Could the rule have prevented the Sam Bankman-Fried criminal conviction?

Could the rule have prevented the Sam Bankman-Fried criminal conviction?



Former FTX CEO Sam Bankman-Fried pleaded guilty to seven charges late on November 2. The jury delivered a verdict in less than 10 minutes after deliberating for four hours. to silence in the crowded courtroom of the Southern District Court of New York.

Throughout the long trial, my thoughts kept returning to: How did he get here? Could all this damage have been prevented? What can we do to avoid the next FTX?

Some say that the current financial regulations could have prevented the collapse of FTX. Complying with regulatory requirements, Bankman-Fried has never been able to collect and embezzle customer funds.

FTX used Alameda Research as a “payment processor,” as described in Bankman-Fried's defense. North Dimension, one of Alameda's subsidiaries, has received deposits from FTX clients since the exchange's inception. Without any corporate control, the companies merged funds.

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Fundraising does not necessarily involve fraudulent intent, but it can still be problematic due to a lack of transparency and accountability. In fact, it's a “dirty word” in securities law, explained an attorney handling Bankman-Fried's trial.

Embezzlement, on the other hand, involves intentional and fraudulent acts, where a person under financial control uses capital for personal gain or an unauthorized purpose. According to prosecutors, Bankman-Fried used billions of dollars in venture capital investments, real estate purchases and political donations for personal gain. None of this money was his.

Without corporate oversight, the defense failed to prove that the $8 billion lost from customers was the result of a market failure, not embezzlement.

Bankman-Fried had high ambitions. He dreamed of becoming the President of America. He thought raising FTX was the only way to cover the billion dollar hole on the balance sheet, but it was too late for FTX. As Warren Buffett wisely said, “You only know who's swimming naked when the tide goes out.”

In the end Banman-Fried was caught not in crypto fraud, but in traditional fraud. In theory, regulatory watchdogs could prevent him from hoarding and embezzling money, but the law doesn't stop someone who believes he's out of reach from making mistakes.

This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.

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