I am not concerned with the fact that, as Rich Lowry and I discussed in recent episodes of The McCarthy Report, the Justice Department routinely files charges when billions of dollars of investor money go bankrupt, so any SBF prosecution would not be surprising . Also, proponents of progressive regulation in the Biden administration, especially those affiliated with Gary Gensler’s Securities and Exchange Commission, are dying for a chance to end the era of free crypto in the Wild West . In my opinion, even though FTX goes against what cryptocurrency was designed for, its implosion is the perfect excuse to push for regulation.
No, what surprised me the most was the timing.
The now-notorious SBF was slated to testify on Tuesday at a hearing of the House Financial Services Committee, with fireworks anticipated to result. It is highly unusual for a suspected fraudster who knows he is under investigation to make public statements explaining himself — especially when his very-prominent lawyer parents are presumably pleading with him to exercise his constitutional right not to help prosecutors build a case against him.
Good defense lawyers advise even clients they believe are innocent to remain silent, at least until charges are filed and discovery begins. Having access to the charges and the Justice Department’s prosecutorial theory, along with information about what the witnesses and documents say, enables defense counsel to gauge the strength of the government’s case, and potentially trade testimony for leniency.
Consequently, if you were a prosecutor from the Southern District of New York (SDNY), the U.S. attorney’s office that has filed the charges against SBF, you would be delighted that your defendant has been ignoring sound advice and making public statements for weeks. You also drool at the thought of being sworn in by top writers in Congress for hours on end.
So why, on the eve of a House hearing, would SDNY suddenly move to arrest SBF, knowing it would inevitably interrupt his testimony? There was obviously no sense of urgency to arrest him. In the month since the collapse of the FTX, SBF has been free and speaking out. Also, if he testifies before Congress, his fate will be known, even by teleportation, assuring prosecutors that he is not willing to flee to hard-to-extradite countries. Why wouldn’t the Biden Justice Department wait a day or two, then, to give SDNY prosecutors the benefit of wide-ranging testimony that could be used against SBF — both in the criminal proceedings and in the SEC’s civil lawsuit, which like the indictment was made public Tuesday morning?
One obvious possibility, for the cynical among us, is that the Democrats who run the House Committee (which is led by firebrand lefty Maxine Waters of California), were loath to abide Republican harangues about SBF’s prodigious political contributions to Dems, whose regulatory enthusiasm he echoed, making him the bane of his crypto competitors’ existence. SBF reportedly donated about $
0 million to Democratic candidates and PACs, making him second only to George Soros in Democratic contributions in the just-concluded midterm cycle. The committee majority may not have relished giving Republicans a chance to spotlight the fact that prominent Democrats received lavish contributions from SBF of what now appears to be stolen money, while the investors who provided the money — and had no idea it was being donated to politicians — lost their shirts.
If this were the reason for the sudden arrest, it would not be the first time the Democrats who run the Justice Department accommodated the whims of congressional Democrats. But is this the reason? Reports indicated that while the seat belt was beloved by progressives until his recent resentment, he also made large donations to Republicans, though he said he did so with “black money” for cars because there was less public and therefore less prone to anger and liquidity. . media . —— Democratic complex. (The Guardian reports on the SBF’s clarification of its claim that it gave to both parties more or less equally: “All Republican donations are dark,” it said, referring to undisclosed political donations .For Republicans, reporters get smart. They’re all very liberal and I don’t want to fight that fight.” Republican and GOP PAC donation to FTX Capital Markets $23 million.) An explanation for the timing of the arrest is pending and it has been indicated that seat belt forces will attempt to secure. extradition from the Bahamas. Perhaps he will, but it is unlikely he’ll be successful if he does. The Bahamian authorities have good relations with their American counterparts.
As this column was being finalized, the Manhattan federal district court unsealed, and SDNY prosecutors publicly released, the eight-count indictment, which while it was still under seal had been the basis for the issuance of an arrest warrant for SBF, and for his detention by authorities in the Bahamas (where he also faces charges).
The indictment charges SBF with the sorts of federal offenses you’d expect to find in the case of a big swindle: wire fraud against customers and lenders and conspiracy to commit it, securities- and commodities-fraud schemes, and money laundering — the last of which will turbo-charge any potential prison sentence. The indictment also alleges that the defendant defrauded the United States by flouting campaign-finance laws, which limit corporate contributions and require disclosure of donation sources. (There is also a hefty forfeiture provision on the books, though there may not be much left for the government to claw back at this point.)
At this early stage, the conspiracy counts are the most notable thing about the indictment. As a matter of law, a person cannot conspire alone — it take two (at least) to tango, as they say — yet SBF is the only person named in the indictment. This suggests that more people will be charged as the investigation continues. Indeed, the Justice Department may already have gotten cooperation from potential coconspirators, such as other officers in SBF’s maze of corporate structures, who could enter guilty pleas in due course.
Clearly trying to elbow in front of DOJ’s big indictment announcement, the SEC released its civil lawsuit against SBF, also filed in the SDNY, early Tuesday morning. He claims SBF was involved in a year-long scam in which money was diverted from FTX investors to support his hedge fund, Alameda Research, and for personal expenses: venture capital and real estate purchases. Uh, political donations
