SEC: CoinDeal Offered 56 Million Percent Return (Plus a Bentley)

CoinDeal’s Bentleys Weren’t RealAt the highest tier, a $100,000 investment, that’s a 56 million percent promised return, not even counting the Bentley, which I guess more than doubles your money right there. Also, I mean, imagine a world in which you put $25,000 into some investment and got back ELEVEN POINT TWO FIVE BILLION DOLLARS and they also gave you a “$35k car allowance!” and you were excited for the car allowance? Like, you check your bank balance, and it says $11,250,000,000, and then you go to the Subaru dealership and pick out a nice Forester in the top trim package and the salesperson is like “that one is $36,495, let me tell you about our financing options” and you are like “actually I have a voucher?” ELEVEN BILLION DOLLARS PLUS A CAR ALLOWANCE! Come on. This is so, so stupid. Nobody could have fallen for this, except that people allegedly did, to the tune of $45 million, and those are the people you want when you’re running a scam. CoinDeal’s email list is worth a fortune.

Sam Bankman-Fried Seeks to Keep Grasp on $450M in Robinhood Shares

Sam Bankman-Fried has argued he should retain control of around $450 million in shares of financial trading app Robinhood, disputing a rival claim by the estate of the company he founded and once ran, the bankrupt crypto exchange FTX.

The 56 million shares, in principle owned by Bankman-Fried and co-founder Gary Wang through a holding company called Emergent Fidelity Technologies, are the subject of a complex legal battle that also includes bankrupt crypto lender BlockFi and the U.S. Department of Justice.

In a Dec. 22 filing to the Delaware bankruptcy court, FTX – now under the management of restructuring expert John Ray – said the shares were only nominally held by Emergent Fidelity, and should be frozen until they can be divided up fairly among FTX creditors. Its claim was supported by those liquidating the company in the Bahamas.

Lawyers Advising Crypto-Firms Could Face Civil, or Even Criminal Liability

Consider SBF and Fenwick & West. According to the WSJ, when Daniel Friedberg was a Fenwick & West partner (before he became FTX Chief Regulatory Officer), he may have enabled FTX’s alleged fraud:

“Bankman-Fried needed ever-larger sums to keep the operation afloat. In late 2018, he promised potential lenders of cash or crypto annual returns of up to 20%, according to people familiar with the pitches. When one prospective lender asked about Alameda’s financials, Bankman-Fried’s lawyer explained that the firm often handled large amounts of bitcoin but offered no detailed financial information, according to a document viewed by the WSJ. ‘We know the owner of Alameda and consider him of the highest reputation in the industry,’ Daniel Friedberg wrote on the letterhead of his law firm, Fenwick & West LLP.”

US Closes In on Bankman-Fried Inner Circle With Probe of FTX Chief Engineer

The scrutiny of Singh, who until recently lived with Bankman-Fried in a Bahamas penthouse and was a high school friend of his younger brother, Gabe, presents the latest legal threat to Bankman-Fried as he fights a slew of criminal charges. Former close associates Caroline Ellison and Gary Wang have pleaded guilty to fraud in connection to their roles at Alameda and FTX and are working with authorities.

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The exact scope of the probe into Singh’s role and activities at FTX isn’t known. Bloomberg News last month reported on documentation that showed a GitHub account bearing Singh’s name authored code that hid Alameda’s ballooning liabilities. GitHub is a repository that companies and individual software developers use to store and share code. The documentation reviewed by Bloomberg was in the form of comments associated with specific lines of code.

Attorney General James Sues Former CEO of Celsius Cryptocurrency Platform for Defrauding Investors

New York Attorney General Letitia James today filed a lawsuit against Alex Mashinsky, a co-founder and former CEO of cryptocurrency lending platform Celsius Network LLC and its related entities (Celsius), for defrauding hundreds of thousands of investors, including more than 26,000 New Yorkers, out of billions of dollars worth of cryptocurrency. The lawsuit alleges that Mashinsky repeatedly made false and misleading statements about Celsius’s safety to encourage investors to deposit billions of dollars in digital assets onto the platform. As Celsius lost hundreds of millions of dollars of assets in risky investments, Mashinsky misrepresented and concealed Celsius’s deteriorating financial condition. Mashinsky also failed to register as a salesperson for Celsius and as a securities and commodities dealer. Attorney General James’ lawsuit seeks to ban Mashinsky from doing business in New York and require him to pay damages, restitution, and disgorgement.

U.S. securities regulator probes FTX investors’ due diligence -sources

The U.S. Securities and Exchange Commission (SEC) is seeking details about FTX investors’ due diligence, according to two sources familiar with the inquiry, as fallout from the crypto firm’s collapse spreads.

The SEC has so far brought charges against three of FTX’s top executives, accusing them defrauding investors in the crypto trading platform that has since filed for bankruptcy.

The SEC is now asking financial firms what diligence policies and procedures they have in place, if any, and whether they followed them when choosing to invest in FTX, the sources said.

FTX Customers Take Enron, WorldCom Path in Legal Fight for Cash

FTX customers going outside bankruptcy court to recover losses from Sam Bankman-Fried’s failed crypto empire are using a legal path that has worked in past collapses such as WorldCom and Enron: They’re going after the supposed enablers.

Laws that freeze claims against debtors in bankruptcy don’t apply to third parties. So customers have filed more than a half-dozen proposed class actions against the NFL’s Tom Brady, accounting firm Prager Metis and Bankman-Fried as an individual, among others.

“When you have a massive financial collapse like FTX, there are going to be many, many institutions—and perhaps individuals—who allegedly profited improperly along the way,” said Samuel Issacharoff, a New York University law professor.