Despite a recent Supreme Court ruling, FTX founder Sam Bankman-Fried’s (SBF) chances of dismissing fraud charges remain low.
Despite a recent Supreme Court ruling that redefined fraud, Sam Bankman-Fried, the founder of cryptocurrency exchange FTX, faces an uphill battle in his fight against multiple charges related to the downfall of his exchange. But, legal experts do not expect that the authorities will dismiss the charges.
🚨 BREAKING: FTX founder SBF hopes that a recent Supreme Court decision limiting fraud prosecutions will strengthen his defense against charges linked to his crypto exchange's collapse, but legal experts believe the chances of the charges being dismissed are slim – Reuters
— BecauseBitcoin.com (@BecauseBitcoin) May 17, 2023
Earlier this month, SBF, pleading not guilty, turned to U.S. District Judge Lewis Kaplan to eliminate most of his charges. His argument hinges on the idea that some charges rest on a now-invalidated theory of fraud. This theory, known as the “right to control,” involves depriving a victim of information of economic value, rather than physical property.
Supreme Court Decision’s Role in SBF’s Case
The Supreme Court recently discredited the “right to control” theory, overturning the conviction of a Buffalo construction executive involved in bid-rigging. The court highlighted this theory’s inconsistency with the structure and history of federal fraud statutes. SBF’s legal team quickly moved to associate this decision with their client’s case, claiming a “direct bearing.”
However, legal experts suggest that the prosecutors have a strong argument against SBF’s defense. The government can demonstrate that tangible property was lost by FTX customers, who, they argue, handed over their money based on potentially fraudulent statements made by SBF. Therefore, the Supreme Court’s decision might not be as beneficial to Bankman-Fried’s case as his defense hopes.
SBF’s representatives and a spokesperson for the U.S. Attorney’s office in Manhattan, tasked with responding to Bankman-Fried’s motion to dismiss by the end of May, both refrained from commenting on the matter.
The Charges and Implications for Digital Asset Exchanges
Bankman-Fried’s case comes at a time when U.S. prosecutors and regulators are intensifying their scrutiny of digital asset exchanges. This increased scrutiny follows the sharp drop in Bitcoin and other tokens’ values last year as central banks upped interest rates. Bankman-Fried allegedly misled customers into thinking that FTX was a secure, responsible platform amidst this volatility, even as he diverted customer funds.
SBF, now 31 years old, leveraged the Bitcoin boom to amass an estimated net worth of $26 billion prior to FTX’s bankruptcy declaration in November. This bankruptcy followed a series of customer withdrawals after reports emerged that FTX had mixed assets with Alameda Research, Bankman-Fried’s crypto-focused hedge fund.
SBF’s Potential Outcomes
Bankman-Fried may have a better chance of getting the bank fraud count dismissed by arguing that it leans on the now-invalidated right to control theory. The charge in question alleges that Bankman-Fried misrepresented his intentions when opening a trading company account that he actually planned to use for processing FTX customer deposits and withdrawals.
However, even if judges dismiss this count, Bankman-Fried still must face 12 other counts at his trial, scheduled for October 2nd. Former federal prosecutor Tim Howard, currently a partner at Freshfields, echoes the sentiment of many experts by suggesting that Bankman-Fried faces a tough fight. To avoid liability, he must prove that none of the fraud theories apply to him – a challenging task indeed.
