Bankman-Fried accusations show growing US prosecutor’s role in crypto enforcement According to Reuters

© Reuters. FILE PHOTO: U.S. Attorney Damian Williams during a news conference regarding the indictment of Sam Bankman-Fried, founder of failed crypto exchange FTX in New York City, U.S., December 13 2022. REUTERS/David ‘Dee’ Delgado/File Photo

By Luc Cohen and Chris Prentice

NEW YORK (Reuters) – When he took office as top federal prosecutor in Manhattan at the end of 2021, Damian Williams pledged to make it a priority “to root out corruption in our financial markets.”

Now, with fraud allegations filed earlier this week against Sam Bankman-Fried, founder of the bankrupt FTX exchange, Williams has further cemented his office’s growing role in the fraud. prosecuting crypto-related financial crimes, according to interviews with half a dozen former prosecutors.

“Every US attorney is held in high esteem by the public for some of the biggest cases they bring,” said Harry Sandick, a partner at the law firm Patterson Belknap and former Manhattan federal prosecutor. “This will forever be connected to the current US attorney.”

The indictment is against Bankman-Fried, who is accused of using billions of dollars in stolen client funds to buy real estate, pay off debt to his hedge fund, Alameda Research, and donate to campaigns. political epidemic – considering Williams as the main rival of the famous businessman, its demise has attracted public attention and led to calls for stricter regulation of cryptocurrency platforms.

Bankman-Fried, 30, has admitted to risk management failures at FTX but said he does not believe he is criminally responsible. His attorney said he was assessing his legal options. On Tuesday, a judge in The Bahamas ordered his detention there while he protested a US extradition request.

Williams led the Southern District of New York (SDNY) securities and commodities task force before being nominated by President Joe Biden as the county’s top prosecutor. Williams, SDNY’s first black American attorney, earned a law degree from Yale and clerked for former Supreme Court Justice John Paul Stevens as well as current Attorney General Merrick Garland when Garland was an appellate judge. .

Earlier this year, Williams launched the first insider trading lawsuits involving digital assets alleging against a former employee of the non-fungible token trading platform OpenSea as well as a former executive. products at Coinbase (NASDAQ:) Global Inc, a rival of FTX.

Both defendants pleaded not guilty.

SDNY has long been known as one of the most powerful financial crime enforcement agencies, and several former prosecutors have compared Williams’ string of crypto-related prosecutions to a focus on transactions. insider translation of Preet Bharara, who served as US Attorney from 2009 to 2017 and secured. convictions of fund managers like Raj Rajaratnam.

Williams was a prosecutor in several high-profile financial crime cases during Bharara’s tenure, including former Goldman Sachs (NYSE:NYSE:) insider trading and Rajat Gupta. fraud by a former portfolio manager at Visium Asset Management LP.

Mike Ferrara, a former prosecutor and now an attorney for Kaplan Hecker & Fink LLP in New York, said: “Cryptocurrency is the Wild West, but fraud is fraud at the end of the day. “Damian is doing a great job saying, ‘we’re going to push the crypto cap,’ in a way that Preet has been very aggressive about insider trading.”

A spokesman for Williams’ office declined to comment.


Pursuing crypto-related prosecutions is not without challenges. Defense attorneys may argue that because the field is relatively new and questions about how to govern it are still being resolved, their clients do not have a clear understanding of how the laws intended to be applied to them. traditional finance for them.

“The government is having a hard time keeping up and making it clear to industry participants what they have to do,” said Elise Maizel, professor at NYU Law School and former white-collar defense attorney. “With these criminal cases, most of the time they adjust through enforcement.”

In a setback for prosecutors, the three former founders of crypto exchange Bitmex and their first employee – who pleaded guilty to charges brought by Williams’ predecessors – of failing to establish the scheme Anti-Money Laundering – received lighter sentences earlier this year than prosecutors requested.

The judge in that case said that although the crime was serious, prosecutors had not brought more serious money laundering or fraud charges and that there were no identifiable victims.

To be sure, Williams’ office has also pursued more traditional financial crime cases, with charges filed this year against the founder of Archegos Capital Management for lying to banks to obtain loans before the company collapsed, and against a former investment manager at a German unit Allianz (ETR:) SE for inflation fund results.

Both pleaded not guilty.

Following Bankman-Fried’s arrest, Williams made it clear that he will continue to enforce crypto laws. On Wednesday, he announced allegations of a wire transfer fraud conspiracy against the founders of two separate cryptocurrency mining and trading companies, which he called a Ponzi scheme.

The five individuals charged in one of the cases have pleaded not guilty, while the three individuals charged in the other have yet to plead guilty.

On Tuesday, Williams told reporters there could be more allegations in the FTX investigation.

“This investigation is very much going on and it’s moving very quickly,” Williams said. “To anyone who has been involved in misconduct at FTX or Alameda Research and who has yet to come forward, I strongly encourage you to come see us before we come to you.”


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