TL;DR:
- Lawyers for former FTX CEO Sam Bankman-Fried (SBF) have said his criminal trial scheduled for October 2 may need to be delayed.
- Bankman-Fried’s defense team will reportedly seek to distance him from the day-to-day operations of FTX and challenge the credibility of cooperating witnesses, including former Alameda CEO Caroline Ellison.
- FTX’s legal fees in January alone amounted to $38 million for a team of hundreds of lawyers, consultants, paralegals, and accountants.
- Silvergate Capital Corporation, the holding company of crypto-focused Silvergate Bank, announced its intent to wind down operations and voluntarily liquidate the banking unit.
The update
Sam Bankman-Fried is a former crypto billionaire and CEO of FTX, a cryptocurrency exchange based in Hong Kong. Bankman-Fried’s criminal trial is scheduled for October 2, but his lawyers have expressed concerns that it may need to be delayed due to the amount of evidence that needs to be reviewed and a defense that needs to be prepared. They reportedly sent a letter to U.S. District Judge Lewis Kaplan stating that federal prosecutors in Manhattan had yet to provide evidence.
Bankman-Fried was arrested in December on eight counts of fraud and was released on a $250 million bond. He has been under house arrest at his parent’s home in California. However, it was discovered that he had used a VPN to access the internet, which led Judge Kaplan to consider changing his bail terms. Prosecutors proposed that he remained free with strict limits on his use of technology.
Bankman-Fried’s defense team will reportedly seek to distance him from the day-to-day operations of FTX and challenge the credibility of cooperating witnesses, including former Alameda CEO Caroline Ellison. They have suggested that he will attempt to shift blame onto Ellison and dispute her expected testimony at his potentially delayed trial. This is a commonly used strategy for defendants who often argue that they are motivated to lie and implicate others in a bid to win leniency.
Legal fees and lawsuits
In related news, FTX’s legal fees in January alone amounted to $38 million for a team of hundreds of lawyers, consultants, paralegals, and accountants, according to court documents. The legal fees are related to a number of ongoing lawsuits and investigations.
One such lawsuit is FTX’s recent lawsuit against crypto fund manager Grayscale. FTX is attempting to unlock as much as $9 billion from its Bitcoin and Ethereum Trusts. The lawsuit accuses Grayscale of withholding the funds and not fulfilling its contractual obligations.
Silvergate bank
Another related development is the recent announcement by Silvergate Capital Corporation, the holding company of crypto-focused Silvergate Bank, that it intends to wind down operations and voluntarily liquidate the banking unit. The move comes after Silvergate was facing a financial crisis due to the “crypto winter” and the implosion of FTX, which used the bank to transfer customer funds.
Silvergate Bank was founded three decades ago in California as a small local lender but had soared to become a key player in the crypto industry in recent years. Its fortune also rose and fell with market volatility. As token prices boomed, deposits at Silvergate surged from around $2 billion in 2020 to over $10 billion in 2021. But by the end of 2022, its deposits slumped to $6.3 billion, a decrease of over 50% from just three months earlier.
At the time of FTX’s collapse last fall, Silvergate tried to reassure investors and regulators that its exposure to the digital assets exchange was limited. However, U.S. prosecutors in the Justice Department’s fraud unit were investigating Silvergate’s dealings with Following the collapse of FTX, Silvergate was trying to reassure investors and regulators that its exposure to the digital assets exchange was limited. However, the investigation by the Justice Department’s fraud unit indicated otherwise.
The investigation was centered on Silvergate’s dealings with FTX and whether the bank had violated any banking laws. The allegations against Silvergate were that it had provided banking services to FTX without conducting proper due diligence and that it had allowed FTX to conduct transactions that violated U.S. banking laws.
FTX’s collapse last fall had left many investors and regulators concerned about the safety of digital assets exchanges. The collapse had resulted in significant losses for investors, and regulators were worried about the potential for similar collapses in the future. The investigation into Silvergate’s dealings with FTX added to these concerns, as it raised questions about the safety and reliability of banking services offered to digital assets exchanges.
As the investigation continued, Silvergate tried to reassure investors and regulators that it was cooperating fully with the authorities and that it was committed to upholding banking laws and regulations. The bank also emphasized that it had taken steps to improve its due diligence process and risk management framework to avoid similar issues in the future.
The investigation into Silvergate’s dealings with FTX was ongoing as of the last update, and it remains to be seen what the outcome of the investigation will be. However, the case highlights the challenges that banks face when dealing with digital asset exchanges. These exchanges are relatively new, and the regulatory framework around them is still evolving. Banks that offer banking services to these exchanges must navigate this evolving regulatory landscape carefully, to avoid running afoul of banking laws and regulations.
Overall, the investigation into Silvergate’s dealings with FTX underscores the importance of strong risk management frameworks and due diligence processes for banks that provide services to digital assets exchanges. Banks must be diligent in their efforts to comply with banking laws and regulations, to avoid the reputational damage and financial losses that can result from regulatory violations.
The FTX contagion continues to claim more victims and as companies fall and investors lose out on millions of eyes are still on the trial and Sam Bankman-Fried. The young ex-CEO has violated certain stipulations of his house arrest which has caused the judge to create new rules for him while he is home. The trial may be delayed but we will continue to focus on the situation and all readers up to date!
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