Bankrupt crypto exchange FTX and a unit of distressed crypto lender Genesis have agreed to resolve a legal dispute involving missing funds. Genesis Global Capital, the lending division of Genesis which declared bankruptcy after FTX collapsed, is the largest FTX creditor, having loaned the now defunct crypto exchange a total of $226.3 million. Genesis, unsurprisingly wants that money back. But FTX claims Genesis owes the exchange nearly $2 billion. The terms of the two firm’s recent agreement are unknown. Genesis is a subsidiary of Digital Currency Group, which is CoinDesk’s corporate owner. Elsewhere in the FTX-verse, disgraced founder Sam Bankman-Fried is asking the court to seal the personal diary of his former employee and sometimes lover, Caroline Ellison. This follows Department of Justice accusations that Bankman-Fried leaked that critical piece of evidence to the New York Times.
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An in-depth look into the latest advancements and current challenges in crypto and bitcoin mining
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Mining rig makers like Bitmain and MicroBT are expanding to Russia as the U.S. market becomes saturated, sources said.
Securities Clearance?
A national defense spending bill that contains a provision tightening federal oversight over crypto trading, crypto mixers and privacy coins passed the Senate on Thursday. The 2024 National Defense Authorization Act was brought forward by a bipartisan group of U.S. Senators including Kirsten Gillibrand (D-N.Y.), Cynthia Lummis (R-Wyo.), Elizabeth Warren (D-Mass.) and Roger Marshall (R-Kan.), who said in a press release the move represented “one of the most substantial congressional actions to date regarding crypto assets.” Elsewhere in the hallowed halls of Congress, George Santos, the first-term member of the House of Representatives charged with 13 felonies in March, is now being accused of being part of a crypto scam that resembled the classic Nigerian prince email scheme.
Under the Bridge?
A bridge connecting Ethereum to Shibarium, a soon-to-launch scaling system for the Shiba Inu meme coin, is now live and its developers want you to test it. The bridge will initially let users transfer testnet ether tokens to Shibarium, which is due to start operations next month, according to chief developer Shytoshi Kusama. Each transaction is expected to take a maximum of up to 30 minutes and, as of Friday, real assets were not supported. Meanwhile, Crypto.com has done what rival exchange Binance could not: become officially registered as a crypto service provider by the Dutch central bank. De Nederlandsche Bank, as its known in Dutch, previously fined companies including Binance and Coinbase millions of euros and has taken a hardline against crypto.
The Takeaway: Not ‘Getting Away With It’
(FTX)
Yesterday, July 27, 2023, we received an object lesson in the dangers of disinformation. News of changes to the criminal charges against disgraced FTX founder Sam Bankman-Fried began spreading like wildfire on social media. But these changes were misrepresented by influential figures – in some cases with the obvious goal of feeding a conspiratorial and partisan narrative.
That narrative, which has been spreading since FTX’s collapse, holds that Sam Bankman-Fried is a puppet for the Biden administration, and that he’s “getting away with it” thanks to friends in high places.
The U.S. Department of Justice (DOJ) says it will not pursue a campaign finance charge against Sam Bankman-Fried. This comes as the DOJ wants the FTX founder to be jailed heading into his criminal trial. “The Hash” panel discusses the details, reactions, and industry implications of the latest developments in the ongoing FTX saga.
To be crystal clear, Bankman-Fried is absolutely not going to get away with it. Not only does he still face a laundry list of active charges scheduled to be tried in October, prosecutors will likely continue to pursue the campaign finance charges. Similar procedural issues led to the dropping of another set of charges, including bank fraud, in June, but those charges were quickly revived as part of a separate trial scheduled for March 2024. It is expected prosecutors will request a similar rescheduling of the campaign finance charges in March.
But these easily Googleable facts didn’t stop political influencers including right-wing blogger Ian Miles Cheong and co-founding editor of The Intercept Glen Greenwald from turning a flawed premise into political red meat. Republican residential candidate Vivek Ramaswamy followed swiftly after, castigating the “corrupt” Department of Justice (DOJ) for supposedly going easy on a major Democratic donor.
In March, New York DA Alvin Bragg brought indictment charges against the former president over an alleged “campaign finance violation.” Now the corrupt DOJ is *dropping* the campaign finance violation charge against Sam Bankman-Fried, a Democrat megadonor.
These pundits and others like them leveraged their mischaracterization of events to advance the FTX-Democrat connection. That politicized framing has been building on the political right since soon after FTX’s collapse – and in fairness, there are many signs of deep, systemic corruption in U.S. politics that suggest something well beyond one young man’s unhinged shell game.
But many of the basic assumptions tying Sam Bankman-Fried to the Democratic party are simply wrong – including the idea that he was a partisan Democratic donor at all. And in using false premises to boil that complex reality down to a partisan rivalry, conspiracy theorists are actually helping the corrupt elites they pretend to be attacking.
What really happened
The most important thing to understand is that the campaign finance charges against Sam Bankman-Fried are unlikely to go away.
As CoinDesk reported, they were dropped from the omnibus trial scheduled for this coming October. But if prosecutors instead attach the campaign finance charges to the March trial, that would likely mean more jeopardy for Bankman-Fried, not less.
Two separate trials would mean two separate juries. The second jury would be able to focus more on the campaign finance and bank fraud charges, leaving most of the complexity of Bankman-Fried’s embezzlement and financial fraud for the A-team.
Given the high likelihood of his conviction in the first trial, and the influence that would almost inevitably have on jurors in the second trial, yesterday’s reshuffling could make it *more* likely that he goes down for the campaign finance stuff, not less. A second, separate trial, moreover, makes it less likely that portions of his sentence could be served concurrently, potentially increasing his total jail time.
But you wouldn’t know any of this if you listened to figures like Ian Miles Cheong. Cheong’s comment on yesterday’s events is a sterling example of the blurry line between deception and incompetence, with his tweet seeming to imply that Bankman-Fried had been cleared of all charges, not just the campaign finance issue.
Replies to the post make clear that his followers believe Bankman-Fried has simply walked away scot-free – and that his Democratic donations were the key to this (nonexistent) get out of jail free card.
The cutout
This idea that “the Democrats did it” is, ironically, rooted in believing Sam Bankman-Fried’s own lies. Before his downfall, the master swindler burnished his image in the media by pretending to be driven by a desire to save the world (in fact, he wanted to buy a private island for his friends). One pillar of this carefully-crafted image was his declaration that he would give $1 billion dollars to Democratic politicians in the 2024 election cycle.
This was a lie in (I’ve counted carefully) at least four ways.
First, Sam Bankman-Fried never had a billion dollars to give, or any real chance of getting there. Second, even before his fraud was revealed, he walked back the $1 billion number, which he seems to have made up because it sounded good. Third, Bankman-Fried later admitted that his entire commitment to the (already corrupt and broken) ideology of “Effective Altruism” was itself a strategic lie.
But the lie that really counts here (the fourth one) is that Sam Bankman-Fried was committed to Democratic party politics. In fact, he was donating stolen customer funds to both Republicans and Democrats. His real goal was never to get Joe Biden re-elected, but to curry favor with politicians on both sides in pursuit of favorable regulation.
The entire idea that Bankman-Fried was a “Democratic megadonor,” in other words, came about because he wanted to hide his donations to conservatives, and did so illegally. The goal was to maintain his public image as a nice (neo)liberal guy, so he routed those donations through others, including FTX staffers, who falsely claimed to be donors.
And here lies the real harm of the partisan and fact-averse interpretation of the FTX scandal as a Democratic Party operation: it obscures the fact that to the rich and powerful, America’s political parties are nothing but strategic playthings.
People like Sam Bankman-Fried and his coterie are dangerous not because of their political commitments, but because of their complete lack of real values beyond pursuing their own benefit. The very fact that Bankman-Fried was consciously working both sides of the aisle shows why it’s so misguided and dangerous to turn his prosecution into a political football.
It is now more important than ever to set industry standards and align on practical short-term and long-term objectives through pointed conversations with the best legal minds and Washington D.C.’s most important decision makers.
Join us at State of Crypto: Policy and Regulation on October 24 in Washington D.C. for an unprecedented opportunity to evaluate, dissect and ultimately shape crypto regulatory frameworks that support a vibrant, secure and healthy future for the digital economy.
