The shock over FTX’s sudden collapse is turning to anger as it becomes clear that CEO Sam Bankman-Fried used customer funds from the exchange to plug losses in his failing crypto empire. It is now unclear what will happen to SBF, the iconic icon that everyone knows.
While there will be civil lawsuits as customers and investors try to recover what’s left of FTX’s assets, the Justice Department is also reported to be investigating, raising questions of whether the agency will file criminal charges, and whether SBF could see the inside of a prison cell.
Even though the facts may appear to be quite damning, the lawyers that were contacted by The Sunday Review cited two potential obstacles to any criminal conviction—though ones prosecutors could likely overcome.
First, jurisdiction. The first is jurisdiction. FTX was an offshore company that had its headquarters in the Bahamas. It did not cater for Americans. Defense lawyers could argue that the actions of its executives are outside the scope of U.S. enforcement.
However, the Justice Department is adept at finding a “nexus” Randall Eliason, an ex-prosecutor who now teaches at George Washington University, said that the links between foreign defendants and American shores were made by Randall Eliason. Two other lawyers spoke with Randall Eliason. The Sunday Review echoed this view, saying it would like be easy for prosecutors to find a nexus in the FTX case—in the form of a tie between FTX and U.S. banks, emails, stateside meetings, or other interactions.
Intent is the second possible obstacle to criminal prosecution. Eliason explains that any conviction will depend on whether SBF was not only incompetent, but whether he intentionally deceived investors.
“Mismanaging your company and losing a bunch of other people’s money is not criminal. It happens all the time. For a criminal case, there has to be deception,” He said.
Eliason stated that he wasn’t familiar with details of the FTX scandal, but that prosecutors could show deception through a smoking gun communication or a pattern that suggests fraudulent intent.
However, a long-standing crypto lawyer told the story The Sunday Review he has no doubt that SBF’s behavior and FTX’s business practices clearly demonstrated fraud. The lawyer, who spoke on condition of anonymity, pointed to evidence like FTX’s terms of service as well as the company’s investor presentations and public statements by SBF.
The crypto lawyer added that all the elements are in place for Justice Department prosecutors to bring a case under a federal criminal law called Section 1343, which covers wire fraud—a term that describes a variety of fraud committed with the aid of electronic tools. Maximum punishment for the offense is 20 years imprisonment.
SBF, who is not currently being charged with anything, would be presumed innocent unless found guilty in Court. SBF did not immediately reply to a message regarding whether he is concerned about criminal charges or serving time in prison.
If the Justice Department decides to pursue criminal charges against anyone, it will also need to arrest any FTX officials it believes are complicit in any wrongdoing. That would involve locating them, possibly arranging extradition. An unconfirmed weekend report by Semafor Several FTX executives said they had flown to Hong Kong for work, but that SBF remained at the Bahamas.
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