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The Bankman family are asked to give back millions of dollars to FTX, Binance raises doubts over the EU’s incoming stablecoin laws, and a US regulator warns that more crypto enforcement actions are coming.
Bankrupt crypto exchange FTX has sued the parents of its co-founder and former CEO in an attempt to recoup millions of dollars in company funds.
In a new , FTX alleges that Joseph Bankman and Barabara Fried assisted their son, Sam Bankman-Fried, in a “vast” fraudulent scheme to enrich themselves using FTX funds.
“Despite presenting itself to investors and the public as a sophisticated group of cryptocurrency exchanges and businesses, the FTX Group was a self-described ‘family business’,” says the complaint.
“It has since been revealed to have been fueled by fraud, perpetrated by and for the benefit of a group of insiders.”
Bankman, 68, and Fried, 71, are both tenured professors at Stanford Law School, where Bankman specialises in tax law and Fried specialises in legal ethics.
According to the complaint, Bankman had worked with FTX in both an official and an unofficial capacity prior to its collapse.
In 2021, Bankman was retained as a pro bono counsel to advise the company on tax and legal affairs, and was also appointed as a senior advisor to the FTX Foundation.
At the same time, he served as a “de facto” director of the company, and his role was described as such by other FTX insiders.
Ryne Miller, for example, former general counsel of FTX US, has described Bankman to prosecutors as a “strategic advisor” and “general overseer” of the FTX businesses.
Bankman was also identified in an internal document as a member of the FTX “management team” alongside six other executives.
In this de facto role, Bankman was “richly rewarded” for helping to “perpetuate” the FTX fraud, receiving millions of dollars in “gifts” and other expenses, the complaint argues.
He is also said to have advised FTX on hundreds of millions of dollars of loans, charitable donations and acquisitions of properties in the Bahamas.
For example, Bankman used his insider status to funnel “vast sums” of FTX cash to his favourite causes and institutions, including $5.5m to Stanford University.
“The donations did not benefit the FTX Group, and instead amounted to naked self-dealing by Bankman, who sought to curry favour with and enrich his employer at the FTX Group’s expense,” the complaint notes.
Since the lawsuit was filed, Stanford University has agreed to give back the entire $5.5m that Bankman donated to the school, according to a sent to the Associated Press.
Fried, likewise, played an unofficial role in the running of FTX. In the complaint, Fried is described as the “single most influential” advisor with regard to FTX’s donations to political candidates and causes.
covered by Vixio, by the time of the FTX collapse, Sam Bankman-Fried had personally donated more than $40m to Democratic campaigns, and other FTX executives had more than $20m to Republican campaigns.
Binance raises stablecoin red flag at EBA hearing
Binance has warned that multiple stablecoin issuers may be forced to delist their tokens from European exchanges if the EU’s Markets in Crypto-Assets (MiCA) regulation is implemented in its current form.
On Thursday (September 21), Binance took part in a on the technical implementation of MiCA with the European Banking Authority (EBA).
After the meeting, Binance published a explaining its stance on MiCA and stablecoins, following media reports that Binance found misleading.
As MiCA currently stands, EU exchanges can only list a stablecoin if its issuer holds an electronic money institution (EMI) licence.
The problem with this, Binance argues, is that at present, no stablecoin issuer in the EU holds an EMI licence, and there is no grace period offered to them after June 2024, when MiCA comes into effect.
“While we are confident that there will be a constructive solution in place before the mid-2024 deadline, if left as is, this could have an impact on the European crypto market and the competitiveness of European crypto exchanges,” said Binance.
Overall, Binance said the “broad intent” of MiCA is “overwhelmingly positive” for the crypto industry. However, there are still certain technical details that need to be worked out collectively by industry and regulators.
“As an exchange, we believe it’s important that these constructive conversations take place to help ensure that MiCA achieves its goals and any unintended consequences are reduced,” it said.
More charges to come, says SEC crypto head
A crypto lead at the US Securities and Exchange Commission (SEC) has warned that the agency is ready to file new charges against crypto exchanges and decentralised finance (DeFi) platforms.
This week, while speaking at the in Chicago, Dave Hirsch, head of the SEC’s Crypto Assets and Cyber Unit, said the industry’s compliance failures go “well beyond any two entities”.
Referring to the SEC’s two ongoing cases against Binance and Coinbase, Hirsch said that enforcement action will not stop at these two large exchanges.
He said the SEC will continue to be actively monitoring intermediaries “that can be brokers, dealers, exchanges, clearing agencies or any others who are active in this space, are within our jurisdiction and not meeting their obligations, either through registration or failure to provide adequate or complete disclosures”.
Hirsch added that defi platforms, although much smaller in terms of volume, will not escape the agency’s attention.
“We're going to continue to conduct investigations, we're gonna be active in the space, and adding the label of DeFi is not going to be something that's going to deter us from continuing our work,” he said.
In the past two months, as covered by Vixio, the SEC has opened up enforcement actions against several unusual crypto targets.
These include the agency’s first ever cases involving non-fungible tokens (NFTs), which the regulator has characterised as unregistered securities offerings.
One of these cases involves "", an animated NFT series that raised $8m from investors and was endorsed by actress Mila Kunis.
Another case involves crypto investment firm Titan Global Capital Management, which the SEC charged with violations of its amended marketing rules.
Titan was alleged to have misled investors as to the potential returns they could earn from investing with Titan, and was also alleged to have misled investors as to the safety of Titan’s custody practices.
Titan settled with the SEC and agreed to a cease-and-desist order, $192,000 in disgorgements and an $850,000 civil penalty that will be distributed to affected clients.
