Bankman-Fried to Face “Significant Cross-Examination” Today

SBF to face brutal grilling Monday, mysterious rebuttal witness

Ex-crypto golden boy Sam Bankman-Fried is set to face a blistering cross-examination by Manhattan federal prosecutors Monday — and then a planned mysterious “rebuttal” witness.

The MIT grad, 31, coolly tried to weasel out of blame in court Friday for his alleged $10 billion theft from FTX investors, claiming he knew “basically nothing’’ about cryptocurrency when he started his business and that it imploded because of “mistakes,’’ not crimes.

But he won’t be able to dodge getting slammed by prosecutors under cross-examination when his criminal trial resumes Monday morning.

Prosecutors also hinted Friday that they then plan to call a “rebuttal” witness after he leaves the stand.

Overdue: Statement of Dissent on LBRY from Commissioner Hester M. Peirce

Earlier this year, LBRY tweeted: “It’s the year 2028, hundreds of thousands of Americans have been jailed for using illegally cryptocurrency instead of CBDCs, and Hester Pierce [sic] is still just writing dissenting memos.” Although I will be tending bees, not writing dissents, in 2028, I think often about the crux of that criticism and ask myself: “What could I do to help prevent another group of people with a big idea for changing the world from going through what LBRY has over the past several years?” I have not come up with an answer to that question; however, I urge people who have suggestions about how the Commission can right its course on crypto and innovation more broadly, to send them my way.

The Hunt for Crypto’s Most Famous Fugitive. ‘Everyone Is Looking for Me.’

Fallen crypto tycoon Do Kwon was ready to get out of Montenegro. He and his colleague arrived at the small Balkan country’s main airport, where a Bombardier business jet was waiting to take them to Dubai.

Inside the VIP terminal, Kwon handed his passport to an immigration officer, who swiped it. An alert flashed across the officer’s screen. Kwon, it said, was the target of an Interpol red notice—a request to police around the world to arrest him.

Kwon had been lying low in the Balkans for months, but his luck was running out. About two hours earlier that day, March 23, a tipster had separately warned Montenegro’s top cop, Interior Minister Filip Adžić, that Kwon was likely in the country.

Congress may modernize the SEC’s mission. Will it work?

Buried inside the 212-page Financial Innovation and Technology for the 21st Century Act (FIT Act) is Section 504 — a single amendment to securities laws that could be a potent legislative check on the overzealous use of regulatory power by the Securities and Exchange Commission.

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What’s so significant about Section 504? While it’s not a complete reform — time would tell how effective it is — it just might provide a much-needed modernization of the regulatory agency’s 85-year-old mission.

Instead of another long-winded rule or multipronged provision with more nested definitions than a Wikipedia rabbit hole, Section 504 simply adds the word “innovation” to key sections of existing SEC regulations that govern how the commission conducts its business. Such a small change might have a monumental impact, requiring the SEC to consider whether its actions promote or harm innovation.

Time to Say RIP to ESG?

It is no secret that I am skeptical of the usefulness of ESG as an analytic tool and even as an intellectual concept. As I have contended, there are fundamental disagreements about what ESG actually means, and the idea that it can be objectively measured and quantified is illusory, at best. Now, in an October 21, 2023, Financial Times op-ed column (here), NYU Business School Professor Aswath Damodaran argues that ESG is “beyond redemption” and it may be time to administer last rites.

The SEC is Receiving More Whistleblower Tips than Ever, Underscoring Importance of Reform

On October 25, Gary Gensler, Chair of the U.S. Securities and Exchange Commission (SEC), revealed that in the 2023 Fiscal Year the SEC Whistleblower Program the SEC Whistleblower Program received 18,000 whistleblower tips, a new fiscal year record.

“The public’s tips, complaints, and referrals (TCRs) are essential to our work as a cop on the beat,” Gensler stated during remarks at the 2023 Securities Enforcement Forum. “We received more than 40,000 TCRs in the previous fiscal year, including more than 18,000 from those critical whistleblowers.”

FINRA Defends Self-Regulatory Model as Dating to Founding of US

Congress’s ability to delegate aspects of governmental authority to private organizations is constitutional and deeply rooted in the nation’s history, the Financial Industry Regulatory Authority Inc. argued in a brief to the D.C. Circuit Friday.

The theory advanced by challenger Alpine Securities Corp. “threatens to cripple not just FINRA, but also dozens of other self-regulatory organizations that oversee the capital markets and other aspects of the American economy,” the authority said. Alpine’s theory would also affect “a host of other longstanding congressional practices,” it said.

What’s the Deal With Sam Bankman-Fried’s ‘Advice of Counsel’ Defense

The so-called advice-of-counsel defense is a well-established legal routine that tries to cast doubt in a defendant’s culpability by spreading fault to people who were advising him, and should have known better.

DOJ lawyers, however, have long argued this strategy is besides the point, and have filed numerous documents in the case saying SBF’s lawyers should be prohibited from making it, in part because it might distract the jury from the actual crime….

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And so, Kaplan, as is his right, will decide this morning what if any of SBF’s testimony about the advice his lawyers gave him can become an official part of his defense. Whether allowed or not, SBF is fighting an uphill battle. As Kaplan himself asked defense after SBF’s testimony, looking for their input on why this should all go before a jury: Isn’t this a matter of a thief stealing money and asking lawyers to draft up documents allowing him to spend it?

Trying to halt the SEC

Some of the SEC rule proposals generating the most withering criticism are among those that would have the biggest impact on financial advisors. But the widespread opposition won’t necessarily influence the SEC to revise them substantially before they become final regulations.

Financial industry trade associations, bipartisan lawmakers on Capitol Hill and even some investor advocates are strongly resisting SEC proposals on mutual fund reform, advisor custody of client funds and conflicts of interest related to advisors’ use of artificial intelligence and predictive analytics.

Many opponents want the SEC to withdraw those proposals. Although the agency has modified to some extent most of the nearly two dozen final rules it has promulgated since Chair Gary Gensler was sworn in in April 2021, taking a proposal off the table would be an extraordinary step.