It seems pretty hard to me to be in the New York Times seat here and actually trying to defend this, especially as the prosecution revealed that there had been something like over a hundred calls between Sam and New York Times reporters. As the prosecution said, that's not just Sam making comment to the effect that he's not guilty. That's an intentional strategy carried out by press, with the press's complicity because they get a juicy story. Now certainly the New York Times is well within its rights to take advantage of a defendant who wants to talk that much. But the idea that that somehow justifies leaking someone's personal journal and trying to pass it off as an essential and material to the case is just ridiculous. Speaking of ridiculous, lastly today, Ilya Dutch Liechtenstein and his wife, Heather Rosilcon Morgan, entered guilty pleas on Thursday in relation to the 2016 Bitfinex hack. Liechtenstein pled guilty to one charge of conspiracy to commit money laundering and, in admitting to the prosecution's facts in the case, identified himself as the Bitfinex hacker for the first time. Liechtenstein had only been charged in relation to the money laundering, not the hack itself, leading some to speculate whether there was an additional unknown person that carried out the hack. Prosecutors said, The stash of nearly 120 ,000 Bitcoin was worth around $70 million at the time of the hack, but swelled to a value of over $4 .5 billion over the years since. This made the Bitfinex seizure the largest ever recovery of stolen cryptocurrency when law enforcement arrested the pair in February of this year. 94 ,000 Bitcoin are known to be recovered from the heist. Liechtenstein faces a maximum sentence of 20 years in prison, but his assistance in recovering additional funds since his arrest could mitigate that penalty substantially. Now Liechtenstein's wife, Heather, aka Razzle -Kahn, an amateur rapper, also pled guilty to charges of conspiracy to commit money laundering and defrauding the U .S. government. The self -proclaimed Crocodile of Wall Street faces a maximum sentence of five years in prison for her role in the crime. Cleanup year continues, and good lord, we can't get through it fast enough. That is going to do it for today's episode. Thank you for hanging out and listening. Until next time, be safe and take care of each other.

Ricardo Masierra Zach Guzman Alfred Matua Mohamed Hersey Caroline Razzle -Kahn CMA Wednesday Ellison Heather Carolyn Ellison $87 .6 Million 16 .5 % Last Week SAM Africa Heather Rosilcon Morgan Blackrock December SBF
"carolyn ellison" Discussed on The Breakdown

The Breakdown

01:51 min | 7 months ago

"carolyn ellison" Discussed on The Breakdown

"All right, Friends, happy Saturday. Let's catch up with some news we missed from earlier in the week. And let's start with FTX. In a presentation filed in the FTX bankruptcy case on Thursday, bankruptcy lawyers said that the firm has a, quote, massive shortfall in assets. Amounting to $8.9 billion worth of customer funds. The presentation walked through the assets recovered so far, stating that 2.2 billion in cash and crypto have been identified in the wallets owned by FTX, valued at spot prices on the date of bankruptcy. Of this only 694 million was made up of what the bankruptcy estate is calling category a assets, which includes liquid assets including Fiat, stablecoins, Bitcoin, Ethereum, and other liquid tokens. Other assets include 385 million in payments due from customers, as well as a massive claim against Alameda research. The presentation showed that Alameda had $9.3 billion in net borrowing from FTX at the time of bankruptcy. Essentially, the entire shortfall is attributable to loans made to Alameda. Although, of course, we're using the word loan very, very loosely. FTX U.S. also showed a shortfall in customer assets of around a 116 million. The FTX U.S. accounting also showed that Alameda research was owed a net of a 107 million from the U.S. exchange. Unauthorized transfers were detected from both exchanges after the bankruptcy filing, and here's an interesting little detail, unauthorized transfers were detected from both exchanges after the bankruptcy filing, with 139 million from the U.S. exchange, and 293 million from the international exchange. Now, this FTX U.S. shortfall is something that I think is pretty notable given that Sam has continuously said that FTX was solvent despite the fact that Carolyn Ellison said that Sam instructed Alameda to wire millions of dollars to FTX U.S. during that week that everything was happening in order to shore it up.

The Hole on the FTX Balance Sheet Remains Gaping

The Breakdown

01:51 min | 7 months ago

The Hole on the FTX Balance Sheet Remains Gaping

"All right, Friends, happy Saturday. Let's catch up with some news we missed from earlier in the week. And let's start with FTX. In a presentation filed in the FTX bankruptcy case on Thursday, bankruptcy lawyers said that the firm has a, quote, massive shortfall in assets. Amounting to $8.9 billion worth of customer funds. The presentation walked through the assets recovered so far, stating that 2.2 billion in cash and crypto have been identified in the wallets owned by FTX, valued at spot prices on the date of bankruptcy. Of this only 694 million was made up of what the bankruptcy estate is calling category a assets, which includes liquid assets including Fiat, stablecoins, Bitcoin, Ethereum, and other liquid tokens. Other assets include 385 million in payments due from customers, as well as a massive claim against Alameda research. The presentation showed that Alameda had $9.3 billion in net borrowing from FTX at the time of bankruptcy. Essentially, the entire shortfall is attributable to loans made to Alameda. Although, of course, we're using the word loan very, very loosely. FTX U.S. also showed a shortfall in customer assets of around a 116 million. The FTX U.S. accounting also showed that Alameda research was owed a net of a 107 million from the U.S. exchange. Unauthorized transfers were detected from both exchanges after the bankruptcy filing, and here's an interesting little detail, unauthorized transfers were detected from both exchanges after the bankruptcy filing, with 139 million from the U.S. exchange, and 293 million from the international exchange. Now, this FTX U.S. shortfall is something that I think is pretty notable given that Sam has continuously said that FTX was solvent despite the fact that Carolyn Ellison said that Sam instructed Alameda to wire millions of dollars to FTX U.S. during that week that everything was happening in order to shore it up.

Alameda FTX Ethereum U.S. Bitcoin Alameda Research Fiat Carolyn Ellison SAM
FTX Ex-Engineering Chief Pleads Guilty to Criminal Charges

The Breakdown

01:33 min | 7 months ago

FTX Ex-Engineering Chief Pleads Guilty to Criminal Charges

"Yesterday the news tightened around sand bagman freed even further as yet another of FTX most senior execs turned against him. Former head of engineering at FTX nishad Singh pled guilty to criminal fraud charges and agreed to assist prosecutors in their case against SPF. As part of his agreement, single plead guilty to one count of wire fraud, three counts of conspiracy to commit fraud, what count of conspiracy to commit money laundering, and one count of conspiracy to defraud the United States by violating campaign finance laws for a total of 6 counts. Now in separate civil actions, singers agree not to contest fraud complaints from the SEC and the CFTC. The SEC will be asking for a ban on sing asking as a corporate officer or director, which will be subject to court approval. This is in line with previous plea agreements from other FTX co-conspirators, Carolyn Ellison, and Gary Wong. In a statement sings lawyers said quote, shot is deeply sorry for his role in this and is accepted responsibility for his actions. He wants to do everything he can to make things right for victims, including by assisting the government to the best of his ability in this case. Now, nashad turning on Sam has seemed kind of like a foregone conclusion. Ever since we got that conversation that Sam had with the vox reporter that he thought was off the record where he said that nashad felt really terrible really genuinely terrible about all this, whereas Sam kind of made clear that he didn't. Now Singh was released on a $250,000 bond to await sentencing and his was so much lower than Sam's bond because as prosecutors said, Singh had traveled back from The Bahamas voluntarily in November shortly after the collapse in part to assist with Justice Department investigations.

Bagman Nishad Singh Carolyn Ellison SEC Gary Wong Cftc SAM United States Singh The Bahamas Justice Department
"carolyn ellison" Discussed on Markets Daily Crypto Roundup

Markets Daily Crypto Roundup

07:34 min | 8 months ago

"carolyn ellison" Discussed on Markets Daily Crypto Roundup

"Bitcoin, ether, and other top tokens are up this morning in market showing green almost across the board. A broad theme over the last year has been the correlation between the crypto market, the consumer price index, and equities. Tuesday's official inflation report, which showed January's consumer price index slowing down at a slower rate than expected, shook that market narrative. But Bitcoin managed to keep its upward trajectory. Speaking on point STV, Martin lean Weber, a digital asset product strategist at market vector indexes, said that the crypto market seems a little bit undecided right now. Quote, it seems that the market focuses more on trends and not at the level. Maybe the fact that they've changed methodology to calculate the CPI going forward is also a role. Lean Weber said that this is leading to a shift in market focus from beta trading to looking for alpha in digital assets quote there's a renewed interest in thematic investing, he said, pointing to the significant growth in tokens like optimism, layer twos, and liquid staking derivatives like lido. Quote, DeFi could decouple when you compare it with Bitcoin. He said, continuing. There's a greater demand for infrastructure applications. End quote. But with recent action over the last week, it's worth noting that DeFi needs stablecoins, and the headline surrounding U.S. regulators attacking stablecoins are frightening to investors, quote, my hope is that we have some clarification going forward because investors will need to have a reliable stablecoin because we need that in the ecosystem. Diving a bit deeper into that this morning, the governance token for the liquid staking platform lido saw roughly 17% gain. Lido Dow has the highest value locked of all decentralized finance protocols, according to the site DeFi Lama. Looking forward, lean Weber says we need to watch out for meme coins, which is always good advice in this space. As the broader tech market is caught up in a GPT-3 fueled frenzy over artificial intelligence, a number of AI related tokens have popped up. Lean Weber cautions that these are just the cycles meme coins. Quote, there's no AI in blockchain, he said. And speaking of memes, traders are pumping all things Shiba Inu this morning after Twitter CEO Elon Musk posted a meme involving his dog floki, posing as the new boss of Twitter. And in the aftermath, coindesk did shows that the price of doge has risen by more than 5% over the last 24 hours. Bitcoin is currently trading at $22,717 per token. That's up a bit more than 2% since our check in yesterday, while ether is trading at $1579 per eth. That's up more than one and a quarter percent at the same time period, according to the coin desk market index. And speaking of the coin desk market index, we're looking at an absolute reading this morning of 1080 that compares against the prior day's reading of 1047 and represents a more than 3% gain on the day across top traded tokens. Now, before we get to today's traditional markets update, let's take a quick look at some top headlines. First up, the European Union's executive arm yesterday launched a regulatory sandbox for what they describe as innovative applications of distributed ledger technologies or DLT that underlying crypto. The initiative aims to facilitate the cross border dialog with and between regulators and supervisors on the one hand and companies and public authorities on the other hand, the official announcement said, coin disc sunda Lee Honda gamma has more on this one. Elsewhere hub 71 Abu Dhabi's tech ecosystem has reportedly started a new $2 billion initiative to back web three and blockchain technology startups in the region. The hub 71 plus digital asset ecosystem initiative will also reportedly provide startups access to a wide range of programs and potential corporate government and investment partners, according to a press release out this morning. Coin desk brandy bets has more there. Meanwhile, U.S. senator Tommy tuberville, a Republican from Alabama, reportedly plans to reintroduce legislation later today, which would restrict employers and investment firms from offering crypto as part of 401k retirement plans. News website Politico reported. U.S. lawmakers had asked investment giant fidelity to reconsider its Bitcoin based 401k offerings after the collapse of the exchange FTX. Coin desk's spotted sheet feature reports. And in our latest installment of Sam watch, FTX company insiders, including sandbank and freed, former Alameda research CEO Carolyn Ellison, thank good fried's father, as well as his cofounders have been served subpoenas by bankruptcy administrators for the defunct exchange. Court documents show that the circle of former executives and insiders are required to produce certain documents by February 16th, which is tomorrow. While bang bang freed has until February 17th, as he has the most comprehensive lists to procure. Included in the order are demands for documents about a takeover offer from binance, which the exchange eventually walked away from, saying that FTX had failed its due diligence process. The specific orders from the court vary depending on the individual, while all are required to turn over communications between a broad circle of FTX and FTX U.S. executives. There's a bunch more details on this one. Sam Reynolds has it all in the show notes. And finally, a little bit of closure for at least some of the catastrophe last year. Debtors of bankrupt crypto lender Celsius have presented a sale plan to the U.S. bankruptcy court for the southern district of New York. The plan is a part of an overall reorganization plan for Celsius retail platform, and mining business, and has the support of the official committee of unsecured creditors, better known as the UCC. At the center of the plan is an in principle agreement with nova wolf digital management or nova wolf for short. The digital asset investment firm making it the planned sponsor. The debtors reportedly chose nova wolf as it, quote, provides the best method to distribute the debtor's liquid crypto assets and maximize the value of the debtor's illiquid assets through a new company run by experienced asset managers, the filing said. The plan is the product of the debtor's court approved sales process, which Celsius network lawyers had outlined last month. They had said that the bankrupt crypto lender is planning to reinvent itself as a new publicly traded recovery corporation in order to exit the bankruptcy process. The next step will be to finalize a binding agreement that designates nova wolf as the successful bidder. According to the plan, nova wolf will make a direct cash contribution of 45 to $55 million to the new co, a term used to describe corporate spin offs before they're assigned final names. That new co is planned to be a regulatory compliant public reporting company 100% owned by earned creditors. All of whom will receive a significant distribution of liquid crypto with a so called convenience class of creditors receiving 70% of their funds. No Celsius founder will be involved in the new company, and the majority of the company's board will be appointed by the unsecured creditors committee. The plan specifically reserves some $50 million for the company's mining operations, among other mining related specifics. And digging in a bit deeper on where the money all comes from, Celsius and its creditors have begun court actions to recover millions that they say were fraudulently transferred from founder and former chief executive Alex mashinsky, his wife, and other former senior executives. A new batch of court documents published yesterday alleged former CEO mashinsky and others mismanaged the crypto lender. Inflated the price of the company's CEL token for their own benefit and made, quote, negligent reckless and sometimes self interested investments. And, quote, in the run up to bankruptcy in July of last year. The 150 page legal document requests recovery costs and punitive damages based on some 33 counts that include the transfer of billions to decentralized platform key fi, which mashinsky partly owned to allegedly engage in speculative investment, a move which the filing set lost Celsius roughly $200 million. There's a lot more here for those who want to dig in in the show notes. Mashinsky did not, by the way, immediately respond to coin desks request for comment. Coin desks Jack Schuyler and Amitabh Singh have more on this one. And now with traditional markets, here's Adrienne blossom. Thank you, Adam, let's get everybody. Pretty much across the globe stock futures declined after data showed a rebound in retail sales, a sign of economic strength that could encourage the U.S. Federal Reserve to keep combating inflation by raising interest rates. Again, good news for the

Bitcoin Martin lean Weber DeFi Lido Dow Weber Lean Weber ledger technologies U.S. senator Tommy tuberville STV Coin desk Sam watch
"carolyn ellison" Discussed on Bloomberg Radio New York

Bloomberg Radio New York

01:40 min | 10 months ago

"carolyn ellison" Discussed on Bloomberg Radio New York

"For airlines and Amazon spokesperson declined to comment on the plans. We're hearing the pressure to make money from unused space aboard its jets is increasing as the company looks to boost profits in a period of slower revenue growth. We're learning more about how Sam bankman freed was persuaded not to fight extradition, details from Bloomberg's Janet Wu. A judge agreed to let prosecutors keep it a secret that two of his closest associates had flipped on him. 28 year old Carolyn Ellison, former CEO of his trading firm Alameda research, and 29 year old Gary Wang, his FTX cofounder, have pleaded guilty in exchange for their cooperation. Bankman freed was released on a $250 million bail package and is living with his parents in Palo Alto, California, while awaiting trial. I'm Janet Wu, Bloomberg radio. Meantime, former Alameda research CEO Caroline Ellison said she and FTX cofounder Sam bankman fried knowingly misled lenders about how much the now bankrupt trading from was borrowing from the cryptocurrency exchange. Ellison gave her first public account of her actions in December 19th plea hearing in Manhattan federal court. I knew it was wrong, she said, according to a transcript of the hearing, FTX cofounder Gary Wang also gave a statement that day. Global news, 24 hours a day on air and on Bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. I'm Suzanne Palmer. This is Bloomberg. Hello, this is the odd lots podcast on Bloomberg radio. I'm traci aloy. And I'm

Janet Wu Sam bankman Alameda research for airlines Gary Wang Carolyn Ellison FTX Bankman Bloomberg radio Bloomberg CEO Caroline Ellison Amazon Manhattan federal court Palo Alto Ellison California Suzanne Palmer traci aloy
"carolyn ellison" Discussed on Bloomberg Radio New York

Bloomberg Radio New York

01:38 min | 10 months ago

"carolyn ellison" Discussed on Bloomberg Radio New York

"Space for airlines and Amazon spokesperson declined to comment on the plans. We're hearing the pressure to make money from unused space abort its jets is increasing as the company looks to boost profits in a period of slower revenue growth. We're learning more about how Sam bankman freed was persuaded not to fight extradition, details from Bloomberg's Janet Wu. A judge agreed to let prosecutors keep it a secret at two of his closest associates had flipped on him. 28 year old Carolyn Ellison, former CEO of his trading firm Alameda research and 29 year old Gary Wang, his FTX cofounder, have pleaded guilty in exchange for their cooperation. Bankman fried was released on a $250 million bail package and is living with his parents in Palo Alto, California, while awaiting trial. I'm Janet Wu, Bloomberg radio. Meantime, former Alameda research CEO Caroline Ellison said she and FTX cofounder Sam bankman fried knowingly misled lenders about how much the now bankrupt trading from was borrowing from the cryptocurrency exchange. Ellison gave her first public account of her actions in a December 19th plea hearing in Manhattan federal court. I knew it was wrong, she said, according to a transcript of the hearing, FTX cofounder Gary Wang also gave a statement that day. Global news 24 hours a day on air and on Bloomberg quicktake powered by more than 2700 journalists and analysts in more than 120 countries. I'm Suzanne Palmer. This is Bloomberg. On the latest edition of a tape podcast, a conversation with Michael sonnenfeld, founder and chairman of Tiger 21 on investing for the ultra wealthy. Can we draw

Janet Wu Sam bankman Alameda research space for airlines Gary Wang FTX Carolyn Ellison Bankman fried Bloomberg radio Bloomberg CEO Caroline Ellison Amazon Manhattan federal court Palo Alto Ellison California Suzanne Palmer Michael sonnenfeld
"carolyn ellison" Discussed on Bloomberg Radio New York

Bloomberg Radio New York

02:33 min | 10 months ago

"carolyn ellison" Discussed on Bloomberg Radio New York

"Of extreme need to do so. The plea directly to consumers is one of the last measures a grid manager can take to avoid a stage three emergency, which is historically meant, rolling blackouts. Speaking of Christmas and Hanukkah gift buying is a little different this year, Mary Lou Gardner, Infosys consulting associate partner, says consumers have been more careful with their money this holiday season. They're being very particular about where they're spending. They're spending their buying less items and they're buying less extravagant items. Gardner says people are still worrying about a recession and are holding back a bit to make sure they have a cushion in case one hits. We're learning more about how Sam bankman freed was persuaded not to fight extradition. We get details on that from Bloomberg's Janet Wu. A judge agreed to let prosecutors keep it a secret at two of his closest associates had flipped on him. 28 year old Carolyn Ellison, former CEO of his trading firm Alameda research and 29 year old Gary Wang, his FTX cofounder, have pleaded guilty in exchange for their cooperation. Bankman fried was released on a $250 million bail package and is living with his parents in Palo Alto, California, while awaiting trial. I'm Janet Wu, Bloomberg radio. Meantime, former Alameda research CEO Carolina Ellison said she and FTX cofounders knowingly misled lenders about how much the now bankrupt trading firm was borrowing from the cryptocurrency exchange. Alison gave her first public account of her actions in a December 19th. Plea hearing in Manhattan federal court. I knew that it was wrong, she said, according to a transcript of the hearing. FTX cofounder Gary Wang also gave a statement that day. To Chinese cities were reported daily COVID cases that far surpassed the official national tally, and that's another illustration of the unreliability of data in China after abruptly ending COVID zero policies. The city of dongguan in the southern province of Guangdong and qingdao city, in the eastern province of Shandong, say they have seen hundreds of thousands of cases. These local estimates show a huge discrepancy with the official tally of only 4103 cases reported for China for December 23rd. It also underscores the inaccuracy of government data and points to the enormous challenge facing the country after its rapid relaxation of COVID rules. Global news 24 hours a day on air and on Bloomberg quicktake powered by more than 2700 journalists and analysts in more than 120 countries. I'm Susanna Palmer. This is Bloomberg

Janet Wu Alameda research Gary Wang Mary Lou Gardner Sam bankman Carolyn Ellison Bankman fried Bloomberg radio CEO Carolina Ellison Infosys Manhattan federal court FTX Gardner Bloomberg Palo Alto qingdao city Alison California dongguan
FTX founder Sam Bankman-Fried released on $250 million bond

AP News Radio

00:41 sec | 10 months ago

FTX founder Sam Bankman-Fried released on $250 million bond

"Cryptocurrency entrepreneur Sam bankman freed walked out of a Manhattan courthouse. The parents of the founder and former CEO of trading platform FTX agreed to sign a $250 million bond. Bankman fried will stay in their California home as he awaits trial on charges of swindling investors and looting customer deposits. In court, federal prosecutor Nicholas ruse said bankman freed perpetrated a fraud of epic proportions. The judge also required bankman freed to wear an electronic monitoring bracelet. He did not speak during the hearing, except to answer the judge. Carolyn Ellison, the former chief executive of bankman Fred's trading firm, Alameda research, and FTX cofounder Gary Wang have

Sam Bankman FTX Bankman Bankman Fried Nicholas Ruse Manhattan California Carolyn Ellison Bankman Fred Alameda Research Gary Wang
"carolyn ellison" Discussed on Bloomberg Radio New York

Bloomberg Radio New York

06:30 min | 10 months ago

"carolyn ellison" Discussed on Bloomberg Radio New York

"Of the holiday deluge. We'll talk restaurants with the CEO of OpenTable, and we'll hear from a newly minted Bloomberg 50 honoree who's rewriting the labor story at Starbucks. All of that to come, we begin though with a story that everyone keeps talking about and no, we are not talking about the fed's latest interest rate hike. But FTX. Bloomberg businessweek columnist max chaffin has a story online and on the terminal that focuses on the relationship between sand achmed freed and binance's Chiang Peng zhao better known as CZ. CZ, as you may recall, helped last month to blow the whistle on his longtime rivals failures. Carolyn, I asked max about the implications of that with bankman fried, who's now in custody in The Bahamas, Congress continues to probe what happened. I think it's pretty clear, you know, he's got some tough legal sledding ahead. It's who else gets roped into this. So there are other figures connected obviously to FTX. Carolyn Ellison, of course, former girlfriend of former ex-girlfriends, CEO of Alameda, and also kind of the person that Sam bankman fried was sort of it kind of felt like was trying to pin this all on Perhaps unfairly. Talk about a messy breakup. No, just kidding. Yeah. And then you have the other crypto exchanges. And you know, we've seen this play out before over the last few months where we have one exchange go down. One major player in crypto go down and it's starting to suck everybody else down. People have been talking about, you know, this sort of unfolding credit crisis. And I think it remains to be seen, you know, kind of who else does sandbank and bring down with him. And I think it's very possible because as we've seen in sort of the details of this case, these guys were all pretty tightly enmeshed. And one of the interesting things that in the testimony that Sam bankman freed, which we and others have been talking about, you know, he's got these text messages from other CEOs of exchanges. The title of this text message group is exchange coordination. It's all very weird and it makes you wonder whether anybody else is potentially vulnerable either to like legal issues or potentially just asset price that's falling and then hurting other companies. Right, it makes me wonder like, how systemic all of this is and who else comes down beyond the FTX kind of universe at the same time, it also makes me wonder about collusion and I'm not maybe using it in a legal way. And also kind of harken back to robber barons where anything could happen and people would get rid of their other competitors or smaller competitors because they wanted to own the marketplace. And I feel like that's where potentially Suzy. Yeah, and well, and you look at like, why was Gary gensler? Why were people in the U.S. resistant to this to these companies? And one reason was potential manipulation. You have all of these very small number of players, lightly traded currencies, and they're going around trying to pull in money from normal people, which course raises questions. You bring up zhao, CZ. So Chiang Peng zhao, CEO of binance, which is the other major exchange. Basically Sam bankman fried's main competitor, and over the years, these two had a serious rivalry, where it's kind of happening as I write in the column today. This is all kind of happening behind the scenes, but they were both in binance's case. I are both operating in regulatory gray areas. So as we know, sandbank and freed based on The Bahamas was operating this kind of quote unquote offshore exchange binance kind of same situation operating no one really knows where. That's the main difference. As far as we're concerned, we don't know where binance's headquarters is, but it's the same thing where they're trading these altcoins, S coins are sometimes called, as well as crypto derivatives, much of that is not allowed in the U.S. and as a result they're in this kind of regulatory gray area. And that has left them kind of vulnerable to potential SEC sanction, CFTC, potentially even criminal investigation. What we saw behind the scenes is that zhao and Sam bankman freed were kind of vying to find a way to sort of legalize their business to take this business from the gray area and bring it into the light. And I think that's part of what led to the conflict and maybe even part of what led to the run on withdrawals that ultimately exposed the FTX, the alleged fraud at FTX. Well, go back to this idea of FUD, fear uncertainty and doubt, because a big portion of your column today is about that. And I don't know if you found yourself at the center of this at all max. But if you talk about crypto online and you express any skepticism about it, you are accused of spreading thud as you write in your column. So where does FUD come into this conflict? So everybody who's anybody in crypto has thrown around the suggestion of FUD. Chiang Kai zhao has a huge Twitter followings at like 8 million or 7 million followers. I haven't I'm not exactly a witch. But he's constantly anytime anyone writes anything negative, you know, he's calling FUD. We saw about a month ago, it was kind of his tweet in response to these coin desk reports. The coin desk reports were about, you know, this shaky balance sheet, same bankman freed and his colleagues are denying it, zhao comes in and says, hey, this looks really concerning. We're going to sell our FTX tokens called FTT. And that sets off this run. And in some sense, right, zhao is spreading what a crypto person would call FUD on another sense. He's acting as a whistleblower. He's exposing an actual flaw. Now, and so I think it's important, you know, we've got to make that distinction, but since then, zhao has kind of seemed to do the same thing to a couple of other exchanges, which is interesting. And perhaps telling, you know, he a couple of weeks ago, he went after coinbase, suggesting a coinbase was shaky. Coinbase course is based in the U.S., has audited financial statements. Serious charging deleted the tweet. Same thing with kraken and other reputable exchange. And you also deleted that tweet. And I think what's going on is you have the FTX collapse and that's creating a sense of panic in the market, potential legal vulnerability. It's also, it's also shrinking the market and it's creating an opportunity for somebody like binance or coinbase or cracking or any of these people to consolidate and to get customers. And in

Sam bankman Chiang Peng zhao binance max chaffin bankman fried businessweek Carolyn Ellison zhao FTX OpenTable Bahamas Bloomberg Starbucks Alameda Gary gensler Carolyn harken fed max
"carolyn ellison" Discussed on Bloomberg Radio New York

Bloomberg Radio New York

09:23 min | 10 months ago

"carolyn ellison" Discussed on Bloomberg Radio New York

"This is Bloomberg law with June grosso from Bloomberg radio. Questions we have are where are the assets? How are we locate those assets? It's a mining exercise at this point. And look, at the end of the day, we're not going to be able to recover all the losses here. Money was spent that will never get back. John ray, who's guided dozens of companies, including enron through bankruptcy, called FTX collapse one of the worst business failures he's ever seen, saying it was run by a small group of grossly inexperienced people with a complete lack of oversight and financial controls and an unprecedented lack of documentation. You know, even in the most failed companies, you have a fair road map of what happens, we're dealing with literally a sort of a paperless bankruptcy in terms of how they created this company. It makes it very difficult to trace and track assets. Currently, FTX is founder Sam bankman fried is sitting in a Bahamas prison, fighting almost certain extradition to the U.S. to face criminal charges and civil lawsuits by the Securities and Exchange Commission and the commodities futures exchange commission. Joining me is securities law expert Robert heim, a partner at tartar krinsky and drogon. How would you describe generally the SEC's complaint? The SEC's complaint in this matter is very interesting because it really spells out a very basic fraud in the sense of misusing customer deposits at BFT exchange and using those for personal purposes by bank and freed and others to what some people thought might be a very complex fraud. It turns out to be very garden variety except just on a very massive scale. The SEC's jurisdiction is limited to fraud and security sales. And there's ambiguity about whether crypto is a security. So how did the SEC steer clear of that in its complaint? The SEC has brought security fraud charges in its complaint and the way they have done that is that they have alleged that starting in 2019 the way back to the very beginning of when FTX was founded that misrepresentations were made to investors, including U.S. investors to induce them to invest in the equity of FTX. These are separate in the customers who traded crypto. They were institutional investors who invested billions of dollars into FTX and CSEC said that that was done through misrepresentations and omissions and that's how the SEC has crafted its securities fraud complaints in this matter. Tell us a little about the SEC's allegations that bankman fried concealed fgx relationship with Alameda research, and used commingled customer funds. One of the key allegations in the SEC complaint has been that there is an affiliated hedge fund called almeda research, which essentially traded crypto, made markets and crypto and was supposed to have been a separate company, but the SEC is alleged there was significant amount of commingling of assets specifically customer assets at FTX that was used to fund our operations and that was contrary to the representation that FTX was making to customers as well as to its lenders and investors. What would the SEC have to prove? What are the basics of what the SEC would have to prove if this went to trial? In addition to having to prove that the representations to investors were material, the key thing that the SEC has to prove is what's called the, which is either intent or recklessness on the part of banking. And in white collar cases like this one of the defendants intent is always a contested issue. And I think we've seen a preview of bank and freed defense and prior public statements that he's given, where he says that he wasn't aware that FTX is customer deposits were being used to cover. I'll meet his debts and a liability. So he's trying to step up as a defense that the underlings at the two companies were doing this and he wasn't aware of it. And that can be a tough defense to really be successful on. What kind of things would the SEC point to to show the enter? In order to show the answer, the SEC could prove a few different things, number one is the personal benefit financially to banks and freed as a result of these transactions and courts have held that when a person is getting personal benefits and money that that could be an indication of motive and an opportunity to engage in securities fraud. But even beyond that, the SEC is going to have to look and prove the corporate structure and show how banks and free to prove transactions like money being moved from FTX customer town to almeida, they're going to look at email correspondence between the other employees at FTX that may have updated banking freed about what was happening. And I think importantly, there's been a lot of speculation and rightfully so as to whether there'll be cooperators in this case, other employees like Carolyn Ellison, who was the CEO of Alameda, who made me wanting to cut deals with the SEC and the prosecutors in exchange for their testimony against bank and freed. SEC chair Gary gensler said, we allege that Sam bankman freed built a House of Cards on a foundation of deception, while telling investors that it was one of the safest buildings in crypto. Does the SEC have to prove that investors relied on his alleged misrepresentations? The SEC itself does not have to prove reliant as part of its case to the extent that there is going to be private lawsuits and class actions. Those private lawsuits and the investors will have to prove the lion. So the SEC is set up in a way by statute that they have a lower burden in order to prove their case. So reliance is not part of the SEC's claims here. John ray spoke about this unprecedented lack of documentation, the paperless bankruptcy, is that going to make it much harder for the SEC. There is his view of very shocking lack of any sort of paper or documentation to support loans and why and how money was moved from FTX to almeida research and where the money went from there. However, with digital assets and then crypto, there is going to be a record on the blockchain of a lot of these transactions and while it may take more work for the investigators to comb through all of those transactions for the last three years. I think ultimately they're going to be able to put together a pretty complete picture of what happened even though FTX records themselves don't appear to be very good. Is prosecuting a case with crypto is that a challenge for the SEC? At this stage, I don't think that prosecuting a crypto based case like this is going to present any significant challenges. The SEC has been studying the market for years. They have a market abuse team that brought other cases in crypto. So there's a lot of institutional knowledge about the market and I think one thing that's going to help is the fact that this appears to be more or less garden variety type of fraud and an embezzlement granted it involved billions of dollars of customer assets, but at the same time, I think that's what the transactions being publicly available on the blockchain and even having potential cooperators is going to make the SEC's job a lot easier. One nagging question I've had throughout these revelations about what gensler called a House of Cards is looking at the allegations, especially for example something like the $1 billion loan to himself. By a man who basked in publicity and self promotion. The Super Bowl ads, the deals with sports teams, the political contributions on and on, how did bankman freed ever expect to get away with this? I mean, the House of Cards was bound to collapse at some point. Yeah, absolutely. It's really shocking and the SEC actually also discusses this in their complaint where they say for the past three years bank and freed has been out self promoting himself as responsible businessman and wanting to have regulation in the crypto industry and ethical practices. But meanwhile, he used this reputation as a person who was running legitimate crypto exchange to help convince investors to put more and more money into FTX and all the while according to the SEC bank and creed knew that it was setting up to be a very risky investment and then also misusing customer deposits. So all his public statements now can potentially be used against him in this SEC case. Thanks, bob. That's Robert heim, a partner, a tartar Kristin drogon, coming up next. The FTC tries to stop meta from buying another startup. This is Bloomberg. Global market news changes in an instant. So don't miss a minute. Listen to Bloomberg radio anytime anywhere around the world on the iHeartRadio app. Tune in, the Bloomberg business app

SEC FTX Sam bankman Bloomberg radio Robert heim commodities futures exchange c John ray tartar krinsky bankman CSEC Alameda research almeda research enron Bloomberg almeida U.S. Carolyn Ellison Bahamas House of Cards Gary gensler
"carolyn ellison" Discussed on Bloomberg Radio New York

Bloomberg Radio New York

06:36 min | 10 months ago

"carolyn ellison" Discussed on Bloomberg Radio New York

"Carriers in the midst of the holiday deluge. We'll talk restaurants with the CEO of OpenTable, and we'll hear from a newly minted Bloomberg 50 honoree who's rewriting the labor story at Starbucks. All that to come, we begin though with a story that everyone keeps talking about and no, we are not talking about the fed's latest interest rate hike. But FTX. Bloomberg businessweek columnist max chaffin has a story online and on the terminal that focuses on the relationship between Sam bacon freed and binance's Chiang Peng zhao better known as CZ. CZ, as you may recall, helped last month to blow the whistle on his longtime rivals failures. Carolyn, I asked max about the implications of that with bankman fried, who's now in custody in The Bahamas, Congress continues to probe what happened. I think it's pretty clear, you know, he's got some tough legal sledding ahead. It's who else gets roped into this. So there are other figures connected obviously to FTX. Carolyn Ellison, of course, former girlfriend of former ex-girlfriends, CEO of Alameda, and also kind of the person that Sam bankman fried was sort of kind of felt like was trying to pin this all on. Perhaps unfairly. Talk about a messy breakup. No, just kidding. Yeah. And then you have the other crypto exchanges. And, you know, we've seen this play out before over the last few months where we have one exchange go down. One major player in crypto go down and it's starting to suck everybody else down. People have been talking about, you know, this sort of unfolding credit crisis. And I think it remains to be seen, you know, kind of who else does Sam banquet freed bring down with him. And I think it's very possible because as we've seen in sort of the details of this case, these guys were all pretty tightly enmeshed. And one of the interesting things that in the testimony that Sam bankman freed, which we and others have been talking about, you know, he's got these text messages from other CEOs of exchanges. The title of this text message group is exchange coordination. It's all very weird and it makes you wonder whether anybody else is potentially vulnerable either to like legal issues or potentially just asset price that's falling and then hurting other companies. Right, it makes me wonder like, how systemic all of this is and who else comes down beyond the FTX kind of universe at the same time, it also makes me wonder about collusion and I'm not maybe using it in a legal way. And also kind of harken back to robber barons where anything could happen and people would get rid of their other competitors or smaller competitors because they wanted to own the marketplace. And I feel like that's where potentially Suzy. Yeah, and well, and you look at why was Gary gensler, why were people in the U.S. resistant to this to these companies? And one reason was potential manipulation. You have all of these very small number of players, lightly traded currencies, and they're going around trying to pull in money from normal people, which course raises questions. You bring up zhao, CZ, so Chiang Peng zhao, CEO of binance, which is the other major exchange. Basically Sam bankman fried's main competitor, and over the years, these two had a serious rivalry, where it was kind of happening as I write in the column today. This is all kind of happening behind the scenes, but they were both in binance's case. Both operating in regulatory gray areas. So as we know, Sam bankman freed, based on The Bahamas, was operating this kind of quote unquote offshore exchange binance kind of same situation, operating no one really knows where. That's the main difference. As far as we're concerned, we don't know where binance's headquarters is, but it's the same thing where they're trading these altcoins, S coins are sometimes called, as well as crypto derivatives, much of that is not allowed in the U.S. and as a result they're in this kind of regulatory gray area. And that has left them kind of vulnerable to potential SEC sanction, CFTC potentially even criminal investigation. What we saw behind the scenes is that zhao and Sam bankman freed were kind of vying to find a way to sort of legalize their business to take this business from the gray area and bring it into the light. And I think that's part of what led to the conflict and maybe even part of what led to the run on withdrawals that ultimately exposed the FTX, the alleged fraud at FTX. Well, go back to this idea of FUD for your uncertainty in doubt, because a big portion of your column today is about that. And I don't know if you've found yourself at the center of this at all max. But if you talk about crypto online and you express any skepticism about it, you are accused of spreading thud as you write in your column. So where does FUD come into this conflict? So everybody who's anybody in crypto has thrown around the suggestion of FUD. Zhao has a huge Twitter followings at like 8 million or 7 million followers. I haven't I'm not exactly a witch. But he's constantly any time anyone writes anything negative, you know, he's calling FUD. We saw about a month ago, it was kind of his tweet in response to these coin desk reports. The coin desk reports were about, you know, this shaky balance sheet, same bankman freed and his colleagues are denying it, zhao comes in and says, hey, this looks really concerning. We're going to sell our FTX tokens called FTT. And that sets off this run. And in some sense, right, zhao is spreading what a crypto person would call FUD on another sense. He's acting as a whistleblower. He's exposing a actual flaw. Now, and so I think it's important, you know, we've got to make that distinction, but since then, zhao has kind of seemed to do the same thing to a couple of other exchanges, which is interesting. And perhaps telling, you know, he a couple of weeks ago, he went after coinbase, suggesting that coinbase was shaky. Coinbase course is based in the U.S., has audited financial statements. You know, serious charging deleted the tweet. Same thing with kraken and other reputable exchange. And you also deleted that tweet. And I think what's going on is you have the FTX collapse. And that's creating a sense of panic in the market, potential legal vulnerability. It's also, it's also shrinking the market and it's creating an opportunity for somebody like binance or coinbase or cracking or any of these people to consolidate and to get customers. In that sense, an opportunity, but it's also shrinking the market dramatically. So you kind of

Sam bankman Chiang Peng zhao binance max chaffin Sam bacon bankman fried Bloomberg Carolyn Ellison Sam banquet zhao FTX The Bahamas OpenTable Starbucks Alameda Gary gensler Carolyn harken
"carolyn ellison" Discussed on Bloomberg Radio New York

Bloomberg Radio New York

03:06 min | 10 months ago

"carolyn ellison" Discussed on Bloomberg Radio New York

"Being used to cover meat as debts and liabilities. So he's trying to set himself up as a defense that the underlings at the two companies were doing this and he wasn't aware of it. And that can be a tough defense to really be successful on. What kind of things would the SEC point to to show the center? In order to show the answer, the SEC is going to have to prove a few different things where they could prove a few different things. Number one is the personal benefits financially to banks and freed as a result of these transactions. And courts have held that when a person is getting personal benefits and money that that can be an indication of motive and an opportunity to engage in securities fraud. But even beyond that, it's really the SEC is going to have to look and prove the corporate structure and show how bank and free to prove transactions like money being moved from FTX customer town to almeida, they're going to look at email correspondence between the other employees at FTX that may have updated banking freed about what was happening. And I think importantly, there's been a lot of speculation and rightfully so as to whether they'll be cooperators in this case, other employees like Carolyn Ellison, who was the CEO of el Nida, who made me wanting to cut deals with the SEC and the prosecutors in exchange for their testimony against bank and freed. Does it make it harder for the SEC that so much of this appears to have been done without the normal control so you're not going to see, for example, there were loans that were made and no paper backing them up, I believe, and things were done by emoji basically sometimes. Yes, this is something that the new CEO John ray has pointed out is that there's, in his view, a very shocking lack of any sort of paper or documentation to support loans and why on how money was moved from FTX to el nido research and where the money went from there. However, with digital assets and crypto, there is going to be a record on the blockchain of a lot of these transactions and while it may take more work for the investigators to come through all of those transactions for the last three years. I think ultimately they're going to be able to put together a pretty complete picture of what happened, even though STX's records themselves don't appear to be very good. Coming up next on the Bloomberg law show, I'll continue this conversation with Robert heim, of tartar krinsky and drogon, and we'll talk about how equipped the SEC is to deal with a case like this, involving cryptocurrency. What is the agency asking for if it wins the case? And what about the complaint by the CFTC? I'm June Grasso and you're listening to Bloomberg. Now that so much

SEC Carolyn Ellison el Nida almeida el nido research John ray Robert heim tartar krinsky drogon STX CFTC Grasso Bloomberg