What the FTX Happened?
What a week for those who are wary that cryptocurrency might be one massive scam and legal black hole.
Sam Bankman-Fried, son of a Stanford law professor and a law professor who is also a highly-regarded political fundraiser, saw his net worth plummet this week to zero from a peak of $26,5 billion, as per Forbes.
Known by many as simply SBF, he put FTX into bankruptcy last Friday, driven by up to $2 billion of missing client funds, in what appeared to some to be the work of company insiders. Bankman-Fried also secretly transferred $10 billion of customer funds from FTX to his trading company Alameda Research. CNN also noted that FTX legal and finance teams also learned that Bankman-Fried implemented what the two people described as a “backdoor” in FTX’s book-keeping system, which was built using bespoke software.
Yes, a blockbuster book will come out on all of this, and there will be a huge movie, probably starring Jonah Hill who bears more than a passing resemblance to SBF. What remains to be seen is what assets will be seized and, ultimately, whether the legal process will determine that Sam Bankman-Fried was indeed Sam Bankman-Fraud and put him behind bars.
John Lawlor, a Florida lawyer, remarked that:
“Whenever we see these massive breaches of trust by people and institutions that handle our assets, it’s destructive to the financial system. It’s left to the legal system to clean up the pieces created by these bad actors.”
How and when the legal process really kicks in may also determine the future of cryptocurrency. An excellent piece in the Atlantic this week argued that Bankman-Fried may have permanently altered the crypto horizon by showing how few real safeguards exist to bring long-term stability to the industry. It makes sense that how quickly and well authorities ultimately deal with SBF and the FTX collapse will shape the future of crypto.
The Return of the President?
This week, former President Trump announced he would again like to be President.
From the legal perspective, this raises manifold unanswered questions, ranging from whether this is a good idea to whether a President can serve a term from prison.
There is no doubt that again running for President brings a new dimension to Donald J. Trump’s legal challenges, but his path forward is uncertain, as Attorney Nancianne Aydelotte points out:
“Even working under the assumption that former President Trump is innocent and not liable in every potential criminal and civil claim against him between what has already been filed and the 2024 election, he is facing a complicated path full of legal obstacles.”
What motivates people to do what they do is best left to psychologists, philosophers, and theologians, yet what remains certain here is that if Donald J. Trump was so reticent to take no for an answer before, his plans for the next six years may involve the same steely resolve.
Commanders and the NFL Sued by DC AG.
Mired in self-created controversy, the Washington NFL franchise, now known as the Commanders, is again being dragged into court.
The plaintiffs’ argument, in a suit brought by the District of Columbia attorney general, is that because of the horrible culture Dan Snyder, the team owner, created through his actions, fans who supported the team were injured.
The lawsuit is obviously more nuanced than this, but that’s the basic argument.
Michael Epstein, a lawyer who regularly comments on sports issues here, observed that:
“The plaintiffs in this case have a high bar to clear if they’re going to prove that the team’s and league’s actions caused them to suffer financial injuries by supporting the team through this period of time.”
I did a TV news hit this week on this story – you can see it here.
A January 6th Block Fails.
On Monday, the Supreme Court said no to Kelli Ward’s bid to block the January 6th House Select Committee from being allowed to review her phone records. Justices Alito and Thomas dissented in the brief order.
By itself, the fact that the Chair of the Arizona GOP lost doesn’t mean that much. But what is becoming evident and is a surprise to many people is that the January 6th committee might have had more legs than anticipated.
But, on Monday, Republicans took the House. Then, on Wednesday, former Vice-President Pence announced that the committee has no right to his testimony.
Whether this will be a question of all of the committee’s momentum being pulled back remains to be seen.
Attorney Eric Purchase observed that:
“The public needs to be confident that Congressional committees have the ability to pursue investigations and to do so in bipartisan ways.”
The public is already deeply divided about the work of the committee, so further starts and stops aren’t going to engender more confidence. Where this goes over the next few weeks will be very interesting to follow.
Djokovic Down Under.
We all remember last year’s absolute mess
In Australia, in which Novak Djokovic was banned from the Australian Open for immigration violations related to his vaccination status. I wrote and interviewed about this at length.
This week, tennis great Novak Djokovic was cleared to play in January’s Australian Open when the government lifted the three-year entry ban that came with his deportation in January 2022.
Attorney Dayle Lopez commented that:
“The government and tournament organizers saved themselves a lot of time and headaches by being proactive and announcing the lifting of the Djokovic ban two months before the tournament begins.”
The question that stands out for me is whether the government lifted similar entry bans on regular people. Let’s also never forget the Park Hotel, in which Djokovic was required to stay during the pendency of his case. As Vice pointed out in an excellent piece last winter, some people held there have been detainees for years. Is the Australian government giving any of them one one-millionth the attention they have given Djokovic or made any exception or exemption for them?
Djokovic returning to Australia will get a ton of international attention. Let’s hope that the ongoing struggles of others embroiled in Australia’s immigration process receive at least some of this attention once January comes.
Insane in the Membrane. Insane in the Brain.
Sen. Ted Cruz (R – TX) was in the news this week, deeply upset that Republicans would vote for Congressional leaders Tuesday and Wednesday before a full leadership review.
“It would be insane if we re-elect the same leadership. If we say hey, nothing happened. Everything’s good. Keep rowing off the waterfall and crash into the rocks,” Cruz declared on Monday.
Cruz lost, as Rep. McCarthy and Sen. McConnell firmed up their grasp on the party’s leadership this week, much to the Senator from Texas’s chagrin.
Still reeling from the red tsunami that failed to materialize, Sen. Cruz and others in Congress were looking to new leadership to create a different type of momentum. That didn’t come this week.
Last words of the week to Krenar Camili, a New Jersey lawyer, who remarked:
“As frustrating as it may be for some, both the House and Senate followed proper procedures this week in taking leadership votes. While this followed quickly after the midterm elections, there’s nothing there that violated any procedures or laws.”
Until next week, be well!
About Aron Solomon
A Pulitzer Prize-nominated writer, Aron Solomon, JD, is the Chief Legal Analyst for Esquire Digital and 24-7 Abogados. He has taught entrepreneurship at McGill University and the University of Pennsylvania, and was elected to Fastcase 50, recognizing the top 50 legal innovators in the world. Aron has been featured in Forbes, CBS News, CNBC, USA Today, ESPN, TechCrunch, The Hill, BuzzFeed, Fortune, Venture Beat, The Independent, Fortune China, Yahoo!, ABA Journal, Law.com, The Boston Globe, NewsBreak, and many other leading publications.