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. Now the question is: What will the consequences be for the one-time icon SBF is a common name.
Customers and investors will try to recover their losses even though there may be civil lawsuits. what’s left This is FTX’s assetsThe Justice Department is also available. reported to be investigatingThis raises questions about whether the agency will face criminal charges and whether SBF could be allowed to see inside a prison cell.
Even though the facts may seem to be quite damning, lawyers can still be contacted by Fortune cited two potential obstacles to any criminal conviction—though ones prosecutors could likely overcome.
The first is jurisdiction. Defense lawyers could argue that FTX, an offshore company with headquarters in the Bahamas, is beyond the reach U.S. law enforcement.
The Justice Department, however, is good at finding a “nexus” linking overseas defendants to American shores, according to Randall Eliason, a former prosecutor who now teaches law at George Washington University. Two other lawyers spoke with Randall Eliason, a former prosecutor and now teaches law at George Washingon University. Fortune 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 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 of the time. For a criminal case, there has to be deception,” he said.
Eliason stated that he wasn’t familiar with the details of FTX’s debacle. However, prosecutors can use a smoking gun communication or a pattern in behavior to show deception. fraudulent intent.
However, a crypto lawyer of long standing told Fortune 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. The maximum penalty for the statute is 20 years imprisonment.
SBF is not currently charged and would be presumed innocent unless found guilty in court. He did not immediately reply to a text message asking if he was concerned about possible criminal charges or prison time.
If the Justice Department decides to pursue criminal charges, it will also have the authority to arrest any FTX executives that it believes are complicit in any wrongdoing. This would involve locating them, and possibly arranging for their extradition. An unconfirmed weekend report by Semafor Several FTX executives were reported to have flown to Hong Kong, but that SBF remained at the Bahamas.
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