Previewing FTX Founder Sam Bankman-Fried’s Not Guilty Plea in Court
Happy New Year everyone! Thanks for sticking around as this newsletter heads into year three. And as is befitting the first issue of 2023, we’re going to spend today in court for FTX founder Sam Bankman-Fried’s arraignment.
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.
GM. It's the third day of 2023, but to the U.S. federal court system it's the day of Sam Bankman-Fried's arraignment. For those of you in New York, it'll be at 500 Pearl St. in Manhattan at 2:00 p.m. Eastern.
Why it matters
Bankman-Fried was extradited and taken to court for a bail hearing in fairly short order last week, after just over a week in a Bahamian prison. U.S. authorities have already unveiled their charges against the former FTX CEO, and now we'll start seeing their actual case.
Breaking it down
To recap: Sam Bankman-Fried was arrested last month in the Bahamas at the behest of U.S. authorities, who later revealed they had indicted the FTX founder and former CEO on eight different charges: conspiracy to commit wire fraud on customers, wire fraud on customers, conspiracy to commit wire fraud on lenders, wire fraud on lenders, conspiracy to commit commodities fraud, conspiracy to commit securities fraud, conspiracy to commit money laundering and conspiracy to defraud the U.S. and violate campaign finance laws.
Bankman-Fried is likely to plead “not guilty” to these charges this afternoon in a Manhattan courthouse, the Wall Street Journal and Reuters reported last week. After his extradition to the U.S., he appeared in court for his first bail hearing.
He’s currently out on a $250 million personal recognizance bond (not bail, which is important to note: neither he nor his family actually put $250 million in escrow or paid it to the court or even put up assets worth that much as collateral. Also SBF wants the names of the two co-signers to remain redacted).
CoinDesk will cover the arraignment, so keep an eye on the site for live updates.
Mark Cohen, the well-known attorney defending Bankman-Fried, and Christian Everdell, who works at Cohen’s firm Cohen & Gresser LLP, have both confirmed their appearances for the defense in court.
It's unclear, at least at the time of writing, whether any other motions or issues may be discussed. At any rate, today's hearing will set off the next steps in this long and increasingly complex process.
In bankruptcy news
In FTX's bankruptcy case, things are getting strained. Specifically, the U.S. management team and the Bahamas-appointed liquidators are escalating the ongoing jurisdictional mini feud.
Early last week, the Securities Commission of the Bahamas announced it had recovered and secured $3.5 billion worth of assets from FTX, a staggering and significant sum. That amount, coupled with the $1 billion the U.S. bankruptcy managers said they identified, would go a long way to helping the exchange's creditors become whole.
But, the U.S. bankruptcy team said the calculation was incorrect, and that the Bahamas had only recovered around $300 million worth of assets.
Obviously, that's a whole order of magnitude apart. The U.S. team said the value of the assets the Bahamas had recovered had fallen by the time the country announced their efforts.
Yesterday, the Bahamas disputed this characterization, saying the U.S. managers were wrong.
Without knowing what exactly these assets are, it's hard to say who's correct here. Still, this kind of fight seems unique, and it's clear the relationship between the managers in each country is continuing to deteriorate. The uncertainty also can’t be helping FTX’s creditors, who just want to know if they'll get their money back.
In non-FTX news
One of the big things we’re watching for this year is the U.S. Congress. During last year’s election, Republicans retook the House of Representatives with a slim margin, while Democrats retained the Senate. The split control of Congress was seen as a hopeful sign for the crypto industry, given its appearance as a bipartisan issue.
Before we get to the legislating though, the House needs to pick a new speaker. And it’s a little unclear how this is going.
The Speaker of the House sets the legislative body’s agenda, ensures bills can come to the floor for a vote and otherwise has a lot of influence over what legislation lives and dies. The crypto industry should obviously pay attention as the individual who occupies this office will definitely impact which bills move forward.
Kevin McCarthy (R-Calif.), the former minority leader, was seen as a shoo-in for the speaker position now that his party is the majority.
However, the Republican majority is slim, and McCarthy doesn’t have much margin for winning the speakership. According to the D.C. press corps, he doesn’t currently have the votes to take up the gavel. One of the “no” votes, Rep. Scott Perry (R-Pa.), confirmed in a statement he would not support McCarthy at this time. Other lawmakers are signaling hesitance as well.
This doesn’t mean McCarthy’s speakership bid is dead, just that it’s a lot more uncertain than people perhaps expected at this stage.
Meanwhile, Rep. Tom Emmer (R-Minn.), who is very vocally crypto-friendly, remains the Majority Whip, which means he’ll also help influence legislation this upcoming Congressional term.
Changing of the guard
- (The New York Times) I had a link about this last week but Southwest Airlines’ holiday meltdown really was something special. And of course by special I mean catastrophic. Anyways, can’t wait for the next major winter storm.
- (The New York Times) This is an important story but buried in it is a warning that if you rely too heavily on a centralized cloud service provider, you run the risk of losing it. Have some offline backups handy or something.
- (Bloomberg) This is a fun story written by former CoinDesker Muyao Shen: There's a bitcoin bar in New York staffed by a former Michelin star chef.
- (CoinDesk) If you missed last week's edition, catch up here. CoinDesk's regulation team explained what they'd look out for this year.
December 30, 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!