After Bankman-Fried, Investor Class Action Focuses on Celebrities, Law Firms and VCs

After SBF Conviction Investors Target Tom Brady, Larry David, Celebrities

Sam Bankman-Fried’s criminal fraud conviction came just as the FTX implosion was approaching its first anniversary. But for others who helped promote the cryptocurrency exchange, the legal fallout will continue for years.

Attention now turns to a sweeping class-action suit in Miami federal court by investors who claim they lost billions in the collapse of FTX and seek to pin blame not just on Bankman-Fried and his inner circle, but also on celebrities who were paid to endorse it to the masses, as well as bankers, accountants and lawyers who propped up the empire’s legitimacy.

Crypto’s Bromance With U.S. CFTC May Be One-Sided, Enforcement Record Shows

Half of the 2023 sanctions from the U.S. Commodity Futures Trading Commission (CFTC) targeted digital assets companies and individuals, according to the agency’s annual enforcement snapshot released on Tuesday.

The opening section of the report boasted that “the CFTC cemented its reputation as a premier enforcement agency in the digital asset space.” The U.S. derivatives regulator, which has authority over fraud and manipulation in the crypto markets, filed 47 actions in fiscal year 2023 against the crypto industry that represents a tiny fraction of the trading the regulator oversees.

Congress Must Aid Fight Against Illicit Use of Crypto, Treasury Official Says

A senior Treasury Department official said the Biden administration wants new powers from Congress to aid in a crackdown on the illicit use of cryptocurrencies, citing digital asset flows allegedly connected to Palestinian militant group Hamas.

Treasury has been in communication with Democrats and Republicans about actions that they could take, Deputy Treasury Secretary Wally Adeyemo said Tuesday in Washington at the annual meeting of the Securities Industry and Financial Markets Association, a trade group.

Opting Out

Cornerstone Research has issued an interesting report on opt-outs in securities class action settlements (i.e., when a putative class member chooses not to participate in the settlement and may consider bringing its own direct action against the defendants). A few highlights from the results:

(1) The percentage of securities class action settlements with at least one opt-out has been steadily increasing, although it remains relatively small. The report concludes that from 1996 to 2005 the rate of opt-outs was 2.9%. From 2006 to 2018 the rate increased to 5.8%, and then has jumped from 2019 to H1 2022 to 11.5%….

Sam Bankman-Fried’s Wildest, Craziest, Dumbest Trades

This is a roundup of some of the worst gambles we know Sam Bankman-Fried took during his five years as a crypto-trading behemoth, gleaned from the fallout of FTX, his ex-girlfriend Caroline Ellison’s courtroom testimony and on-chain sleuths. For a man obsessed with calculating the “expected value” of his actions, SBF was remarkably bad at gauging reality — in hindsight that may be expected, considering he thought taking the stand at his own criminal trial and likely perjuring himself was a risk worth taking.

Sam Bankman-Fried’s brother Gabe was absent from his trial. Could he be in trouble too?

In the cinematic version of this courtroom drama, we’d have gotten a glimpse, here and there, of the fourth member of the Bankman-Fried family: Sam’s younger brother, Gabriel. That never happened, because the Brown computer science grad does not seem to have set foot in the Daniel Patrick Moynihan Courthouse.

***

And so Gabe’s absence, following years in which he was a bit character in the Sam Bankman-Fried story, piqued my curiosity. Could Gabe be in legal trouble himself? Where did the bulk of Guarding Against Pandemics’ money go? If someone sends stolen funds to his brother’s nonprofit, what happens to that money? And—most fascinatingly of all—had Gabe really planned, as so many have reported, to buy an entire island nation?