Strap in folks: It’s a big week. Former FTX CEO Sam Bankman-Fried and current FTX CEO John J. Ray III were supposed to speak to the House Financial Services Committee. Obviously, things didn’t quite work out that way.

You’re reading State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. Click here to sign up for future editions.

Oh jeez

The narrative

Sam Bankman-Fried (SBF) will spend Christmas behind bars after a judge denied him bail. FTX’s bankruptcy case continues moving through the U.S. court system and, wow, there's been a lot of hearings this week.

Why it matters

These legal cases are going to be interesting.

Breaking it down

I originally planned to write a “what might SBF say” piece based on his various media interviews and whatnot.

And then he got arrested. And then Forbes published his prepared testimony. And then the Securities and Exchange Commission and Commodity Futures Trading Commission came out with their own charges.

What a week.

So, to recap: Sam Bankman-Fried was arrested Monday night by the Royal Bahamas Police Force, after learning from the U.S. Attorney’s Office for the Southern District of New York that a grand jury had indicted him.

The indictment was unsealed Tuesday morning, revealing that prosecutors charged Bankman-Fried with wire fraud against both investors and lenders, conspiracy for the same, conspiracy to commit money laundering and some securities fraud and campaign finance-related counts for good measure.

The Securities and Exchange Commission came in with its own charges, alleging that Bankman-Fried misled investors on multiple occasions and that he committed various forms of securities fraud.

The Commodity Futures Trading Commission likewise targeted Bankman-Fried’s various public statements, alleging those statements impacted the price of commodities.

Bankman-Fried appeared in a courthouse in the Bahamas. A judge denied him bail and scheduled an extradition hearing for February. But if you read anything, you have to read this incredible piece from the ground by Cheyenne Ligon, who attended the Bahamas hearing.

I’d also recommend this excellent analysis by Danny Nelson on what these various lawsuits reveal about the closeness of Alameda Research and FTX.

Elsewhere, Bankman-Fried’s successor as CEO of FTX, John J. Ray III, had basically a grand old time testifying before the House Financial Services Committee about how poorly run the company was under its prior leadership. Jesse Hamilton recaps the highlights here.

FTX’s other travails

FTX continues to enjoy a troubled bankruptcy process. In its first bankruptcy hearing, its attorneys argued that the names and other information tied to the exchange’s creditors should be withheld for now, contrary to normal bankruptcy practices.

Judge John Dorsey of the federal Bankruptcy Court of Delaware agreed, at least for now: He ruled that the names and other personally identifiable information (PII) should remain under seal for the moment. There will be a hearing to discuss this on Dec. 16.

Late last week, a number of news organizations, including Bloomberg, Dow Jones, the New York Times and the Financial Times, filed to join the bankruptcy case in order to argue that – at the least – the names of the creditors should be released.

“Debtors claim that their ‘customer list, and related customer data, is an important and valuable asset of the Debtors and the Debtors maintain their customer list in strict confidence,’” the filing said. “They also claim that ‘Public dissemination of the Debtors’ customer list could give the Debtors’ competitors an unfair advantage to contact and poach those customers and would interfere with the Debtors’ ability to sell their assets and maximize value for their estates at the appropriate time.’”

The news organizations are not convinced by this argument, calling it vague and saying that a concern about competition does not rise to the level necessary to redact the names of a bankruptcy estate’s creditors.

The news organizations also specified that in this cas, they’re only looking for names, and not the addresses or contact information for creditors, though they added that these types of redactions should not be normalized if there isn’t a threat to the creditors.

The crypto industry is likely to argue that there is a threat, that crypto investors are targets because they hold valuable, easily transferable assets.

We saw this whole thing happen earlier this year with Celsius Network, which filed for bankruptcy protection a few months ago. Some 600,000 customer accounts were revealed, including wallet addresses, transaction histories and crypto holdings. This information could easily make someone a target for a malicious actor hoping for an easy score.

On the other hand, bankruptcies are matters of public record and the U.S. does have a system that publishes creditor names for various reasons, including having a list of people to notify. What’s more, if FTX’s creditors want to recover their funds they'll have to share their own names anyway, the news organizations pointed out.

“The Court has indicated that proofs of claim will not be submitted anonymously. If disclosure is inevitable, there is no point to keeping the names anonymous now,” the filing said.

Where things start to get kind of odd is with the U.S. Trustee’s office, which also objected to redacting the names of creditors. That entity’s filing points out that FTX doesn’t even want to file the names under seal, which is somewhat unusual.

Biden’s rule

Changing of the guard

The Senate Banking Committee advanced the FDIC nominations, including that of current Acting Director Martin Gruenberg, to the full Senate.

Outside CoinDesk:

• (CoinDesk) No ruling yet on whether the CFTC can serve an entire decentralized autonomous organization (DAO) through a web forum but the judge in the Ooki DAO case wants to know why bZeroX founders Tom Bean and Kyle Kistner haven’t been served with the case.
• (The Wall Street Journal) Major exchange and crypto CEOs apparently have a group chat, where Binance chief Changpeng “CZ” Zhao accused former FTX chief SBF of trying to de-peg the stablecoin tether (USDT).
• (Protos) An op-ed by Protos’ Cas Piancey takes aim at the actions of El Salvador President Nayib Bukele and the crypto companies supporting his seemingly dictatorial actions.
• (The New York Times) I saw the Times report that Sam Bankman-Fried was under investigation for market manipulation and it wasn’t too surprising until I realized he allegedly manipulated Terra’s luna token.
• (New York Magazine) People on Twitter may have seen something about The Twitter Files, internal documents shared 280 characters at a time by a roving group of columnists. New York Magazine takes a look.

a lotta yall still dont get it

indictment holders can use multiple lawyers on a single indictment

so if you have 1 criminal defense lawyer and 3 federal defense lawyers you can respond to 3 indictmentshttps://t.co/rfSEERZ4xm

— Philip Bump (@pbump) December 13, 2022

If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at [email protected] or find me on Twitter @nikhileshde.

You can also join the group conversation on Telegram.

See ya’ll next week!