While Sam Bankman-Fried sits in a Bahamian prison awaiting the inevitable extradition request from the US, the rest of the cryptocurrency industry scrambles to avoid following suit. While rivals to Bankman-Fried’s FTX empire may not have been reckless enough to maintain a group chat headlined “Wirefraud” or publicly admit that it “wasn’t even trying” to manage risk, they are legitimately concerned about the Department of La justice is looking their next way.
Because the feature that drives the whole enterprise is a near (or maybe not so near) Ponzi scheme in which cryptocurrency holders sitting on speculative bubbles spend like crazy to convince someone, whoever, to buy up their treasures at inflated prices so that early investors wouldn’t be left with the stock when the foundations collapsed. Save all the talk about excluding greedy banks from the domain of the electronic funds transfer process… whatever noble use cryptocurrencies might have, it is no longer the industry that exists.
Binance is already talking to the DOJ in an effort to get the government to step aside and let it continue on its merry way. And his Gibson Dunn lawyers got into a well-worn script.
Binance’s defense attorneys at US law firm Gibson Dunn have held meetings with Justice Department officials in recent months, the four people said. Among Binance’s arguments: A criminal case would wreak havoc in a cryptocurrency market already in a protracted recession. The discussions included potential plea deals, according to three of the sources.
It worked for everyone responsible for the Great Recession, so you can’t blame them for trying. But Bitcoin is not Citigroup. Letting the big banks skate in 2009 deeply damaged basic faith in the rule of law, but at least there was an argument that the banks had become too integrated into the system to fail without crashing the economy. Couple that reprieve with hard and necessary reforms to reduce the power of the banks and avoid future misconduct would have been nice, but that ship sailed.
Either way, cryptocurrencies won’t destroy the economy if the scheme collapses. Cryptocurrencies probably account for less than 5% of the global money supply (it was less than 3% a year ago). And given the speculation surrounding these things, it is truly much less. The failure of the cryptocurrency industry is a speed bump.
More to the point, the banking industry argued in 2009 that it should get a pass for its toxic behavior so it can continue to do its constructive work. What exactly is the equivalent here? Facilitate money laundering? Encouraging boiler rooms? Pay Eric Adams?
See? Three completely unjustified use cases.
Reuters Headline Says DOJ ‘Split’ Over Binance Charging, But That’s Not the Case truly what the article claims. Rather, the article cites four sources close to the investigation for claiming that the Justice Department is torn between indicting Binance and its executives now or waiting to examine the evidence further. Prosecutors tend not to speak up on cases themselves at this juncture — if someone is urging caution, it’s most likely because they want to drive the nails even deeper into the coffin before acting.
And they’re certainly unlikely to say they just need to review more evidence because they’re concerned that cryptocurrencies are too big to fail.
Exclusive: US Department of Justice Divided Over Binance’s Charge as Crypto World Falters [Reuters]
Joe Patrice is senior editor of Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any suggestions, questions or comments. Follow him Chirping if you’re interested in law, politics, and a healthy dose of college sports news. Joe is also Chief Executive Officer of RPN Executive Search.