Crypto exchange FTX collapsed after facing liquidity crunch and failing to receive a $9.4 billion rescue package, forcing CEO Sam Bankman-Fried to file for Chapter 11 Bankruptcy. Prosecutors believe FTX and its founder SBF could face criminal charges for using customer funds for his other company Alameda Research. Meanwhile, challenges for prosecutors such as the intent behind his statements and jurisdiction over Bahamas-based FTX.
Challenges And Possibilities For Prosecutors Against FTX, SBF
Crypto exchange FTX’s offshore status and keeping Americans trade in FTX US prevented the company from stringent U.S. laws regarding trading and investments, reported Wall Street Journal on November 14. However, criminal lawyers believe FTX and its founder Sam Bankman-Fried could face criminal charges, including fraud or embezzlement, over using customer funds to back risky investments.
Initially, prosecutors will likely examine reports of customer funds transferred between FTX and Alameda Research, according to the Manhattan U.S. attorney’s office investigating the FTX crisis. SBF’s tweets related to acknowledging his mistakes support prosecutors’ claims.
Samson Enzer, a former Manhattan federal prosecutor, said:
“What this will boil down to is, were there deliberate lies to convince depositors or investors to part with their assets? Were there statements made that were false, and the maker of those statements knew they were false and made with the intent to deceive the investor?”
Prosecutors could also take on SBF regarding his statements that FTX was “fine” and customer assets were safe. However, he reached out to Binance CEO “CZ” to help with the liquidity crunch. Later, he deleted these tweets. Moreover, any efforts to fake market action despite problems at FTX or Alameda could prove criminal liability.
However, a challenge for prosecutors regarding the jurisdiction over Bahamas-based FTX is still unclear. Meanwhile, the Bahamas securities regulator and financial investigators are investigating the collapse of FTX. Indeed, US authorities can investigate illegal transfers and fraud as well as emails passed through the country. Wire fraud remains the most flexible charge in this case.
FTT Continues To Slide Lower
FTT Token (FTT) price continued to plunge lower after the FTX filed for bankruptcy. FTT price is trading at $1.45, down over 20% in the last 24 hours.
Meanwhile, Binance CEO “CZ” clarified that Binance never shorted FTT tokens. Binance stopped liquidating FTT tokens after SBF called him.
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