Sam Bankman-Fried’s deleted tweets about Tom Brady and FTX could add to his legal woes
FTX was actually wrong.
Sam Bankman-Fried, the founder and now former CEO of cryptocurrency exchange FTX, wrote on Nov. 7 that his company and assets were “fine” in a since-deleted tweet. In the same tweet, he claimed that his exchange “has enough to cover all customer holdings” because it doesn’t invest “customer assets.”
Days later, Bankman-Fried was spectacularly refuted. His competitor Changpeng Zhao, CEO of rival exchange Binance, sparked a run on FTX assets that pushed FTX into bankruptcy and made Mr. Bankman-Fried an outcast in the crypto industry. The 30-year-old is now reportedly under investigation by the Justice Department and the Securities and Exchange Commission for possible fraud and dipping client funds to invest in the operations of trading firm Alameda Research, another company he founded.
As investigators close in on the crypto world’s former golden boy, this deleted Nov. 7 tweet and several others like it may be haunting him again. In addition to claims about FTX’s stability that were quickly proven false, he also deleted his retweets of posts from FTX announcing partnerships with celebrities like NFL star Tom Brady and Red Sox legend David Ortiz, who have helped build FTX’s credibility and reach.
In cases of potentially fraudulent conduct, much depends on investigators being able to show that their targets were aware of wrongdoing and knowingly obstructed any search for incriminating evidence, said Andrew Boutros, regional chair of the United States White Collar Crimes Attorney Dechert and a former federal prosecutor told wealth.
Boutros, who did not specifically comment on the FTX case or Bankman-Fried, noted that fraud cases often “come down to intent” and whether prosecutors could prove it.
Willful intent or negligence?
According to Boutros, when it comes to allegations of fraud, it usually depends on what investigators can show that the suspect knew about.
“It’s rare that in a fraud case the question is asked, ‘Was there a loss? Or was there a theft?’ The question is usually, “Who knew? who knew when Or who caused it?” he said.
In FTX’s case, Bankman-Fried has yet to be charged with a felony, although he is reportedly being held “under surveillance” in the Bahamas, where FTX is based. The Bahamian authorities are reportedly negotiating an extradition treaty with US counterparts. Bloomberg reported on Tuesday.
In a recent interview with the New York Times, Bankman-Fried did not address the investigation or the allegations leveled against him in some corners of the financial world. Instead, he attributed the collapse of FTX and the chaos that followed to being distracted because he was also running several other operations at once and didn’t see the troubles coming before they did.
In several apologetic, and sometimes cryptic, tweets over the past week, the former CEO has expressed his views wrote that he was “shocked to see things the way they did”.
“Touch of Fraud”
If investigators can attribute criminal intent to Mr. Bankman-Fried’s actions and knowledge of FTX’s violations, his deleted tweets could be used as evidence in a potential case, under a decades-old law known as Title 18 US Code 1519 to serve.
The law in question states that anyone who “knowingly alters” an entry in a record “with intent to obstruct, obstruct or influence an investigation” is committing a criminal offense and punishable by a fine or imprisonment of up to 20 years years can be occupied. But it also contains a critical provision that could be applied to any situation “regarding or contemplating such a matter.”
In these cases, Boutros said, “contemplation” refers to something called “predictive obstruction determination.” This would happen when a person preemptively eliminates potential evidence “pending an investigation,” he added.
Boutros pointed out how this type of charge was used in the 2002 indictment of energy company Enron and accounting firm Arthur Andersen. The two companies were embroiled in an accounting scandal that ultimately led to their demise. Arthur Andersen was accused at the time of destroying thousands of documents related to the Justice Department’s investigation.
Over the past week, many, including former Treasury Secretary Larry Summers, have compared the FTX collapse to Enron’s, citing “touch of fraud” suggesting “financial failures” and a “huge fortune explosion that no one fully understands” where she comes from ”
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