Original Jurisdiction’s Post

By next Thursday, August 16, creditors must vote on whether to approve the Chapter 11 liquidation plan of FTX, the once high-flying cryptocurrency exchange. FTX’s former CEO, Sam Bankman-Fried aka SBF—the son of two Stanford law professors, who went on to become one of the world’s youngest billionaires—is behind bars. He’s in the process of appealing his convictions for fraud, conspiracy, and money laundering, as well as his 25-year prison sentence. Ryne Miller 🇺🇸 served as general counsel of FTX US, one of several corporate entities that was part of the sprawling FTX empire. Working out of New York, he was not part of SBF’s high-living, Bahamas-based inner circle. But after a fateful phone call in November 2022 from SBF’s father, Joe Bankman, informing Ryne of a multibillion-dollar “liquidity hole”—some $8 billion to $10 billion in FTX customer deposits that had somehow gone missing—he played a crucial role in responding to the situation. By the end of that week, FTX was in bankruptcy. Why did Ryne leave a partnership at Sullivan & Cromwell LLP, one of the world’s leading law firms, to become the GC of FTX US? Should he have noticed certain red flags at the company, such as the lack of a board or a weak compliance function? What lessons does he draw from his time at the company? And how is he putting them to work today at his new law firm, Miller Strategic Partners LLP, which marks its one-year anniversary next month? Ryne and I covered all this and more, in the latest edition of the Original Jurisdiction podcast. Thanks to Ryne for joining me, and thanks to NexFirm for sponsoring! https://bit.ly/3T3uHWD #podcast #podcasts #podcasting #law #lawyer #lawyers #attorney #attorneys #legalcareer #legalcareers #regulation #regulatorylaw #finance #crypto #cryptocurrency #FTX #bankruptcy #bankruptcylaw #digitalasset #digitalassets #Bitcoin

Sharing the link to my discussion with David Lat and his Original Jurisdiction podcast, for those interested.

FTX’s legal battle with Anthony Scaramucci and SkyBridge Capital is more than just a financial dispute—it’s a deeper reflection of the toxic culture and questionable practices that surrounded the crypto giant. What’s behind this lawsuit, and what does it reveal about FTX's dealings with money, influence, and transparency? FTX filed a lawsuit against Scaramucci as part of a broader effort to recover funds for creditors. The firm alleges that Sam Bankman-Fried (SBF) engaged in lavish, showy investments in various companies, including SkyBridge Capital, to enhance his political and financial standing during the 2022 “crypto winter.” But the real kicker? These investments weren’t just to boost legitimate ventures—they were allegedly aimed at creating the illusion of solvency and maintaining FTX’s image in the public eye. In fact, one of the core accusations is that millions of dollars were funneled into these “investments,” only for the money to be shuffled back, inflating valuations and propping up the image of both SkyBridge and FTX. This raises troubling questions about potential money laundering—using investments as a mechanism to recycle funds and hide the true state of FTX’s finances. As the legal fallout from FTX’s bankruptcy and Bankman-Fried’s fraud charges continues to unfold, more details about these investments will come to light. But one thing is clear: the crypto industry, which once promised decentralisation and transparency, is now facing questions about the very practices it was supposed to be free of. If these allegations are true, it’s a stark reminder of the need for accountability in the crypto world. The industry can no longer afford to ignore the complex financial games being played behind the scenes. As investors, regulators, and consumers, we must demand more transparency and less hype. What can we learn from the FTX debacle, and how can we push for better practices in this space? Let me know your thoughts in the comments.

Syed Rahman wrote about the issues that still need addressing at FTX now that the crypto exchange’s founder Sam Bankman-Fried has been jailed for fraud. In his piece, which features on the CFAAR blog, Syed considers the plans for FTX customers to recover most of their funds, how the value of the assets held by FTX has risen and whether the Internal Revenue Service’s claims against FTX will take priority. He also outlines customer dissatisfaction with how complicated it is to submit claims through FTX’s bankruptcy administrators. The piece is on the CFAAR website. https://buff.ly/3TVzvN4 #ftx #crypo #sambankmanfried #legal #law #lawfirm

Does the S in SBF stand for sociopath? Bloomberg reports: "Sam Bankman-Fried came up with a lot of ideas to rehabilitate his image and launch a new crypto exchange after FTX went into bankruptcy. Bankman-Fried thought he might “Go on Tucker Carlson, come out as a republican;” “Come out against the woke agenda;” tell people the team running his bankrupt former company “has no idea how to run FTX;” tell people he’s “really glad” the bankruptcy team stepped in and “they’re great.”" He's about as anti-woke as he is woke. There seems to be no narrative he will not consider selling to manipulate observers. Given that he was in the business of selling an asset class based purely on narratives, it should come as no surprise that he regarded his trial similarly as an exercise of marketing a suitable narrative regardless of whether it is true. "In a Google document, which prosecutors attached to a court filing seeking to put Bankman-Fried behind bars for as long as 50 years, the fallen crypto king considered having author Michael Lewis interview him on TV, asking people what to do in a Twitter poll and leaking a document to the press. ... Prosecutors said the Google document helps show that Bankman-Fried is “motivated to launch his redemption narrative” and possibly defraud investors in the future." For future criminals considering a narrative defence, perhaps don't store your conflicting narratives on Google docs? 🤔 And perhaps don't especially label them like SBF? "Applying the maxim that there are no bad ideas in a brainstorm, Bankman-Fried headlined the document: “Note: these are all random probably bad ideas that aren’t vetted; CONFIDENTIAL.”" 🤦🏻 It's probably not a good idea to include a bunch of inconsistent defences in a document. Even if one of them were true, how likely do you think a jury is to believe in it? And an all caps confidential only emphasises you have something to hide. The question remains: how long will the modern idiot Machiavelli spend behind bars? Prosecutors are asking for 50 years (https://lnkd.in/g5RUWTTZ), but I wonder if we should simply slap on an extra 10 for sheer stupidity?

🔍 FTX Creditors Take Legal Action Against S&C 📉⚖️ In a surprising twist, FTX creditors are suing Sullivan & Cromwell (S&C), alleging the law firm's involvement in the exchange's fraud. According to court filings, they claim S&C benefited financially from FTX's misconduct. The lawsuit seeks damages for various offenses, including civil conspiracy. S&C, a long-standing legal institution, has been overseeing FTX's bankruptcy proceedings. But concerns about conflicts of interest have surfaced due to their past ties with FTX. These ties include handling deals for the exchange and receiving payments. The relationship between FTX and S&C became more intertwined with the hiring of Ryne Miller, a former S&C partner, as FTX's general counsel. Allegations suggest Miller directed cases from FTX to his former firm. Despite denials of wrongdoing from S&C, questions about impartiality persist. This situation highlights the importance of transparency and integrity in the crypto industry. The key takeaway? Upholding ethical standards is vital in crypto. By fostering trust and accountability, we can create a stronger ecosystem for everyone involved. Let's continue striving for transparency and integrity in the crypto world. #FTX #SullivanAndCromwell #CryptoFraud #LegalAction #Transparency 📈💼

⚖️ Sam Bankman-Fried’s 25-year prison sentence doesn't reflect a failure of FTX, it reflects a failure of America. ⚖️   Binance’s Changpeng Zhao was recently sentenced to four months in prison rather than the three years recommended by prosecutors, roughly a month after FTX’s Sam Bankman-Fried (“SBF”) was sentenced to 25 years. In SBF’s sentencing, Judge Lewis Kaplan cited that SBF knew what he did was wrong and that he’d got caught. But after listening to “Going Infinite” by Michael Lewis on Audible, it’s difficult not to feel sympathetic towards SBF. My own take – he never should have had the freedom to make the mistakes that he did. The regulators stuck their heads in the sand, and Sam paid the price. Michael Lewis is a phenomenal storyteller and famous for his books on financial crises and behavioral finance, like “Liar’s Poker” and “The Big Short”, many of which have been adapted into movies. 📚 For “Going Infinite”, Michael Lewis was embedded with the FTX team, both before and during the meltdown. He saw the trainwreck from INSIDE the train. This made for an amazing book, which highlighted for me that the failure of FTX was our failure to regulate crypto. 🏛 Some key insights from the book: 📈 SBF is an effective altruist (EA). EA’s core idea is to maximize potential good for the world. This leads many, like SBF, to choose to make as much money as possible just to give it away, since they believe that approach will have the largest positive impact on the world. 📈 Initially FTX could not get a bank account because it was a crypto business. At the start all funds for FTX went to Alameda because they HAD TO. And in the beginning Alameda was the key market maker on FTX because they needed to be. 📈 Why does that matter? Because FTX was a startup run by kids. I've been at a startup that grew at hockey stick graph angles during the early days of China's online game boom— it's messy. I've seen it. 📉 But here, FTX had billions of other people’s dollars, AND they had zero regulatory oversight. Did SBF misuse customer funds? The jury said yes, but if FTX was regulated (like any other financial intermediary) he never would have had that opportunity. The true culprit is the US financial regulatory system – the SEC, Congress – for not regulating an emerging and immensely impactful market. In SBF’s own words, he screwed up, but he never should have had the chance to do so in the way that he did. FTX failed because America failed to regulate FTX. We can do better. It’s time to bring crypto in from the cold before we lock up another of our best and brightest. You can find Michael Lewis’s book, Going Infinite, here (or on Audible, which I LOVE): https://lnkd.in/eysmhNmR #SBF #CryptoRegulation #Fintech

S&C Caught in the Crypto Crossfire: FTX Creditors Cry Foul FTX's creditors are throwing down the legal gauntlet at Sullivan & Cromwell (S&C), a law firm that's been in the mix with the now-bankrupt crypto exchange. They're not just pointing fingers; they're slamming down a lawsuit claiming S&C was knee-deep in the FTX mess, helping to facilitate a multi-billion dollar fraud. These creditors argue that S&C turned a blind eye to some pretty shady dealings because they were making bank off of FTX's schemes. S&C has been the brains behind the bankruptcy proceedings but has a history with FTX that goes way back, including some hefty paychecks for advising on big deals before the crash. There's a bit of a plot twist with Ryne Miller, a former S&C partner who jumped ship to FTX and apparently kept the business flowing back to his old pals at S&C. Amidst all this, FTX's ex-CEO, Sam Bankman-Fried, was practically part of the furniture at S&C's New York office, showing just how cozy they all were. S&C, for their part, insists they're clean, claiming their relationship with FTX was all above board and just business. But with accusations flying of conflicts of interest and calls for an independent investigation, this legal drama's just heating up.

⚖️ Sam Bankman-Fried’s 25-year prison sentence doesn't reflect a failure of FTX, it reflects a failure of America. ⚖️   Binance’s Changpeng Zhao was recently sentenced to four months in prison rather than the three years recommended by prosecutors, roughly a month after FTX’s Sam Bankman-Fried (“SBF”) was sentenced to 25 years. In SBF’s sentencing, Judge Lewis Kaplan cited that SBF knew what he did was wrong and that he’d got caught. But after listening to “Going Infinite” by Michael Lewis on Audible, it’s difficult not to feel sympathetic towards SBF. My own take – he never should have had the freedom to make the mistakes that he did. The regulators stuck their heads in the sand, and Sam paid the price. Michael Lewis is a phenomenal storyteller and famous for his books on financial crises and behavioral finance, like “Liar’s Poker” and “The Big Short”, many of which have been adapted into movies. 📚 For “Going Infinite”, Michael Lewis was embedded with the FTX team, both before and during the meltdown. He saw the trainwreck from INSIDE the train. This made for an amazing book, which highlighted for me that the failure of FTX was our failure to regulate crypto. 🏛 Some key insights from the book: 📈 SBF is an effective altruist (EA). EA’s core idea is to maximize potential good for the world. This leads many, like SBF, to choose to make as much money as possible just to give it away, since they believe that approach will have the largest positive impact on the world. 📈 Initially FTX could not get a bank account because it was a crypto business. At the start all funds for FTX went to Alameda because they HAD TO. And in the beginning Alameda was the key market maker on FTX because they needed to be. 📈 Why does that matter? Because FTX was a startup run by kids. I've been at a startup that grew at hockey stick graph angles during the early days of China's online game boom— it's messy. I've seen it. 📉 But here, FTX had billions of other people’s dollars, AND they had zero regulatory oversight. Did SBF misuse customer funds? The jury said yes, but if FTX was regulated (like any other financial intermediary) he never would have had that opportunity. The true culprit is the US financial regulatory system – the SEC, Congress – for not regulating an emerging and immensely impactful market. In SBF’s own words, he screwed up, but he never should have had the chance to do so in the way that he did. FTX failed because America failed to regulate FTX. We can do better. It’s time to bring crypto in from the cold before we lock up another of our best and brightest. You can find Michael Lewis’s book, Going Infinite, here (or on Audible, which I LOVE): https://lnkd.in/eg54Acre #SBF #CryptoRegulation #Fintech

FTX Asks Judge to Stop Class Action Complaints FTX reportedly aims to stop class action complaints and other lawsuits that target company insiders and venture capital firms accused of being involved in the collapse of the cryptocurrency exchange. The company asked a U.S. judge Tuesday (June 4) to stop this outside litigation, saying it puts at risk its efforts to repay customers impacted by the collapse, Reuters reported Tuesday. By selling assets and filing lawsuits to claw back money paid out before its collapse, FTX has recovered some $16 billion to repay customers, according to the report. The outside litigation could put these funds at risk, the company told the judge, per the report. FTX also said that the class action lawsuits aim to collect legal fees “despite having to date provided next to no monetary benefit” for victims of the collapse, according to the report. Adam Moskowitz, a lead lawyer for the plaintiffs, said in the report: “Our goal is to provide relief for all FTX victims and we appreciate all parties that are helping our efforts.” FTX said May 7 that it has pulled together assets worth enough to pay back 98% of its creditors 118% of what they are owed. The remaining 2% would get back 100% of their claim under a plan that still needs approval from a federal judge. “FTX has achieved this recovery level by monetizing an extraordinarily diverse collection of assets, most of which were proprietary investments held by the Alameda or FTX Ventures businesses, or litigation claims,” the company said at the time in a news release. In another legal action related to the collapse of FTX, it was reported in April that a group of FTX investors agreed to drop legal claims against FTX co-founder and former CEO Sam Bankman-Fried in exchange for his cooperation in their suits against other defendants. The other defendants include various celebrities paid to promote the exchange when it was flying high. Even before criminal charges were filed against Bankman-Fried, a group of investors sued FTX’s celebrity endorsers for securities law violations, alleging that they failed to conduct proper due diligence and helped further the exchange’s fraud. News credit PYMNTS #news #fintechnews #finance #financenews #viralnews #trendingnews #dailynews #dailynewsupdates