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This might just be the 'first arrow' from the SEC with much more to be added down the track, but it's interesting to see that they have gone in heavily on defra

This might just be the 'first arrow' from the SEC with much more to be added down the track, but it's interesting to see that they have gone in heavily on defrauding equity investors in the FTX business -- rather than pulling the rug on customers. Either that's because it's easier for the SEC to prove, and get it to the point of demonstrating fraud? Or the US customers and the FTX US business were relatively untouched throughout this whole process, so there is less to go on for US customer fraud? Or, perhaps, this is just the first arrow to smoke out more data, informants, etc, with a strategic view to adding further allegations down the track?

PaywallBuster 4y ago
probably because FTX.com wasn't supposed to be servicing US customers So US customers who may have used FTX.com were circumventing whatever minimal measures they had preventing them to signup/use the platform
quanticle 4y ago
This might just be the 'first arrow' from the SEC with much more to be added down the track, but it's interesting to see that they have gone in heavily on defrauding equity investors in the FTX business -- rather than pulling the rug on customers. Isn't that the same approach that federal prosecutors took with Theranos as well? From what I understand, Elizabeth Holmes went to jail for defrauding her investors, not providing false test results to patients. I think the SEC's reasoning here is the same — investor fraud is easier to prove, so hit the fraudster with that charge first.
- nnmg 4y ago
  I think you're spot on, it is easier to prove (or prosecutors have more experience prosecuting) financial crimes. To give them credit-- they at least tried to get Holmes for defrauding patients too, but she was acquitted of those charges [0]. Her partner, Sunny Balwani, was convicted on all counts, including defrauding patients [1]. [0]: https://en.wikipedia.org/wiki/Elizabeth_Holmes#U.S._v._Holmes,_et_al https://en.wikipedia.org/wiki/Elizabeth_Holmes#U.S._v._Holme.... [1]: https://en.wikipedia.org/wiki/Sunny_Balwani#United_States_v._Ramesh_%22Sunny%22_Balwani https://en.wikipedia.org/wiki/Sunny_Balwani#United_States_v....
- evancox100 4y ago
  It wasn’t for lack of trying though, Holmes was charged with defrauding patients but acquitted on those counts. Only the investment fraud charges stuck.
- jcranmer 4y ago
  It's also worth point out, if you're interested in seeing punitive justice, that you're going to steeper punishments for defrauding investors than patients. If Holmes were nailed on defrauding patients, that would add something like $100 worth of fraud for sentencing guidelines, which is nothing. But an investor who was defrauded of $100 million... that's $100 million of fraud. You have to specifically prove every instance fraud in a criminal case, so harm that is spread very widely but very shallowly (millions of people who lost $10) doesn't scale up for a fraud case, but harm that is narrow but deep (an investor who lost millions) can be easily done.
tiahura 4y ago
It’s because neither the SEC nor the CFTC have jurisdiction over crypto. The holding of the EPA v West Virg case (CO2 emissions) was that federal agencies can’t regulate new domains without actual legislation. The Securities Acts of 1933 and 1934 unsurprisingly says nothing about crypto.

PaywallBuster 4y ago

probably because FTX.com wasn't supposed to be servicing US customers So US customers who may have used FTX.com were circumventing whatever minimal measures they had preventing them to signup/use the platform

quanticle 4y ago

This might just be the 'first arrow' from the SEC with much more to be added down the track, but it's interesting to see that they have gone in heavily on defrauding equity investors in the FTX business -- rather than pulling the rug on customers. Isn't that the same approach that federal prosecutors took with Theranos as well? From what I understand, Elizabeth Holmes went to jail for defrauding her investors, not providing false test results to patients. I think the SEC's reasoning here is the same — investor fraud is easier to prove, so hit the fraudster with that charge first.

nnmg 4y ago
I think you're spot on, it is easier to prove (or prosecutors have more experience prosecuting) financial crimes. To give them credit-- they at least tried to get Holmes for defrauding patients too, but she was acquitted of those charges [0]. Her partner, Sunny Balwani, was convicted on all counts, including defrauding patients [1]. [0]: https://en.wikipedia.org/wiki/Elizabeth_Holmes#U.S._v._Holmes,_et_al https://en.wikipedia.org/wiki/Elizabeth_Holmes#U.S._v._Holme.... [1]: https://en.wikipedia.org/wiki/Sunny_Balwani#United_States_v._Ramesh_%22Sunny%22_Balwani https://en.wikipedia.org/wiki/Sunny_Balwani#United_States_v....
evancox100 4y ago
It wasn’t for lack of trying though, Holmes was charged with defrauding patients but acquitted on those counts. Only the investment fraud charges stuck.
jcranmer 4y ago
It's also worth point out, if you're interested in seeing punitive justice, that you're going to steeper punishments for defrauding investors than patients. If Holmes were nailed on defrauding patients, that would add something like $100 worth of fraud for sentencing guidelines, which is nothing. But an investor who was defrauded of $100 million... that's $100 million of fraud. You have to specifically prove every instance fraud in a criminal case, so harm that is spread very widely but very shallowly (millions of people who lost $10) doesn't scale up for a fraud case, but harm that is narrow but deep (an investor who lost millions) can be easily done.

tiahura 4y ago

It’s because neither the SEC nor the CFTC have jurisdiction over crypto. The holding of the EPA v West Virg case (CO2 emissions) was that federal agencies can’t regulate new domains without actual legislation. The Securities Acts of 1933 and 1934 unsurprisingly says nothing about crypto.