DoJ Firmly Rejects Crypto Legal Framework Excuse in FTX Misappropriation Charges

The United States Department of Justice (DoJ) has issued a response to Sam Bankman-Fried’s (SBF) request for clarification and reconsideration of charges related to the misappropriation of funds from cryptocurrency exchange FTX. The DoJ’s response, dated October 4, firmly states that the absence of a clear crypto legal framework will not hinder the prosecution of charges against SBF.

SBF had argued that FTX, the main exchange, was not regulated in the United States, and only FTX.US was subject to regulation. However, the DoJ dismissed this argument as irrelevant, asserting that SBF was being charged for violating existing laws pertaining to the misappropriation of customer assets. The agency emphasized that the presence or absence of a specific law does not affect the determination of whether money was entrusted to the defendant’s care by the victims.

Furthermore, the DoJ clarified that SBF is not only accused of breaking laws that prohibit firms from stealing customer assets but also of engaging in substantial misrepresentations to customers. The defendant’s claim that pooling and reallocating customer funds was a common practice in the crypto industry at the time was also rejected by the agency, stating that it does not constitute a valid defense against the charges.

The DoJ also addressed SBF’s attempt to present his “prior good acts,” such as charitable and philanthropic events, as evidence in his defense. The agency stated that it would not object to the admission of such evidence as long as it is presented for a proper purpose and not employed to create a misleadingly positive image of the defendant.

Sam Bankman-Fried, the former CEO of FTX, is currently facing multiple charges, including wire fraud and misappropriation of customer funds in connection with the collapse of the crypto exchange in 2022. The trial commenced on Tuesday with the selection of jurors, who were explicitly instructed not to independently research the case or discuss its details with others.

A copy of the original filing can be found here.