The arrest of Sam Bankman-Fried yesterday was sudden and unexpected in light of Bankman-Fried’s plan to testify before Congress. As a criminal defense attorney, my reaction to the arrest last night remains unchanged: this is the first time that I can recall where prosecutors moved aggressively to stop a defendant from making self-incriminating statements. His testimony would have been entirely admissible and likely devastating at trial.
I previously wrote how Bankman-Fried was doing harm to his case by speaking in the media and to Congress. So why would the Justice Department move to stop the self-inflicted damage? You have a major target who was about to voluntarily testify for hours.
That is ordinarily a dream for prosecutors, but the Justice Department moved quickly to prevent that from happening. At that stage, Bankman-Fried was not charged or in custody. He was not protected by Miranda or other constitutional rules from self-incriminating statements.
Indeed, some of us had already warned that he was causing himself considerable damage in making such statements. This was a defendant with a large legal team facing possible criminal charges who seemed eager to speak about his actions and motivations. Most prosecutors would sit back, make popcorn, and watch this unfold.
The curious move led many to question whether the Biden Administration was eager to prevent questions on Bankman-Fried’s political contributions and associations. He was the second highest donor to Democratic causes in the last election cycle. His mother, a law professor at Stanford also heads a major Democratic campaign fund.
It is also possible that the Justice Department simply wanted to show the public that it was moving aggressively despite his close Democratic ties. It may have secured sufficient evidence (including possible cooperating witnesses) to satisfy the basis for charges and an extradition request. Moreover, the charges are likely to make some Democratic figures uncomfortable as this matter enters the criminal process.
Yet, that still does not explain why the Justice Department would not want to hear a full account from Bankman-Fried before effectively shutting him down as a criminal defendant. This is the first time that I can recall where the prosecutors, rather than defense counsel, moved effectively to muzzle a defendant.
Whatever the motivation, the timing of the charges effectively stopped the windfall of information coming from Bankman-Fried.
Bankman-Fried is accused of diverting customer funds from the start of his cryptocurrency exchange to support his hedge fund, Alameda Research. He is also accused of using his fraudulent practices to fund a lavish lifestyle, buy real estate, make venture investments, and fund Democratic causes. The range of charges includes wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering.
Notably, the eight counts include violating campaign finance laws, a charge that could prove embarrassing for some powerful political interests.
The charges are on top of charges announced earlier Tuesday by the Securities and Exchange Commission, which alleged Bankman-Fried defrauded investors and used proceeds from investors to buy real estate on behalf of himself and family.
The details of those transactions might have been voluntarily disclosed under intense cross examination if the Administration allowed him to appear as a witness. Moreover, Bankman-Fried was already causing himself considerable harm in media interviews.
Bankman-Fried’s parents have left Stanford and are reportedly in the Bahamas with their son. They could themselves face questions. His father, Joseph Bankman, is a tax professor and was a paid employee of his son’s company. His mother reportedly worked with him on some of these massive donations to Democrats.
The parents are reportedly now concerned that the legal costs in the case could “wipe them out.”
Bankman-Fried has admitted that only a few hours of efforts a day might have avoided these losses. It sounds like a “my bad” defense. That will not fly in court and building on that defense might have sealed his fate.
The question is why the Justice Department moved to stop Bankman-Fried as he worked so hard to make the criminal case against himself. He comes across badly in these past interviews like a trophy-laden millennial who believes that he just needs to play to win. It is not quite that easy in a criminal case.
If he testified, Bankman-Fried could not only have made any criminal defense more difficult but he could have potentially tripped the wire for allegedly false or misleading statements under oath. It was a target-rich environment for Congress — and a potential bonanza for prosecutors.
Bankman-Fried was in a dangerous free fall. Despite his legal team, Bankman-Fried seemed to be praying for someone to “stop me before I speak again.” Someone just did.
The Biden Administration’s move seemed to bring a more positive meaning to Ronald Reagan’s “top 9 most terrifying words in the English Language”: “I’m from the government, and I’m here to help.”
I already entered my comment. Where is it????
To quote Professor Turley:
“Merrick Garland is a person with unimpeachable ethics and integrity.”
“The question is why the Justice Department moved to stop Bankman-Fried as he worked so hard to make the criminal case against himself.”
Dictionary: Impeach: 2. To raise doubts about; discredit or disparage
As the Justic Department is lead by Merrick Garland, how is this to be reconciled?
“Moreover, the charges are likely to make some Democratic figures uncomfortable as this matter enters the criminal process.” Respectfully disagree, Professor/Counselor. Democrats need to have a smidgen of personal or professional integrity before they’ll ever feel uncomfortable with this arrest. Prediction: Accused pleads to a single misdemeanor charge and agrees to pay a small fine AFTER the 2024 election.
The moment I saw his photograph, I detected he was suicidal. I’m certainly relieved to learn that he’ll be secure in the custody of the DOJ.
The system protects its own. Again.
Once they drag it out for the longest possible amount of time, they will acquit him or give him a trivial sentence, say, “look – we try demoncrats, too.” t\Then, if Republicans are still in charge, say, “the Republicans are persecuting this poor little nebbish!”
Republicans in congress need to focus on his connections to democrats.
Expose those and he will have no protection and DOJ will jail him for life.
SBF is a pinyatta to allow republicans to bash democrats on political money corruption.
Indeed. Try your best not to be shocked when this fellow suffers an acute case of “Arkancide” while in custody.
The timing is curious at best. My gut feeling is that someone didn’t want him to reveal something, most likely having to do with his donations to the recent elections.
I never understood why people were taken in by him and was not surprised to learn that there was basically no accounting for client funds, not to mention no insurance or even a BofD. FTX was using QuickBooks, a great program but not for 100+ related companies in multiple countries. The involvement of his parents is puzzling — they appear to be well-educated and smart. His father did work for FTX. They couldn’t see what a mess he’d created years ago ? CNBC gave him a lot of air time — “the next John Pierpont Morgan” — he had gravitas similar to that of Michael Avenatti, who frequently appeared on CNN and MSNBC (and no, I didn’t watch any of that, but he was touted as a presidential candidate and instead he’ll be in jail for the next 15 years or so). Although some sophisticated investors like Sequoia and others somehow fell for SBF’s spiel too.
Gensler’s slow walking to finally act was also confusing — I guess that he was too busy with his ESG mandates forcing publicly held corporations to try to account for nebulous costs. The coming fight between the SEC and CFTC over who will regulate crypto will be interesting. Someone could have moved a little faster but I guess that SBF’s special status gave him some extra freedom.
Also, how did our lawmakers think that it would be appropriate to keep or donate to charities their campaign donations from SBF/FTX? These are stolen customer funds and there is a bankruptcy proceeding.
I would like to see a revisit of Citizens United, but that’s another story; maybe the FTX campaign donations and fraud will give it some needed attention.
The Madoff case was mentioned in the hearing — it’s almost concluded finally. It started in 2008, so we’ll probably be hearing about this for a while. Get out the popcorn!
Why is this guy so puzzled by why the Feds moved in so fast? I guarantee you it is because his “roommates” turned on him and made deals with the Feds. They have all they need to secure a guilty verdict and don’t him sugar-coating his testimony before Congress.
The Gestapo Department
_____________________
Enough!
“It’s time to stop talkin’ and start chalkin’!”
– Chick Hearn, L.A. Lakers Sportscaster
________________________________
“But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.”
– Declaration of Independence, 1776
It seems a bit wrong for Congress to be subpoenaing someone to testify if they know an indictment is imminent without reading them their Miranda rights. I mean, a TV interview is one thing which is completely voluntary and does not involve the government, but when Congress subpoenas someone that is compelled testimony.
I am sure he has two prominent lawyer parents who can advise him of this, but it would really violate the spirit of Miranda to require him testify in Congress knowing an indictment is coming the next day.
Not really defending this guy who should be imprisoned for a long time, but he should be given a fair trial first.
“… but when Congress subpoenas someone that is compelled testimony.” ~ Miranda?
And SBF could have asserted his right not to speak, like many others have. The subpoena isn’t compelling a witness to testify, only compelling their presence.
A fair trial like the J6 committee hearings, chock-full of due process violations, i.e. no cross-examination of witnesses allowed; use of edited audio recordings that inculpate Trump wherein unedited recordings would exonerate him; and the disallowing of objections re exhibits of evidence or the presentation of rebuttal witnesses? Were liberals outraged about this? Did anyone (save Jonathan) ever mention that referrals to DOJ should never even be considered given so many constitutional violations? No!
Is that the kind of fair trial you allude to?
To Dems, Congress’ oversight responsibility rivals DOJ’s in its all-encompassing might. When has it ever been different when it served their naked political advantage? Watch now how Dems will begin to put Congress back into the legislative business only and away from usurpation of the executive function as Republicans ramp up their invasive House investigation. Watch as they redefine what a legislative purpose really is. Watch as Repubs begin to demand tax returns. Watch how Dems suddenly hew to the Constitution.
You will see their astounding hypocrisy on full display, without shame or embarrassment. JUST WIN, BABY?
That’s their Eleventh Commandment! Their Twelfth Commandment is, screw the world if we can’t rule it.
Given the full politicization of the DoJ by Garland, one can only take the cynical view that the rush to prosecute was designed to shut him down before revelations would come out about how he benefited the Democratic Party in the mid-terms. His parents clearly benefitted from the SBF Ponzi scheme, may they all spend many years together locked up behind bars. Typical leftists, freely spending other people’s money for good causes!
They aren’t protecting SBF; they are protecting Democrat politicians and political machines.
We have had ample reasons to believe the DOJ is stained with corruption. This is just one more.
SBF was the bagman. He will go down. The dirty politicians who took the money will whistle past the graveyard.
Another equally odd case was the “Joseph Nacchio CEO of Qwest Communications” that started around February of 2001.
Nacchio claims the DOJ tried to coerce him to participate in felony level “warrantless domestic spying” on his customers. When Nacchio refused to participate in these felony crimes (ordered by DOJ), Nacchio claimed the DOJ trumped up charges against him and sent him to prison for several years.
When Nacchio was released from prison, he claims that his refusing to commit felony crimes (orders by DOJ) was the reason for the trumped up charges and prison time.
The real kicker on Nacchio’s allegation – this happened about 6 months BEFORE 9/11. There was no wartime emergency (although warrants are still required during wartime). This case also involved the Bush Attorney General and top DOJ officials.
These came DOJ officials would later commit legal malpractice by green lighting torture, in violation of Ronald Reagan’s treaty and federal criminal law.
Under Article VI of the U.S. Constitution, Ronald Reagan’s treaty was and still is “the supreme law of the United States” and also outlaws cruel treatment, in addition to torture. None of the Bush top officials have been held accountable more than 20 years later.
I always thought prosecutors started at the bottom. Apply pressure the small fish. Flip them. Use their testimony as leverage to get the big fish.
Yet here they seem to be going after the big fish first. Is that because the evidence against SBF is already so overwhelming they don’t need to flip a small fish, or are they planning to use SBF as bait to get to an even bigger fish?
Reading some of the testimony the new FTX CEO John Ray is presenting in Congress today, the gross miss-management practices at the FTX Group among senior management no need for the small fish.
The big fish did it to themselves.
“…never in my career have I seen such an utter failure of corporate controls at every level of an organization, from the lack of financial statements to a complete failure of any internal controls or governance whatsoever.”
“FTX Group’s collapse appears to stem from the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls that are necessary for a company that is entrusted with other people’s money or assets.”
-John Ray
While I think some of the statements are correct, The problems is not the structure of FTX or the confinement of decision making to a few at the top. It is their incompetence, immorality, and intimacy and protection from powerful political people.
This is not a failure of crypto, it is a failure of govenrment efforts to regulate crypto.
It is also important to understand that DBF was running two entities – A crypto exchange and a hedge fund.
A crytpo exchange is a bank for cyrpto currency. Though it is important to note that while banks are a conveinience with crypto they are less necescary and less of a convenience than our traditional monetary system.
So SBF set up an exchange where people could park their crypto – and government could monitor and regulate it.
And then borrowed all the funds to invest in his hedge fund, where he lost them.
The bigger fish are very prominent Democrat politicians and whatever slush fund organizations they fund, so yes, it will stop at SBF for two reasons. 1. He’s of no use to them any longer because he’s broke. 2. Someone needs to be the patsy and he’s the biggest loser right now.
Dear Prof Turley,
Am I to presume the arrest precludes/usurps congressional testimony/investigation (assuming there is one) of Sam Bankman-Fried into collapse of FTX? I would have thought being in jail would help ensure the ‘disgraced CEOs’ timely arrival before the august members of congress (allegedly) investigating?
Let me guess: the DOJ will never, ever comment about ongoing criminal investigations. .. and that’s a long time.
*I am confident the arrest will effectively end FTX founder SBF’s participation in an exclusive conference hosted by the New York Times alongside Ukrainian President Zelensky on Nov. 30. Allegedly, the Ukrainian charity ‘Aid to Ukraine’ used an FTX account to convert Crypto currency into Ukrainian currency.
.
“Disgraced FTX founder Sam Bankman-Fried is scheduled to speak at an exclusive conference hosted by the New York Times alongside Ukrainian President Volodymyr Zelensky and US Treasury Secretary Janet Yellen.
The DealBook Summit, sponsored by Accenture, will be held at Jazz at Lincoln Center in Manhattan on Nov. 30 and features speeches from supposed luminaries such as Mark Zuckerberg, Mayor Eric Adams, former Israeli Prime Minister Benjamin Netanyahu, and former Vice President Mike Pence.
The fee to attend the conference is a whopping $2,499 …
The goal of the conference is to hold conversations to reveal “hidden complexities, unexpected relationships and the wide-ranging ripple effects of change,” according to the event” ~ Story
There are plenty of people who don’t know when to shut up, not just this gentleman. Donald Trump immediately comes to mind. He seemed to have almost a magical touch for creating chaos where there was none, and letting go with cringe worthy tweets and outbursts that either started fights or inflamed an ongoing fight, and talking to media figures who absolutely hated him and would amplify everything bad he said. No concept of message control whatsoever. Bankman-Fried seems another animal personality wise but seemed to have no concept of self preservation or even believed he might be held liable and lousy message control. Doctors are another group hard to shut up. They tend to want to go into long winded explanations on the witness stand and hurt themselves frequently. Good medical malpractice attorneys know this and relentlessly coach you in the great answers of “Yes” or “No’.
I agree it was a pre-emptive strike to shut down a gold mine of information. DOJ knew where he was and simply could have requested the Bahama’s not let him leave and then extradited him after the testimony to congress. Do you think the DOJ will get Andrew Weismann on the case to apply his specialty of going after friends and family in order to compel cooperation? Seems like lots of fruit for him to pick, even if they are democrats.
The tribe moves in mysterious ways.
Yep. The days when people like Theranos could be held accountable are gone like the wind, even though this is the logical conclusion of that insistence on fantasy. At some point we are going to have to collectively acknowledge that a great many of our industries and services are run by the spoiled, utterly incompetent, frankly, dumb and selfish children of their wealthy forebears. It isn’t going to stop, it is only going to get worse. The left loves to crow on about wealth inequity, and it’s the height of irony being they are the wealthy in question – if you do not realize that the days of fat cat Republicans are over, I don’t know what to tell you – this is *inherited* wealth and privilege and providence of the left in America, period. I guarantee you the dem progeny that worked at Twitter have never done an honest day’s work in their life, let alone simple household chores; they crow on about the environment even though they have never done something as simple as go camping. ‘flyover’ country is a fiction to them peopled with imaginary people that hate the earth. People that vote for this s*** are either asleep, low IQ, or both, and it is mighty sad.
And for what it’s worth: the average IQ in America now starts around 85 – 115; 84 is what social security considers to be a legitimate mental disability. Look it up. That’s where other Western countries, in spite of their globalist insanity have a slight leg up – they still actually educate their children. This is fully a relic in America. If you have young kids now, it is absolutely guaranteed they will be behind the rest of the world by wide, wide, verifiable, metrics.
The DOJ moved quickly to shut up Bankman-Fried, but has deep-sixed the Hunter Biden investigation for months.If the DOJ is now the loyal servant of the Democratice Party shouldn’t it be registereed as a lobbyist?
>”.. . has deep-sixed the Hunter Biden investigation for months.”
As I understand it, the FBI confiscated the Laptop in Nov. 2019. The FBI is investigating.
*Time moves slow when you have all the time in the world.
If you receive stolen goods do you have to give it back?
‘Everything’ is politics.
Why did they put SBF in the same cell as Epstein???
Asking for a friend.
LOL!
Sending a “message” to SBF?
They have been hinting to him for two weeks to shut his mouth. This is what Waters’ on again, off again threats were really about, but Bankman-Fried wasn’t taking the hint. When he announced he was testifying via Zoom, that was the last straw for the Democrats- they needed to him to keep his mouth shut one way or another.