Officials with the U.S. Department of Justice’s Eastern District of New York and the U.S. Securities and Exchange Commission (SEC) are examining money flows between Digital Currency Group (DCG) and its subsidiary Genesis, Bloomberg reported Friday. The DOJ prosecutors have requested interviews and documents from DCG and Genesis, the report said, while the SEC appears to be in a similarly early stage of its own inquiry. The report cited people familiar with the matter and does not allege wrongdoing. Separately, on Monday, the U.S. Commodity Futures Trading Commission formally charged the Mango Markets exploiter with manipulating the price of MNGO. This comes weeks after the accused manipulator Avraham Eisenberg was arrested by the DOJ on similar charges.
Bank Out
Metropolitan Commercial Bank, one of the few U.S. banks to openly serve the crypto industry, said it will end crypto-related services because of “recent developments.” “This decision follows a careful review by the Board of Directors and management and reflects recent developments in the crypto-asset industry, material changes in the regulatory environment regarding banks’ involvement in crypto-asset related businesses, and a strategic assessment of the business case for MCB’s further involvement at this time,” the bank said. Its four crypto clients represented 6% of its deposits. Meanwhile, Galaxy Digital’s head of research is predicting Web3-related VC deals see traction this year, despite the market downturn.
Financing for FTX?
Around 117 parties have expressed an interest in buying units of FTX ahead of an approaching deadline to make bids, according to a legal filing posted Sunday. FTX, now under management by restructuring expert John J. Ray, has entered into 59 confidentiality agreements so far – a bit of bright news for a bankruptcy process expected to take years. Meanwhile, the U.S. Department of Justice (DOJ) has seized more than 55 million shares ($450 million) of Robinhood stock owned – via a holding company – by Sam Bankman-Fried and FTX co-founder Gary Wang, according to a court document. Finally, bankrupt crypto lender Voyager Digital – which is planning to sell $1 billion in remaining assets to Binance.US – has called out Alameda Research after the SBF-founded “hedge fund” spoke out in opposition to that plan.
Sound Bites
“It does portend a very tough environment going forward for both venture investors and entrepreneurs this year.”
– Galaxy Digital’s head of research Alex Thorn, on CoinDesk TV’s “First Mover”
The Takeaway: ‘Wealthy Co-Conspirators’
(Getty Images)
Little attention has been paid to the fact that Sam Bankman-Fried has been charged with conspiracy to violate campaign finance laws in his recent indictment.
It was well-documented that SBF had been a major contributor to mostly Democratic candidates (while his colleague, Ryan Salame, was a major Republican donor). Still, the allegations of criminal violations of campaign finance laws are undiscussed. These allegations go far beyond the basic fact that SBF used stolen customer funds to make these contributions.
Damian Williams, the United States Attorney in Manhattan, provided detail about the campaign finance count in his recent press conference, including that SBF made illegal campaign contributions totaling in the “tens of millions of dollars.” He further explained these enormous illegal contributions were disguised to look as if they were coming from, what Williams called, SBF’s “wealthy co-conspirators.”
In other words, SBF used “straw donors” to conceal the source of some of his campaign contributions to evade federal contribution limits. That’s illegal. If these bombshell allegations are proven, what would be the implications?
First, it is telling that prosecutor Williams used the words “wealthy co-conspirators” in his press conference. Generally, it is the one who reimburses the straw donors that gets prosecuted in these kinds of cases. But the federal campaign finance laws make clear that straw donors could themselves be criminally liable as well. This should send a shiver down the spines of these as-yet unnamed wealthy co-conspirators.
Second, if the allegations are proven, it would mean that all published reports of how much SBF contributed to political campaigns in 2020, and in the 2022 midterms, are significantly understated. It has been reported that SBF made over $40 million in campaign contributions. All we know now, according to prosecutors, is that SBF’s real political contribution totals are “tens of millions of dollars” higher than what was reported in the official campaign finance filings – making it the largest straw donor campaign finance fraud if proven.
Third, the indictment alleges that SBF started making his illegal campaign contributions back in 2020. This is important because, in 2020, SBF was contributing to Joseph Biden’s 2020 campaign. SBF contributed a total of $5.2 million to Biden 2020 – that we know about, according to OpenSecrets. The obvious question an inquiring journalist should be asking is: Did the Biden 2020 campaign also receive illegal campaign contributions through SBF’s network of “wealthy co-conspirators?”
Finally, if the allegations in the indictment are true, it would be logical to scrutinize SBF’s politically active mother – Barbara Fried. The indictment alleges that SBF’s illegal campaign contributions went, not only to individual candidates, but also to “independent expenditure committees,” like political action committees (PACs). Well, it turns out that Barbara Fried was the co-founder of a secretive super PAC called Mind the Gap that directed substantial contributions to Democratic candidates in this time period.
Why don’t we just end the speculation right now?
I tend to think that Barbara Fried is not on the list of “wealthy co-conspirators.” No prosecutor in their right mind would accept Barbara Fried’s signature on a guarantee of SBF’s “$250 million” personal recognizance bond if she was under investigation for participating in SBF’s campaign finance crimes. Prosecutors don’t typically accept guarantees of a defendant’s attendance at trial from someone who is suspected of being a co-conspirator with that defendant. They wouldn’t make an exception in this case, would they?
The millions of victims of the FTX fraud have been deceived enough.
As the demand for trustworthy and comprehensive trading services increases in the wake of the FTX collapse, Gate US is looking to fill the void after obtaining several licenses and approvals, with plans to become authorized to operate in more US states before commencing services in 2023. Continue here.
*This is sponsored content
Off-Chain Signals
Digital asset manager Osprey Funds lays off staff as crypto winter fallout continues (Yahoo Finance)
Ethereum Devs Prep Plan to Let Stakers Withdraw ETH From Beacon (The Defiant)
Is LayerZero’s security model at risk? (L2BEAT/Medium)
