Issue 96 – Redefining Solvency
A quick note: Citation Needed will take a break starting November 26, returning in the second week of December.
Legal Developments
Sam Bankman-Fried is appealing his conviction and 25-year sentence, claiming that FTX was never insolvent and that he was wrongly denied the chance to discuss his lawyers’ involvement in the case. While the appeals court has heard their arguments, a decision may not arrive for several months.
SBF’s Defense Strategy
Two years after being found guilty on multiple felony charges related to FTX’s downfall, Bankman-Fried is seeking a retrial. He maintains that the company was solvent and that the financial issues arose from temporary liquidity problems. He argues that ongoing bankruptcy repayments support his claims of solvency. However, these repayments have largely been driven by rising crypto prices and strategic investments.
Concerns Over Legal Arguments
During the appeal, Bankman-Fried’s team faces skepticism from the judges regarding claims of unfair trial conditions. Prosecutors argue that multiple testimonies confirm his misuse of customer funds, emphasizing that restitution does not erase guilt. The judges suggested that the absence of an “advice-of-counsel” defense during the initial trial might have weakened his claims of good faith.
Broader Legal Challenges in Crypto
The Samourai Wallet case is attracting attention as privacy advocates highlight its parallels with the Tornado Cash prosecution. The founders of Samourai Wallet pleaded guilty to operating without a license but argue they only developed privacy-focused software. Prosecutors contend that the software was intended for illegal use, seeking maximum sentences for the developers.
Bankruptcy Outcomes
Bittrex, a US crypto exchange that filed for bankruptcy amid legal troubles, faces accusations of fabricating transaction reports. A researcher claims evidence of fraudulent transactions amounting to around $500 million, casting doubt on the exchange’s financial practices.
International Developments
In global news, the Central Bank of Ireland fined Coinbase €21.5 million for lapses in anti-money laundering protocols. Meanwhile, France has enacted a tax on crypto as part of a broader wealth tax strategy, further complicating the regulatory landscape.
