FTX, FTX, FTX!

Caroline Ellison set to testify as star witness against Bankman-Fried

Caroline Ellison, federal prosecutors’ star witness against former cryptocurrency mogul Sam Bankman-Fried, is expected to take the stand Tuesday to provide potentially make-or-break testimony in the week-old criminal trial.

As the chief executive of Bankman-Fried’s hedge fund and his sometimes-romantic partner, Ellison played an integral role in his crypto empire and is set to provide jurors an insider’s view of what government lawyers call one of the biggest financial frauds in history.

Sam Bankman-Fried Wants to Probe Lawyers’ Involvement in $200M ‘Sham’ Alameda Loans

Prosecutors have already probed Wang about around $200 million- $300 million of loans he received from Alameda, which he used to make venture investments and buy himself a house in the Bahamas.

Wang’s “understanding that these were actual loans – structured by lawyers and memorialized in formal promissory notes that imposed real interest payment obligations – is relevant to rebut the inference that these were simply sham loans directed by Mr. Bankman-Fried to conceal the source of the funds,” the filing said.

Wang has previously said he “didn’t think the lawyers would tell him to sign something that was illegal,” the filing said.

Bankman-Fried’s Legal Woes Extend Far Beyond Criminal Trial

Even if he beats the criminal charges, Bankman-Fried will have to contend with a storm of lawsuits. He is targeted in more than a dozen civil and regulatory actions related to FTX, his lawyers said in court filings. That includes cases by the Securities and Exchange Commission, the Commodity Futures Trading Commission, and a proposed class action from FTX customers.

The civil cases are paused while the criminal case against Bankman-Fried plays out. He has pleaded not guilty to the criminal charges.

Here’s what to know about the outstanding cases.

Crypto Should Ignore the SBF Trial

It’s crucial for the industry to disassociate from rogue actors and showcase its dedication to ethical conduct and responsible practices. The crypto community has proven its capability to do exactly that. Swift reactions to regulatory hurdles, active initiatives to educate lawmakers, and a readiness for constructive discussions all reflect the industry’s maturity and promise. However, the crypto industry risks erasing these achievements if it lets the Bankman-Fried saga dominate the narrative.

So, as the trial unfolds and the world watches, the industry must ignore the sensationalism and get back to business. The shot clock for progress in D.C. in 2023 is ticking ever closer to zero and every stakeholder in the crypto ecosystem should be hustling to amplify its collective voice in Washington. The crypto industry must continue to show the U.S. legislature that, beyond the outliers, blockchain technology is tangible and worth championing.

Securities Broker Loses Challenge to FINRA’s Enforcement Power

A securities broker lost his bid to halt a FINRA enforcement action after a federal court in Washington, D.C. said he was unlikely to succeed on claims that the private, self-regulated organization is a “state actor” under the US Constitution.

Eugene H. Kim, who faces claims of alleged ethics violations, argued that that Financial Industry Regulatory Authority Inc. ought to be subject to Article II’s appointment and removal requirements. But being a state actor requires “permanent control by the government,” the US District Court for the District of Columbia said Oct. 6, rejecting Kim’s bid for injunctive relief.