"Not Guilty"-- Bankman-Fried Plea Sets Up October 2 Trial

Sam Bankman-Fried Pleads Not Guilty to Fraud and Other Charges

Nearly two weeks after he was released by a Manhattan judge on a $250 million bond and ordered to stay with his parents in Palo Alto, Calif., Sam Bankman-Fried, the disgraced cryptocurrency executive, returned to New York and pleaded not guilty on Tuesday to charges that he engaged in widespread fraud, paving the way for a possible trial.

Mr. Bankman-Fried, 30, appeared in Federal District Court in Manhattan, where he faces charges stemming from the implosion of FTX, the cryptocurrency exchange he founded and led. Its collapse resulted in billions of dollars in customer losses.

Mr. Bankman-Fried could ultimately change his mind and plead guilty to at least some of the charges. But his initial response tees up a potentially titanic court fight. The judge, Lewis A. Kaplan, set a tentative trial date of Oct. 2.

SEC Charges Former SPAC CFO for Orchestrating $5 Million Fraud Scheme

The SEC’s complaint alleges that, from June 2021 through July 2022, Morgenthau embezzled money from African Gold and stole funds from another SPAC series called Strategic Metals Acquisition Corp. I and II to pay for his personal expenses and to trade in crypto assets and other securities.

According to the SEC’s complaint, Morgenthau concealed unauthorized withdrawals by falsifying African Gold’s bank account statements and then provided those falsified documents to African Gold’s auditor and accountants for purposes of preparing African Gold’s SEC filings. During the same general time period, Morgenthau raised money from Strategic Metals’ investors based on misrepresentations that the money would be used to launch the Strategic Metals SPACs, when in fact Morgenthau misappropriated the money for personal uses, including to conceal his embezzlement of African Gold’s funds.

Regulators warn U.S. banks on crypto risks including ‘fraud and scams’

U.S. banking regulators warned financial institutions on Tuesday that dealing with cryptocurrency exposes them to an array of risks, including scams and fraud.

“The events of the past year have been marked by significant volatility and the exposure of vulnerabilities in the crypto-asset sector,” the regulators said in a joint statement from the Federal Reserve, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency. The comments come just weeks after the spectacular collapse of crypto exchange FTX.

The regulators said the risks include: “fraud and scams among crypto-asset sector participants” and “contagion risk within the crypto-asset sector resulting from interconnections among certain crypto-asset participants.”

How Sam Bankman-Fried Negotiated His BailMr. Bankman-Fried had another point of leverage: U.S. prosecutors had wanted to extradite him from the Bahamas quickly, to avoid both the perception of slow-moving justice and his getting hurt in a Bahamian jail before being moved to the U.S. If he had fought extradition, he would most likely have lost that fight, but it would have cost the U.S. time and money. In return, he wanted to stay out of prison before trial.

The Justice Department and Mr. Bankman-Fried’s lawyers ultimately negotiated over how to extradite him in exchange for letting him stay out of prison without posting a huge bond, given his lack of funds. So while prosecutors could herald a $250 million bail, one of the highest in history, he was ultimately released on something closer to his own recognizance, which is also a standard arrangement. Prosecutors did demand that his parents post their home as collateral and co-sign the bail deal, expecting that Mr. Bankman-Fried wouldn’t want to hurt his family.

The Top Ten D&O Stories of 2022

The directors’ and officers’ liability environment is always changing, but 2022 was a particularly eventful year, with important consequences for the D&O insurance marketplace. The past year’s many developments also have significant implications for what may lie ahead in 2023 – and possibly for years to come. I have set out below the Top Ten D&O Stories of 2022, with a focus on future implications….

The Largest Class Action Settlements of 2022

In a remarkable year of class action activity, investors across the globe agreed to settlements totaling over $7.4 billion[1] in 2022, a greater than 75% increase from 2021….

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Of the top ten U.S. settlements listed, three occurred in the Southern District of New York, while two occurred in the Northern District of California. Five other court venues were represented by one settlement each. Nine of the top ten U.S. settlements occurred in a federal court, while only one of the ten was resolved in a state court. All of the cases on this top ten list also settled after years of litigation, including some which resolved on the eve of trial.

Crypto Manipulation Has Consequences

Last week I wrote a postscript to “ The Crypto Story” for Bloomberg Businessweek. “One imperfect but useful way to think about crypto,” I wrote, “is that it allowed for the creation of a toy financial system.” A lot of people in crypto described it as a set of innovations that would have profound effects on the real world, on ordinary people’s daily lives. But a lot of people in the crypto financial system treated it as a game where they could click some buttons on a computer and get rich with no real-world consequences. You are trading Mango tokens on Mango Markets! Doesn’t that sound fake? If you find a cool button to press to “make numba go up,” doesn’t it seem like you could press it? Like it would just be fun and consequence-free? And yet the people who did that keep ending up in real jail.

Crypto Collapse: Blockchain-ish Brands Decay in Brutal Echo of Dotcom Era

The crypto collapse has made Blockchain a dirty word. Bitcoin miner Riot Blockchain Inc., once the poster child for rebranding designed to capture the investment zeitgeist, now wants to be known as Riot Platforms after a near-90% share-price fall in 2022. It’s a symbolic moment that attests to the B-word’s shift to curse from blessing on the stock market, where investors have fallen prey to misguided euphoria and the failure to deliver viable business models. And if there’s one safe bet in 2023, it’s that Riot won’t be the last firm to change tack.