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Sam Bankman-Fried’s Criminal Trial Judge Is Married to Law Partner of Firm that Arranged the FTX-BlockFi Deal
by Gunnar Larson 16 Jun '24

16 Jun '24

https://wallstreetonparade.com/2022/12/sam-bankman-frieds-criminal-trial-ju… Editor’s Update: Two days after Wall Street On Parade published this article, Judge Abrams decided to recuse herself from this case, writing as follows: “It has come to the Court’s attention that the law firm of Davis Polk & Wardwell LLP, at which my husband is a partner, advised FTX in 2021, as well as represented parties that may be adverse to FTX and Defendant Bankman-Fried in other proceedings (or potential proceedings). My husband has had no involvement in any of these representations. These matters are confidential and their substance is unknown to the Court. Nonetheless, to avoid any possible conflict, or the appearance of one, the Court hereby recuses itself from this action. See 28 U.S.C. § 455. SO ORDERED. Dated: December 23, 2022 New York, New York.” Clearly, not all of these matters were “confidential,” as Judge Abrams states above. The BlockFi deal appeared on the Davis Polk website and took us all of 30 seconds to locate. If Judge Abrams had invested the same 30 seconds of her time, she wouldn’t have put either herself or this federal district court in this embarassing position. ~~~ By Pam Martens and Russ Martens: December 21, 2022 ~ Ronnie Abrams Testifying at Her Senate Confirmation Hearing in 2011 Last week the New York Times did a puff piece on the judge that will be presiding over the Sam Bankman-Fried criminal trial in the Federal courthouse in lower Manhattan. The judge is Ronnie Abrams. The narrative at the New York Times is that Abrams’ “husband, Greg Andres, is an accomplished former Brooklyn federal prosecutor….” Our take is that Greg Andres is part of Ronnie Abrams’ immediate household and a law partner of Davis Polk & Wardwell LLP, a law firm that has problematic ties to Bankman-Fried’s bankrupt crypto exchange, FTX, and another crypto firm it became enmeshed with, BlockFi, which is also now in bankruptcy. According to the Davis Polk website, the following occurred in July of this year: “Davis Polk advised BlockFi, Inc. as borrower under a $400 million loan facility provided by West Realm Shires Inc, an affiliate of FTX-US. Davis Polk also advised BlockFi, Inc. in connection with an option for FTX-US to acquire BlockFi at a variable price of up to $240 million based on performance triggers… “FTX is a leading cryptocurrency exchange specializing in derivatives and leveraged products. Founded in 2018 by Sam Bankman-Fried, FTX offers a range of trading products, including derivatives, options, volatility products and leveraged tokens. “The Davis Polk corporate team included partner Michael Davis and associates Brian Lee and Malik M. Khalil. The finance team included partners Meyer C. Dworkin and Christopher Nairn-Kim, counsel Erika D. White and associate Matthew Vallade. Partners Lucy W. Farr and Corey M. Goodman and associate Yixuan Long provided tax advice. All members of the Davis Polk team are based in the New York office.” At the very time that Davis Polk wrote that “FTX is a leading cryptocurrency exchange” it was in reality embezzling billions of dollars from its own customers according to the U.S. Department of Justice. The peculiarly named West Realm Shires Inc. that was involved in the BlockFi deal is majority-owned by Sam Bankman-Fried. While hopefully doing some type of due diligence for their client, BlockFi, ten Davis Polk lawyers did not, apparently, stumble upon the fact that BlockFi was accepting an option for a potential buyout with what Damian Williams of the U.S. Department of Justice now calls “one of the biggest financial frauds in American history.” Sam Bankman-Fried, CEO of FTX at the time this deal was put together, now faces eight criminal counts which have the potential to put him in prison for life. And the best the Federal district court for the Southern District of New York can offer up as a judge to preside over the criminal trial is the wife of a law partner at Davis Polk. Davis Polk also represented the crypto exchange, Binance, and its CEO, Changpeng Zhao, in a securities class action against the firm. On March 31 Davis Polk won dismissal of that case, Lee, et al. v. Binance, et al., 1:20-cv-2803-ALC, which was also situated in the Federal district court in the Southern District of New York. Binance and Zhao also have highly problematic ties to FTX and Sam Bankman-Fried. Bankman-Fried blames Zhao for backing away from a deal to buy FTX in November for the collapse of FTX. The two have engaged in a war of words on Twitter, with Zhao calling Bankman-Fried a “fraudster” while Bankman-Fried calls Zhao a liar. This would not be the first time that Judge Ronnie Abrams has presided over a high-profile case while overlooking a conflict of interest on the part of her husband and his law firm. In 2014 Judge Abrams dismissed a whistleblower case brought by Carmen Segarra, a bank examiner at the New York Fed, who credibly alleged she was fired after refusing to change a negative examination of Goldman Sachs. Just 20 days before Judge Abrams issued her written decision, she convened a phone conference with lawyers on both sides. She alerted them that it had just come to her attention that her husband, Greg Andres, “was representing Goldman Sachs in an advisory capacity” according to the telephone conference transcript. Following that telephone conference, Segarra’s lawyer, Linda Stengle, filed a letter with the court asking for a more complete disclosure of the Judge’s husband’s relationship with Goldman Sachs. The New York Fed responded with its own letter, writing: “Plaintiff’s request for additional disclosures raises concerns about the appearance of a different sort of impropriety: forum shopping…Under these circumstances, the Court should deny Plaintiffs request for additional disclosures and proceed with the case.” (See FRBNY Response to Segarra Request for Filing Amended Complaint.) Judge Abrams went on the offensive, adopted this line of reasoning, and accused Stengle of “judge-shopping” in her written decision tossing out the case. It was a bizarre position to take since Stengle had not asked the Judge to recuse herself. Wall Street On Parade found the following interesting background details at the time we wrote about that case: Judge Abrams also worked at Davis Polk just prior to taking the bench in 2012; U.S. Senator Kirsten Gillibrand, who recommended Abrams to President Obama for the Judgeship and spoke on her behalf at her confirmation hearing, also previously worked at Davis Polk; Davis Polk was the second largest contributor to Gillibrand’s 2012 Senate race, according to the Center for Responsive Politics, with its lawyers, employees and/or PACS contributing $333,100; One of the lawyers representing the New York Fed in the Segarra matter, Thomas Noone, previously worked at Davis Polk and his employment there overlapped with that of Judge Abrams; Davis Polk previously represented the New York Fed in significant matters; How big a retainer the Judge’s husband received from Goldman Sachs and when he received it did not come to light. What we did discover is that Goldman Sachs was a large, long-term client at Davis Polk. As we have previously recommended, an independent investigation of the federal district court for the Southern District of New York needs to happen – sooner rather than later. (See The Carmen Segarra Case: Welcome to New York, Wall Street and McJustice and Goldman Sachs Beats Another Fraud Rap: Can the Public Ever Get Justice in New York Courts? and JPMorgan Chase Quietly Settles Whistleblower Case Involving Charges of Keeping Two Sets of Books and Improper Payments to Tony Blair.)

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Bankruptcy Law Expert, Senator Elizabeth Warren, Asks FTX Bankruptcy Judge to Boot Sullivan & Cromwell from the Case
by Gunnar Larson 16 Jun '24

16 Jun '24

https://wallstreetonparade.com/2023/01/bankruptcy-law-expert-senator-elizab… By Pam Martens and Russ Martens: January 11, 2023 ~ Senator Elizabeth Warren Grilling Fed Chairman Jerome Powell at September 28, 2021 Senate Banking Hearing Senator Elizabeth Warren In what is likely a first of its kind effort, four sitting U.S. Senators, including former Harvard Law Professor Elizabeth Warren, who is a bankruptcy law expert, have asked the Judge overseeing the bankruptcy proceedings of collapsed crypto exchange, FTX, to dump the Big Law firm of Sullivan & Cromwell as the lead law firm in the case because of its conflicts of interest in the matter. The case has garnered international media attention because more than $8 billion of customers’ money is said to be missing and the fact that high profile U.S. sports figures and celebrities promoted the company. On Monday, Senator Warren (D-MA) joined Senator John Hickenlooper (D-CO) along with Republican Senators Thom Tillis (R-NC) and Cynthia Lummis (R-WY) in a letter outlining the conflicts to Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware. The political news website, Punchbowl News, broke the story of the Senators’ letter yesterday morning. Hickenlooper then gave the story more momentum by Tweeting a link with the comment: “Get this: FTX’s legal advisors *pre-collapse* want to be appointed to oversee investigations INTO the collapse.” The Senators’ letter includes this blunt assessment of Sullivan & Cromwell’s conflicted role: “To name just one challenge: will the firm’s lawyers be able to effectively investigate their current and former partners who were central in FTX’s conduct? Additionally, given their longstanding legal work for FTX, they may well bear a measure of responsibility for the damage wrecked on the company’s victims. Put bluntly, the firm is simply not in a position to uncover the information needed to ensure confidence in any investigation or findings.” Yesterday, another objector to Sullivan & Cromwell serving as lead law firm in the bankruptcy proceedings filed an amended objection with a scathing assessment of the law firm’s conduct. The objector is Warren Winter, a man described by his attorneys as “a United States citizen residing abroad” who had “several hundred thousand dollars of assets in his FTX account when the exchange collapsed, which he has since been unable to access.” The amended objection made the following points, among numerous others, to the bankruptcy court: “Sullivan & Cromwell is not only an inappropriate candidate for appointment as the FTX Group’s bankruptcy counsel—it is a target for investigation with its own potential liability. Its appointment as counsel would endanger the estate and create a rigged game, undermining creditors’ and the public’s faith in the bankruptcy process. The Court should therefore reject Sullivan & Cromwell’s application and disqualify it from appointment as Debtors’ counsel.” And this: “Two former Sullivan & Cromwell lawyers are General Counsel to FTX Group entities. Sullivan & Cromwell did not disclose these connections in its Application and therefore violated Federal Rule of Bankruptcy Procedure 2014, which requires a statement ‘all of [the firm’s] connections with the debtor … [and the debtor’s] attorneys.’ What’s more, disclosed or not, these connections create a conflict of interest and are disqualifying. FTX US General Counsel Ryne Miller is a former partner at Sullivan & Cromwell…Miller is alleged to have played a key role— perhaps the key role—in wresting control of the FTX Group from Sam BankmanFried and directing this extremely valuable bankruptcy matter to his former firm. According to Bankman-Fried, and supported by what appears to be genuine evidence, Miller proclaimed to have usurped control of the FTX Group by November 8th. He immediately secured a $12 million retainer for his former firm and allegedly mounted an ‘extreme pressure’ campaign to put the FTX Group into bankruptcy with Sullivan & Cromwell and its hand-picked CEO at the helm. “FTX Ventures General Counsel Tim Wilson is another former Sullivan & Cromwell lawyer. The Securities and Exchange Commission has alleged that FTX Ventures made at least $200 million in venture-capital investments using customer funds that had been misappropriated through Alameda Research….” A hearing in the FTX bankruptcy case is scheduled for 8:55 a.m. this morning. It is unclear as to what issues will be discussed today. A live stream of the hearing is available on YouTube at this link. Wall Street On Parade has been pointing out the myriad conflicts with Sullivan & Cromwell since two days after the bankruptcy petition was filed for FTX on November 11 of last year. Yesterday, we reported that Sullivan & Cromwell was also currently serving as legal counsel to four of the largest crypto exchange competitors to FTX. (See Related Articles below.) Related Articles: Sullivan & Cromwell, FTX Lead Counsel in Bankruptcy, Says It Has No Adverse Relationships, Despite Representing Four of FTX’s Crypto Exchange Competitors Big Law Firm, Sullivan & Cromwell, Did Significant Legal Work for Bankrupt Crypto Exchange, FTX No One Trusts the FTX Bankruptcy Case: News Outlets Intervene; Justice Department Trustee Demands Independent Examiner; SEC Orders Disclosures

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xNY.io - Bank.org, PBC | Memo #1 - The People?s Republic of China on ESG and D&O Innovation
by Gunnar Larson 16 Jun '24

16 Jun '24

... ---------- Forwarded message --------- From: Gunnar Larson <g(a)xny.io> Date: Wed, Jun 8, 2022, 2:12 PM Subject: xNY.io - Bank.org, PBC | Memo #1 - The People’s Republic of China on ESG and D&O Innovation To: <Adrienne.Harris(a)dfs.ny.gov> Cc: Weber, Richard (DFS) <Richard.weber(a)dfs.ny.gov>, Weintraub, Cathy (DFS) <Cathy.Weintraub(a)dfs.ny.gov>, Alexi Anania <a(a)xny.io> June 8, 2022 BY ELECTRONIC MAIL Superintendent, Adrienne A. Harris New York State Department of Financial Services One State Street New York, New York 10004 Adrienne.Harris(a)dfs.ny.gov Re: The People’s Republic of China on ESG and D&O Innovation Dear Madam Superintendent: xNY.io - Bank.org, PBC is proud to be under the esteemed oversight of your distinguished office. Today’s memo signals concern of recent ESG and D&O research published by Nanjing Audit University of the People’s Republic of China. The institution is operated under the auspices of the Jiangsu <https://en.wikipedia.org/wiki/Jiangsu> Provincial Government, the National Audit Office of China <https://en.wikipedia.org/wiki/National_Audit_Office_of_China> and the People's Bank of China <https://en.wikipedia.org/wiki/People%27s_Bank_of_China>. Kindly find the attached memo <https://docs.google.com/document/d/1THKGP530wiMOKurCd79mHSFfW6GvCrOJsRzyA_J…> addressed to your honorable attention. Respectfully yours, Gunnar Larson -- *Gunnar Larson * *xNY.io <http://www.xny.io/> - Bank.org <http://bank.org/>, PBC* MSc <https://www.unic.ac.cy/blockchain/msc-digital-currency/?utm_source=Google&u…> - Digital Currency MBA <https://www.unic.ac.cy/business-administration-entrepreneurship-and-innovat…> - Entrepreneurship and Innovation (ip) G(a)xNY.io +1-646-454-9107 New York, New York 10001 June 8, 2022 BY ELECTRONIC MAIL Superintendent, Adrienne A. Harris New York State Department of Financial Services One State Street New York, New York 10004 Adrienne.Harris(a)dfs.ny.gov Re: The People’s Republic of China on ESG and D&O Innovation Dear Madam Superintendent: xNY.io - Bank.org, PBC is proud to be under the esteemed oversight of your distinguished office. Today’s memo signals concern of recent ESG and D&O research published by Nanjing Audit University of the People’s Republic of China. The institution is operated under the auspices of the Jiangsu <https://en.wikipedia.org/wiki/Jiangsu> Provincial Government, the National Audit Office of China <https://en.wikipedia.org/wiki/National_Audit_Office_of_China> and the People's Bank of China <https://en.wikipedia.org/wiki/People%27s_Bank_of_China>. xNY.io - Bank.org, PBC is concerned that the Nanjing Audit University and the People’s Bank of China potentially could be mis-representing intent related to ESG and D&O innovation, at the expense of our global enterprise. 1. According to the Council on Forign Relations, China is the world’s top emitter, producing more than a quarter of the world’s annual greenhouse gas emissions, which contribute to climate change. 2. Nanjing Audit University’s “theoretical analysis and hypothesis developments” suggest that the People’s Republic of China is embryonic in the enforcement of ESG and/or D&O mandates. Meanwhile, suggesting Bloomberg as a reputational capital. 3. xNY.io - Bank.org, PBC has collated 37 highlights to Nanjing Audit University’s ESG and D&O research for NY-DFS consideration. As a Bill and Melinda Gates Scholar and Blockchain Scholar holding international law distinction(s) My international graduate research has touched on Western profit of China’s water resources. xNY.io - Bank.org, PBC seeks to protect pure New York State ESG and D&O innovation. Madam Superindnet, we attentively recognize you are the world’s most powerful regulatory leader in this regard. >From this humble perspective, xNY.io - Bank.org, PBC seeks to earn your respect and consideration to explore the New York False Claims Act as a potential channel. xNY.io - Bank.org, PBC hopes New York State welcomes this assessment at the liberty of your honorable office. Respectfully yours, Gunnar Larson | xNY.io <http://www.xny.io> - Bank.org <http://bank.org>, PBC MSc <https://www.unic.ac.cy/blockchain/msc-digital-currency/?utm_source=Google&u…> - Digital Currency MBA <https://www.unic.ac.cy/business-administration-entrepreneurship-and-innovat…> - Entrepreneurship and Innovation (ip) G(a)xNY.io +1-646-454-9107 CC: Mr. Richard Webber

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Judge John Dorsey Has Effectively Privatized Justice in the FTX Bankruptcy Case
by Gunnar Larson 16 Jun '24

16 Jun '24

https://wallstreetonparade.com/2023/02/judge-john-dorsey-has-effectively-pr… By Pam Martens and Russ Martens: February 23, 2023 ~ John T. Dorsey (2016 Photo from Internet Archives' Wayback Machine) John T. Dorsey (2016 Photo from Internet Archives’ Wayback Machine) Judge John Dorsey is the presiding judge in the bankruptcy proceedings for Sam Bankman-Fried’s collapsed house of cards, which includes the now frozen crypto exchange, FTX; his now shuttered hedge fund, Alameda Research; and more than 100 opaque affiliates operating in the shadows around the globe. Undisputed is the fact that despite FTX being represented by some of the most prominent law firms in America as it built this criminal enterprise – notably Sullivan & Cromwell – more than 10.3 million user accounts were looted of more than $8 billion right under the nose of Big Law. We say “notably Sullivan & Cromwell” in the above paragraph because not only did it work on more than 20 matters for the FTX group of companies for 16 months prior to its bankruptcy filing but its former law partner, Ryne Miller, served as General Counsel of FTX US since August of 2021. In addition, Sullivan & Cromwell has conceded that it personally represented Sam Bankman-Fried on his purchase of more than half a billion dollars of stock in Robinhood Markets (a stock trading app) – the rightful ownership of which is now the subject of multiple court battles. Equally problematic, an email by Sullivan & Cromwell law partner, Andrew Dietderich, has surfaced in a court filing indicating that just four days before FTX filed bankruptcy, Dietderich had told another law firm that FTX is “rock solid.” (Dietderich is now one of the key law partners involved in the FTX bankruptcy proceedings.) Given this set of facts, justice for the defrauded customers and the public interest would obviously demand that the pre-bankruptcy legal interactions between Sullivan & Cromwell, the FTX group of companies and Sam Bankman-Fried (as well as all other questionable activities by others) be investigated by an independent examiner, as is required under bankruptcy law when requested by the U.S. Trustee and debts exceed $5 million. Instead, Judge Dorsey ruled against the U.S. Trustee’s request for an independent examiner in the FTX bankruptcy proceeding and has signed an order making Sullivan & Cromwell the lead counsel overseeing the FTX bankruptcy case. By doing this, Judge Dorsey has effectively privatized justice while sitting on the bench of a federal court. Sullivan & Cromwell is a 144-year old Big Law firm with more than 900 attorneys. Its headquarters is located in the financial district in lower Manhattan on Broad Street. It filed the FTX bankruptcy case, not in U.S. Bankruptcy Court in lower Manhattan, but in U.S. Bankruptcy Court in Wilmington, Delaware – a two-hour drive for its law partners, some of whom are billing as much as $2,165 an hour in the FTX bankruptcy matter. (For 19 days in November and 31 days in December, Sullivan & Cromwell has thus far billed $20 million in legal fees and more than $239,000 in expenses. Part of those expenses include more than $20,000 for “Conference Room Dining” and “Meals – Overtime.”) Judges in U.S. Bankruptcy Court in Delaware, including Judge Dorsey, have previously ruled on multiple occasions against the appointment of an independent examiner when requested by the U.S. Trustee. This might explain the two hour drive to Wilmington, Delaware by Sullivan & Cromwell’s high-priced attorneys. As Sullivan & Cromwell’s partners are billing and eating their way through what’s left of defrauded crypto customers’ money, Judge Dorsey had the audacity to make the argument in turning down the U.S. Trustee’s request for an independent examiner, that it would cost too much money. The U.S. Trustee program is part of the U.S. Department of Justice, a federal agency. Its statutory mandate is “to promote the integrity and efficiency of the bankruptcy system for the benefit of all stakeholders — debtors, creditors, and the public.” The public’s vested interest in this matter could not be greater. The federal prosecutor who has thus far indicted Sam Bankman-Fried and two of his alleged co-conspirators (Caroline Ellison and Gary Wang), has called FTX “one of the biggest financial frauds in American history.” The entire life savings of some customers is gone with the allegation that their customer accounts were used as Bankman-Fried’s personal piggy bank to buy luxury real estate in the Bahamas; buy celebrity endorsements; slap his company’s name on sports stadiums; and funnel tens of millions of dollars to political campaigns. (And let’s not forget the millions of dollars in legal fees that went to Big Law firms – pre-bankruptcy – to keep this house of cards propped up. In addition to Sullivan & Cromwell, Forbes reported that the following U.S. law firms had worked for FTX prior to its bankruptcy filing: Fenwick & West; Gibson, Dunn & Crutcher; Hogan Lovells; Morrison Foerster; Paul Hastings; Perkins Coie; Quinn Emanuel Urquhart & Sullivan; Skadden, Arps, Slate, Meagher & Flom; and White & Case.) Adding to the logical premise that the public is heavily vested in a transparent and independent investigation of FTX and its enablers – and what is transpiring in these bankruptcy proceedings – a total of 18 state attorneys general and/or state securities regulators filed statements with Judge Dorsey’s court endorsing the U.S. Trustee’s request for an independent examiner. But in another show of how Judge Dorsey has privatized these proceedings, he ignored the wishes of 18 states representing more than a third of the population of the United States. We have made multiple requests to the offices of the U.S. Trustee, asking if the U.S. Trustee is planning to appeal the denial of its request to appoint an independent examiner. Thus far, no information on this topic has been provided to us.

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Two Indicted Masterminds of the FTX Fraud Were Clients of Big Law Firm Sullivan & Cromwell
by Gunnar Larson 16 Jun '24

16 Jun '24

https://wallstreetonparade.com/2023/03/two-indicted-masterminds-of-the-ftx-… By Pam Martens and Russ Martens: March 1, 2023 ~ Andrew (Andy) Dietderich, Law Partner at Sullivan & Cromwell Andrew (Andy) Dietderich, Law Partner at Sullivan & Cromwell On January 17, Sullivan & Cromwell law partner Andrew Dietderich filed a declaration in the U.S. Bankruptcy Court for the District of Delaware that acknowledged – after much prodding by the U.S. Trustee – the more than 20 legal engagements Sullivan & Cromwell had been involved in with Sam Bankman-Fried’s FTX Group before it filed for bankruptcy on November 11, 2022. According to the declaration, the law firm’s legal work began 15 months prior to the collapse of the firm. (See our previous report, Sam Bankman-Fried, BlockFi and Sullivan & Cromwell: A Viper’s Nest of Conflicts and Intrigue.) This does not look good for the 144-year old law firm because the Securities and Exchange Commission is now charging that FTX was a fraud from the very beginning and Sam Bankman-Fried illegally used FTX customer funds from the very beginning. Making the situation even more dicey for Sullivan & Cromwell, its former law partner, Ryne Miller, was employed as General Counsel at FTX US as this fraud was expanding. Raising reputational risk not only to Sullivan & Cromwell but also to the federal court system, none of the above information stopped the presiding judge in the FTX bankruptcy case, Judge John Dorsey, from signing an order making Sullivan & Cromwell the lead law firm overseeing the bankruptcy proceedings of the more than 100 companies involved in Sam Bankman-Fried’s collapsed crypto house of cards. Sullivan & Cromwell has already billed more than $20 million in legal fees in the bankruptcy case along with more than $239,000 in expenses – including more than $20,000 for “Conference Room Dining” and “Meals – Overtime.” (See Judge John Dorsey Has Effectively Privatized Justice in the FTX Bankruptcy Case.) The January 17 disclosures to the Delaware Bankruptcy Court by Sullivan & Cromwell revealed that in addition to the 20 legal engagements for corporate entities of FTX or Alameda Research (Sam Bankman-Fried’s hedge fund), Sullivan & Cromwell had also done legal work on an individual basis for Sam Bankman-Fried and the Head of Engineering at FTX, Nishad Singh. Bankman-Fried has now been indicted by the U.S. Justice Department on 12 criminal counts. He has pleaded not guilty to the first eight counts and has not yet entered a plea on the additional four counts, one of which is bank fraud. Yesterday, Nishad Singh pleaded guilty to a 6-count criminal indictment. (Two other top lieutenants at Bankman-Fried’s crypto empire have been indicted: Caroline Ellison and Gary Wang. Both have pleaded guilty and are cooperating with prosecutors, as is Singh.) Sullivan & Cromwell explained in its January 17 filing with the Bankruptcy Court that it had worked for Bankman-Fried from April 14, 2022 to August 5, 2022. The work involved Bankman-Fried’s purchase of more than half a billion dollars in the stock of Robinhood Markets (a trading app). Bankman-Fried used loans he took from Alameda Research to purchase the Robinhood stock. Federal prosecutors have charged that Alameda Research was looting FTX customer funds from the very beginning of the creation of FTX in 2019. The U.S. Department of Justice seized the Robinhood stock in early January. The rightful ownership of the stock is the subject of multiple court battles. Sullivan & Cromwell’s January 17 disclosure also revealed that it had worked on an individual basis for Nishad Singh during a period when he was Head of Engineering at FTX. The disclosure explains: “The work was primarily performed out of the S&C London office and supervised by a partner resident in London. The representation started December 16, 2021 and ceased on August 8, 2022. The work was arranged, and paid for, by Alameda.” According to the bankruptcy court filing, Sullivan & Cromwell’s legal work for Singh concerned “tax matters and estate planning.” It doesn’t appear that Nishad Singh will have much use for that “estate planning” work by Sullivan & Cromwell. Singh signed a forfeiture order with the criminal court in Manhattan yesterday in addition to pleading guilty to the six criminal counts. While the specific properties and assets that he will forfeit have been redacted in the filing, the forfeiture agreement includes anything that is traceable to the six counts of fraud to which he has pleaded guilty. The Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) also filed charges against Singh yesterday. The SEC’s complaint provides far more damning detail than does that of the Justice Department. The SEC writes, for example: “In 2020 and 2021, Singh executed promissory notes with Alameda totaling approximately $577.5 million. The funds borrowed under the promissory notes (referred to internally at FTX as ‘Founders Loans’) in Singh’s name were generally not intended for Singh’s personal use but were instead used by Bankman-Fried for other purposes, including additional venture investments and acquisitions. Singh also borrowed millions to donate to political campaigns and causes, as well as philanthropic causes associated with effective altruism. Some of these donations were funded through a line of credit that Bankman-Fried authorized Singh to provide himself on his personal FTX account. In 2021, Singh also borrowed $10 million in an undocumented loan and provided the funds to friends and family…Moreover, in September and October of 2022, when Singh was already aware that FTX customer funds had been used by Alameda and that Alameda was unable to repay the debt, Singh withdrew approximately $6 million from FTX for personal use and expenditures, including the purchase of a multi-million-dollar house and donations to charitable causes.” Estate planning indeed.

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Crypto Tries to Recreate the Koch Money Machine to Pack Congress with Shills
by Gunnar Larson 16 Jun '24

16 Jun '24

https://wallstreetonparade.com/2024/06/crypto-tries-to-recreate-the-koch-mo… Editor’s Note: For watchdog Better Markets’ detailed analysis of crypto’s “track record of lawlessness, deception, fraud, and investor losses,” see here. By Pam Martens and Russ Martens: June 13, 2024 ~ As meticulously chronicled by Jane Mayer and numerous others, the billionaire owners of fossil fuels giant Koch Industries — Charles Koch and his late brother, David Koch – spent decades building the tentacles of what became known as the Kochtopus. It was, and remains, a sprawling network of Super Pacs, nonprofits, dark money groups, activist groups and think tanks deployed to push an anti-regulatory agenda in Congress – particularly when it comes to fossil fuels and climate change. Koch’s latest addition is an Orwellian voter-mining database and its dangerous appendages. Crypto billionaires appear to have studied the Koch playbook carefully and are now rapidly rolling out a strikingly similar network. As we reported on Tuesday, a handful of crypto billionaires and their related crypto businesses had plowed $92.87 million (as of April 30) into a Super Pac, ironically called “Fairshake,” to defeat candidates for Congress who refuse to be toadies for the crypto agenda. We obtained the $92.87 million receipt figure for Fairshake directly from records at the Federal Election Commission, where there is a lag in updating new donations to the public FEC website. According to Bloomberg News, subsequent to April 30, three prior big-money donors to Fairshake, crypto exchange Coinbase, venture capital firm Andreessen-Horowitz, and blockchain services company, Ripple, each donated $25 million to Fairshake. That additional $75 million would bring Fairshake’s current total to at least $167.87 million — making it one of the largest Super Pacs in the U.S. The vast majority of Fairshake’s money comes either directly from the crypto exchange, Coinbase, or from its billionaire investors. One of those is Brian Armstrong, Chairman and CEO of Coinbase. Armstrong has been brazenly outspoken for the head of a publicly-traded company about threatening members of Congress to either get on board the crypto bandwagon or risk losing their seats in the November election. On the Coinbase blog on June 3, Armstrong wrote this: “Crypto voters won’t be taken seriously until we send a clear message to political candidates that it is bad politics to be anti-crypto. Therefore, the simple conclusion is that we need to support pro-crypto candidates on both sides of the aisle, and unceremoniously vote anti-crypto candidates out of office.” Fairshake did just that in the spring primary in California. It spent over $10 million in attack ads against Congresswoman Katie Porter’s bid for a U.S. Senate seat, falsely claiming that she took campaign money from Big Oil, Big Pharma and Big Banks. Porter was soundly defeated. Because her House term is up in January, Porter’s strong public-interest voice will be eliminated completely from Congress. Like Koch-funded Americans for Prosperity, crypto has also created a “grassroots movement” called StandwithCrypto.org. On its website, it’s sending a warning to the members of Congress that it plans to target. Senator Sherrod Brown, a Democrat from Ohio who is running for reelection this year, is given an “F” rating, with the words “Strongly against crypto” next to his photo on the website. The crypto tentacles also include a dark money nonprofit called Cedar Innovation Foundation. Its website shows that it is already running ads ordering Senator Sherrod Brown (who chairs the Senate Banking Committee) to get Securities and Exchange Commission Chair, Gary Gensler, to back off. The SEC has sued Coinbase for the unregistered sale of securities. The SEC scored a major win in court in March with the judge ruling that the case can move on to trial. Cedar Innovation Foundation is so new and so dark that it could spend tens of millions of dollars this year without providing a hint of its donors, its officers, or even its address. One thing we do know, thanks to OpenSecrets.org, is that it has hired a highly experienced lobbying firm in Washington, D.C. – Mindset Advocacy LLC – which is also a lobbyist for – wait for it – units of Koch Industries. Coincidentally – or perhaps not – crypto has a connection to fossil fuels. According to a 2022 report from the White House Office of Science and Technology Policy, crypto is driving energy consumption in the wrong direction if we are to stop the dangerous heating of the planet. The report revealed this: “From 2018 to 2022, annualized electricity usage from global crypto-assets grew rapidly, with estimates of electricity usage doubling to quadrupling. As of August 2022, published estimates of the total global electricity usage for crypto-assets are between 120 and 240 billion kilowatt-hours per year, a range that exceeds the total annual electricity usage of many individual countries, such as Argentina or Australia. This is equivalent to 0.4% to 0.9% of annual global electricity usage, and is comparable to the annual electricity usage of all conventional data centers in the world.” In a June 2021 Senate hearing, Senator Elizabeth Warren revealed this about crypto: “Cryptocurrencies have turned out to be a fourth-rate alternative to real currency. First, cryptocurrencies are a lousy way to buy and sell things. Unlike the dollar, their value fluctuates wildly depending on the whims of speculative day traders. You know, in just the last two months, the value of Dogecoin increased by more than ten-fold and then declined by nearly 60 percent. Now that may work for speculators and fly-by-night investors, but not for regular people who are looking for a stable source of value to get paid in and to use for day-to-day spending. “Second, crypto is a lousy investment. Unlike, say, the stock market, the crypto world currently has no consumer protection — none. As a result, honest investors and people trying to put aside some savings are at the mercy of fraudsters. Pump and dump schemes are outlawed in the case of ordinary stock, but they have become routine in crypto trading. One study found that the level of price manipulation in cryptocurrency is — and I quote — ‘unprecedented in modern markets’… “Finally, there are the environmental costs of crypto. Many cryptocurrencies are created through ‘proof-of-work’ mining. It involves using computers to solve useless mathematical puzzles in exchange for newly minted cryptocurrency tokens. Such mining has devastating consequences for the climate. Some crypto mining is set up near coal plants, spewing out filth in return for a chance to harvest a few crypto coins. Total energy consumption is staggering, driving up demand for energy. If, for example, Bitcoin — just one of the cryptocurrencies — were a country, it would already be the 33rd largest energy user in the world — using more energy yearly than all of the Netherlands. “And all those promised benefits – the currency that would be available at no cost to millions of unbanked families and that would provide a haven from the tricks and traps of big banks – well, those benefits haven’t materialized.” Warren’s assessment of crypto’s lack of productive purpose was backed up in a letter sent on June 1, 2022 by 1600 of the smartest minds in technology to key members of congress and congressional committees. The authors wrote: “We strongly disagree with the narrative — peddled by those with a financial stake in the crypto-asset industry— that these technologies represent a positive financial innovation and are in any way suited to solving the financial problems facing ordinary Americans….” Raising more alarm bells is the fact that the Koch-related Americans for Prosperity Action (AFP Action) is also targeting Senator Sherrod Brown by running a $1 million ad campaign supporting his opponent, Bernie Moreno. If ever there was a screaming call for campaign finance reform, it is now.

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An Open Letter to Bloomberg on Modern BitLicense Logic
by Gunnar Larson 16 Jun '24

16 Jun '24

Dear Bloomberg: Thank you for pioneering innovation spanning all facets of global finance. For the last 15 years, Bloomberg has served as a wise friend offering daily, quality inspiration. Interviewing Mayor Mike Bloomberg on occasion as a young journalist and advancing to become a global executive and regular Bloomberg Breakaway attendee has fostered a dream of learning from top global business idols. Forever inspired by Bloomberg’s pioneering contributions to the culture of New York and global financial innovation, today’s memo highlights our now eventful journey to fundamentally modernize New York's BitLicense and global regulatory logic. - Our global team <https://drive.google.com/file/d/1S3hI4G7QYR7PmlKlc7oQHhl4RnroLYF-/view?usp=…> is comprised of seasoned professionals who cumulatively represent decades of industry experience across various fields and disciplines. - Our strategic partnerships <https://news.bitcoin.com/ternio-joins-visas-fast-track-program-as-new-enabl…> with the world’s leading financial, healthcare services <http://mydr.co/> and mobile payments providers support the key aim of our endeavor: to attain the legitimate financial inclusion and economic prosperity of all the excluded, under-privileged and under-served, offering financial inclusion and global citizenry. Pioneering global virtual currency innovation is in part due to pedigree responsibility as a “Bill and Melinda Gates Scholar,” (UG) a “Blockchain Scholar” (GR) and a principle creator of “United Nations AudioVisual Library on International Law <https://drive.google.com/file/d/0BweeaClFZ8c0dDNDWGFveVFTXzlOTjhXY2tKS2FZN2…>.” Humble scholars and UN esteem are indeed supportive. However, our working example of success is modeled on Bloomberg's business of international excellence, pioneering many of the world's greatest financial systems and technology frameworks out of New York. *The New York BitLicense vs. Global Regulatory Arbitrage* The 2015 BitLicense mandate was envisioned as synonymous with New York’s leadership of next-generation global innovation. New York’s contemporary virtual currency innovation rests with a modern BitLicense with cross-border logic (similar to New York human rights law <https://dhr.ny.gov/law#HRL298a>). 1. Today many New York firms have various legacy regulatory arbitrage frameworks. 2. The utility concept behind virtual currency is in its cross-border appeal. 3. Modern European regulation shares this logic. New York’s BitLicense does not, therefore creating a virtual currency “Crypto Bank” regulatory arbitrage loophole between Europe and New York. New York banks’ traditional engagement of regulatory arbitrage has overflowed the BitLicense and correspondingly is responsible for global virtual currency marketplace manipulation. Circumnavigating this problem is key to modern BitLicense logic. Given the inherent universal cross-border nature of virtual currencies, there is no real good reason for New York firms under the BitLicense mandate to manipulate other global markets via regulatory arbitrage. Engaging the New York Department of Financial services’ new “Conditional BitLicense” framework as a vehicle, we have signed our clear intent to win the Superintendent's Conditional Approval and other necessary regulatory approvals of modern virtual currency logic. - BitLicense members today should not be surprised by New York wasting no time issuing modern logic and that virtual currency regulatory arbitrage is a lawless New York rights concern affecting <https://dhr.ny.gov/law#HRL298a> over 1 billion people. - European regulation has allowed our team to build these concepts which are theoretically illegal in New York, thus creating global loopholes. - Africa is the most concerning “virtual currency regulatory arbitrage market” directed outside of New York and Europe jurisdictions. African consumers are being manipulated most. United States consumers also are affected at various levels. European consumers have a favorable environment, but do not have the “dynamism” New York affords. Working in New York, European and African jurisdictions as “Blockchain Scholars,” we tested the concept of our Modern BitLicense Logic at our “sister” University in Africa <https://drive.google.com/file/d/1S3hI4G7QYR7PmlKlc7oQHhl4RnroLYF-/view?usp=…>, and interestingly Goldman Sachs out of New York was a lead investor. The key observation is that New York banks “own,” or lead investment in, the European and African marketplace leaders. At every level, New York’s BitLicense is the most significant hurdle to the global virtual currency industry. Given our own experience in these markets, we have found that Goldman Sachs has fine tuned global virtual currency regulatory arbitrage. To be fair, we have reported on various other Silicon Valley firms leveraging the BitLicense, given that Valley firms like Robinhood <https://thecapital.io/article/robinhoods-brand-fake-vs-paypals-crypto-corru…> use New York banks, like Goldman Sachs, as a key actor. Note, as some of the industries top “real global scholars” we understand it would be a mistake to be adversarial to the current New York environment. Like Boomberg, we aim to be very impressive in terms of successfully shepherding/persuading meaningful New York innovation. *The Art of Diplomacy* Rather than a merry-go-round, the process of change is like a slide, and Modern BitLicense Logic is necessary. As a matter of New York law, there is no other option. The process of filing complaints or legal mediation is sub-par. Furthermore, if virtual currency firms want to game regulatory markets they honestly should forfeit the prestige of New York’s BitLicense. 2020 will go down in history as New York banks continued to profit heavily under regulatory arbitrage frameworks while virtual currency reached global proportions. New York’s newly announced “Conditional BitLicense” framework offered our group the perfect opportunity to earn a “Conditional License” and suggests advancing the BitLicense mandate with “modern logic.” - The interests ensured through interpretations of specific provisions in the existing national and supra-national legal framework (civil law, securities law, bankruptcy law, international human rights law) call for New York to clarify the rights of the public and obligations of BitLicense members engaged in the global virtual currency economy. - BitLicense regulation must preserve a technology-neutral, principle-based, non-discriminatory framework for the next generation of modern New York virtual currency public policy, naturally to support innovation within the limits imposed by overriding international public interests. As a proud New Yorker, the only option is to be a “real scholar,” and the job would not be complete without New York regulator approval and campaign for cross-border modernization of the BitLicense logic in any way possible. *Vast Undue Economic Hardship* Bloomberg has championed actions to promote an inclusive economy -- one in which people have the chance to move themselves and their families out of poverty, one in which systemic racism does not limit opportunities and one in which all people can fully participate. Without this inclusivity, the global economy will not be able to live up to its full potential and people will suffer. As we have reported <https://thecapital.io/article/new-yorks-raging-regulatory-arbitrage-racket-…>, virtual currency fraud is a serious problem for such a developed country as the United States, whose bank regulators have drawn attention to the increase of these crimes. Having discovered that an unregulated virtual currency sphere (such as in Africa, or other developing markets) is very popular among virtual currency fraudsters <https://www.americanbanker.com/news/jpmorgan-chase-warns-of-upcoming-fine-o…>, the New York State Department of Financial Services concluded that this kind of regulatory fraud was threatening US national security. Research on the social importance and credibility <https://thecapital.io/article/robinhoods-brand-fake-vs-paypals-crypto-corru…> of good institutional design from an organizational perspective seeks to prevent undue hardship requiring significant expense or difficulty (including a significant interference with the safe or efficient operation of international operations due to the seniority system of New York banks who are playing global markets). - Factors to be considered in determining whether an undue economic hardship exists shall include, but not be limited to, special requirements or conditions that are imposed upon an applicant or class of applicants in circumstances where similar requirements or conditions are not imposed upon other applicants. - Consumer protection is an umbrella term covering a group of laws and organizations that protect the rights of consumers and foster the free flow of accurate information in the marketplace. Consumer protection laws are designed to prevent businesses from engaging in fraud or unfair practices, to protect individuals from scam artists, and to identity thieves and crooks. - A New York State resident or corporation is in violation if found to have contributed to an act committed outside New York State against a resident of this state or against a corporation organized under the laws of this state (or authorized to do business in this state) that would constitute an unlawful discriminatory practice if committed within New York State. - If the New York State has reason to believe that a non-resident person or foreign corporation has committed or is about to commit outside of this state an act which if committed within this state would constitute an unlawful practice, such act is in violation. Speaking generally, at least during its 2015-2020 implementation phase, the BitLicense has likely contributed to increased cross-border virtual currency market manipulation. Specifically, we reference our individual hardship example in New York, Europe and Africa with concern to Goldman Sachs’ cross-border manipulation as a violation of New York Human Rights law. *New York Human Rights Law* Our analysis of the factors that drive cross-border differences in the implementation of BitLicense reform link the resulting heterogeneity to cross-jurisdictional arbitrage. In this manner we identify New York in a “virtual currency regulatory crisis” – to the extent that the BitLicense is unevenly implemented – as a source of new and unchecked global financial risk. Given the nature of traditional regulatory arbitrage, it is key to differentiate the BitLicense and understand New York’s universal nature <https://dhr.ny.gov/law#HRL298a> of Human Rights Law. - The science of pure virtual currency design and human rights are universal movements to end ins <https://en.wikipedia.org/wiki/Institutionalisation>titutionalized <https://en.wikipedia.org/wiki/Institutionalisation> discrimination and disenfranchisement <https://en.wikipedia.org/wiki/Disenfranchisement_in_the_United_States>, and to offer quality consumer financial product access without cross-border regulatory segregation. - We trust that virtual currency regulatory arbitrage can be addressed via BitLicense modernization and that New York regulators share our logical provisional interpretation of cross-borders with respect to human rights. Our experience in Europe and Africa points to the necessity to work with New York regulators directly without BitLicense member interference. This approach is not to purposely irritate the esteemed Superintendent or rock the boat that is New York State and risk disrupting the system that guarantees our future. *Conditional BitLicense Approval* Modern BitLicense Logic’s opportunity is to meet a new global standard for virtual currency regulatory innovation while protecting market integrity by stringent standards applicable to all law-abiding business enterprises. In our case, a few approvals are necessary and are proposed via a hybrid model under the supervision of the Superintendent. Following this desire, we have navigated the five step process for Conditional review. 1. *Inform*: Applicants inform NYDFS of the intent to collaborate with a specific BitLicensee and provide a copy of the draft agreement between the applicant and the BitLicensee. 2. *Submit: *Applicants submit information on the expected type of business and the perceived risks, among other things. 3. *Review: *NYDFS begins its substantive review after all of the requested documentation has been submitted. 4. *Contract: *NYDFS and the applicant enter into a supervisory agreement defining the scope of the applicant’s business, shared responsibilities with its sponsor BitLicensee and NYDFS’ level of oversight. 5. *Approve:* If NYDFS approves the application, a Conditional BitLicense is issued. Every day of delay in ambiguity of Modern BitLicense Logic poses a problem for those who want to offer additional products and services at international scale while staying within the letter of the law. Currently, we believe that our Conditional application is ready to enter stage four and seek to begin negotiation of the supervisory agreement. Bloomberg as the prime example of global prestige and success fuels our desire to be best in class in providing global virtual currency financial services out of New York. Warm regards, *Gunnar Larson* Bill and Melinda Gates Scholar | Blockchain Scholar Conditional BitLicense Applicant (Global Team Lead) New York, New York 10001 -- *Gunnar Larson - xNY.io <http://www.xNY.io> | Bank.org <http://Bank.org>* MSc <https://www.unic.ac.cy/blockchain/msc-digital-currency/?utm_source=Google&u…> - Digital Currency MBA <https://www.unic.ac.cy/business-administration-entrepreneurship-and-innovat…> - Entrepreneurship and Innovation (ip) G(a)xNY.io +1-646-454-9107 New York, New York 10001

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Crypto Just Got Exponentially More Dangerous: Meet Fairshake
by Gunnar Larson 16 Jun '24

16 Jun '24

https://wallstreetonparade.com/2024/06/crypto-just-got-exponentially-more-d… By Pam Martens and Russ Martens: June 11, 2024 ~ The first thing you need to know about crypto is that some of the smartest minds in investment and technology have studied crypto carefully and determined it’s a total sham. In July 2019, NYU Professor and economist Nouriel Roubini summed up his findings like this: “Crypto currencies are not even currencies. They’re a joke…The price of Bitcoin has fallen in a week by how much – 30 percent. It goes up 20 percent one day, collapses the next. It is not a means of payment, nobody, not even this blockchain conference, accepts Bitcoin for paying for conference fees cause you can do only five transactions per second with Bitcoin. With the Visa system you can do 25,000 transactions per second…Crypto’s nonsense. It’s a failure. Nobody’s using it for any transactions. It’s trading one sh*tcoin for another sh*tcoin. That’s the entire trading or currency in the space where’s there’s price manipulation, spoofing, wash trading, pump and dumping, frontrunning. It’s just a big criminal scam and nothing else.” On June 1, 2022, more than 1,600 computer scientists, software engineers and technologists from around the world sent a letter to key members of the U.S. Congress and to the Chairs of the Senate Banking and House Financial Services Committees, disputing that crypto was a worthwhile financial innovation. Among the signatories to the letter were 45 experts who worked at Google; 19 from Microsoft; 11 from Apple; and Ph.Ds from the most prestigious universities in the world, including Oxford and MIT. These experts told Congress the following: “We strongly disagree with the narrative — peddled by those with a financial stake in the crypto-asset industry— that these technologies represent a positive financial innovation and are in any way suited to solving the financial problems facing ordinary Americans… “As software engineers and technologists with deep expertise in our fields, we dispute the claims made in recent years about the novelty and potential of blockchain technology. Blockchain technology cannot, and will not, have transaction reversal or data privacy mechanisms because they are antithetical to its base design. Financial technologies that serve the public must always have mechanisms for fraud mitigation and allow a human-in-the-loop to reverse transactions; blockchain permits neither.” In February of last year, the Wall Street Journal gave the iconic investor, Charlie Munger, space for a 393-word OpEd on crypto. Munger, who died in November of last year at age 99, used the space to urge the U.S. to ban crypto, as China and numerous other countries have already done. Munger wrote this: “…A cryptocurrency is not a currency, not a commodity, and not a security. Instead, it’s a gambling contract with a nearly 100% edge for the house, entered into in a country where gambling contracts are traditionally regulated only by states that compete in laxity. Obviously, the U.S. should now enact a new federal law that prevents this from happening.” But even after the FTX crypto exchange and Sam Bankman-Fried and his colleagues perpetrated one of the largest financial frauds in U.S. history, billionaire investors in crypto companies are still getting their way with far too many members of the U.S. Congress in exchange for fat political contributions. In February and March, the crypto billionaires became exponentially more dangerous. They decided they were going to knock Congresswoman Katie Porter out of the running for a U.S. Senate seat. What was Porter’s transgression against crypto? In January 2022, Porter had joined with Senator Elizabeth Warren and other Democrats in Congress in investigating the inherent dangers between crypto, energy usage and dangerous heating of the planet. A press statement summarized their concerns as follows: “Bitcoin is the largest cryptocurrency by market cap, and the United States’ share of Bitcoin mining increased from 4% in August 2019 to 35% in July 2021. This share of mining is growing even more rapidly after China’s crackdown on cryptomining, which left 500,000 mining operations looking for new locations. This could push North America to represent over 40% of the total global computing power dedicated to mining Bitcoin. As more cryptomining operations proliferate in the United States, the extraordinary energy use raises alarms about massive carbon emissions and the impacts of this energy consumption on consumer energy prices. A recent study estimated that cryptomining in upstate New York raised annual electric bills by about $165 million for small businesses and $79 million for consumers.” The famously outspoken Porter (armed with her whiteboard and Harvard Law degree) could have posed a bigger problem in the Senate than she already does for crypto in the House. So a small group of crypto billionaires decided to simply take Porter out of contention for a Senate seat by spending an acknowledged $10,041,118.54 on grossly misleading attack ads against Porter, falsely claiming she was taking money from Big Oil, Big Pharma and Big Banks. Because Porter’s House term is up in January, she will no longer be a problem for crypto in either the Senate or House come next year. The funding for the attack ads came from a Super Pac with the Orwellian, reverse-speak name of “Fairshake” – exactly what it did not want to give to Porter. As of April 30, Fairshake has taken in $92.87 million in political contributions with the vast bulk of that coming from a handful of tightly-linked crypto interests related to the crypto exchange — Coinbase — according to records at the Federal Election Commission. Coinbase and its payments arm, Coinbase Commerce, contributed over $51.5 million — 55 percent of the total of all receipts at Fairshake thus far. A major investor in Coinbase, Marc Andreessen, of the venture capital firm Andreessen Horowitz (a/k/a AH Capital Management), chipped in $9.5 million. His partner in AH Capital Management, Ben Horowitz, added another $9.5 million. Not wanting to look like pikers – given the huge sum contributed from publicly-traded Coinbase – AH Capital Management itself chipped in $19 million. The Chairman and CEO of Coinbase, Brian Armstrong, handed Fairshake a cool $1 million. The Lead Independent Director on the Board of Coinbase, Fred Wilson, gave Fairshake $1,047,540. Coinbase-related contributions to Fairshake represent 98.5 percent of its total receipts thus far. Unfortunately, knocking out Porter does not appear to be game-over for Fairshake. Two other Senators who are crypto skeptics are running for re-election: Senator Sherrod Brown (D-OH), Chair of the powerful Senate Banking Committee, and Jon Tester (D-MT). Fairshake has thus far spent just $40.6 million of its $92.87 million haul.

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Wall Street’s Go-To Law Firm, Sullivan & Cromwell, Got in Bed with Crypto; Now Its Reputation Is Being Hammered
by Gunnar Larson 16 Jun '24

16 Jun '24

https://wallstreetonparade.com/2024/03/wall-streets-go-to-law-firm-sullivan… By Pam Martens and Russ Martens: March 25, 2024 ~ Ryne Miller, Former Sullivan & Cromwell Partner; Now General Counsel of FTX.US Ryne Miller, Former Sullivan & Cromwell Partner Who Became General Counsel of FTX.US Since January, the reputation of Wall Street’s go-to law firm, Sullivan & Cromwell, has been repeatedly hammered. It all stems from the law firm’s decision some years ago to involve itself in legal representations of crypto firms and/or their principals – an industry that 1,600 of the brightest scientific minds in technology have called a sham. On January 19, the Third Circuit Court of Appeals sharply rebuked the law firm’s position that it didn’t need an independent watchdog appointed by the U.S. Department of Justice to oversee the way it was handling the collapsed crypto house of frauds (known as FTX) in bankruptcy proceedings – despite it having significant conflicts of interests in the matter, such as previously providing legal representation to the mastermind of the fraud, Sam Bankman-Fried. On February 16, a federal lawsuit was filed against the law firm alleging civil conspiracy, aiding and abetting fraud, aiding and abetting breach of fiduciary duty, and violations of civil federal racketeering law in regard to its work for FTX, which had looted customer funds to the tune of billions of dollars. This month Sullivan & Cromwell is the subject of a scathing academic review related to its work for FTX by two law professors, Jonathan Lipson of Temple University-Beasley School of Law and David Skeel of the University of Pennsylvania Carey Law School. The law professors name names – including the alleged activities of key law partners at Sullivan & Cromwell related to FTX. Last year, Wall Street On Parade wrote 20 articles focusing on the glaring conflicts of Sullivan & Cromwell in the FTX matter. Common sense indicated it had rendered itself unfit for the role of lead counsel in the FTX bankruptcy proceeding. (See a relevant sample in Related Articles below.) We also provided much needed sunshine on the peculiar willingness of the presiding Judge, John Dorsey of the U.S. Bankruptcy Court for the District of Delaware, to sign off on a litany of orders that S&C requested as it enriched itself to the tune of $180 million in legal fees from the FTX bankruptcy proceedings in his court. To even casual observers, Sullivan & Cromwell’s conflicts in the FTX case were stunning. One of Sullivan & Cromwell’s law partners, Ryne Miller, had moved to FTX.US and became its General Counsel. Another former Sullivan & Cromwell lawyer, Tim Wilson, became General Counsel for FTX Ventures, the venture capital arm of FTX. Sullivan & Cromwell had not only previously represented Sam Bankman-Fried, who was convicted in November 2023 on seven counts of fraud and conspiracy, but it had also previously represented the Head of Engineering at FTX, Nishad Singh, who pled guilty to fraud charges. According to Sullivan & Cromwell’s own bankruptcy court declaration, it had been involved in more than 20 legal engagements for FTX before it filed for bankruptcy on November 11, 2022. According to the declaration, the law firm’s legal work began 15 months prior to the collapse of FTX. Sullivan & Cromwell’s conflicts with FTX and its demand to be appointed lead counsel in the bankruptcy case were so suspicious that in January of last year four sitting U.S. Senators (Elizabeth Warren (D-MA), John Hickenlooper (D-CO), Thom Tillis (R-NC) and Cynthia Lummis (R-WY)) sent a letter to Judge Dorsey. Senator Hickenlooper Tweeted a link to the letter with the comment: “Get this: FTX’s legal advisors *pre-collapse* want to be appointed to oversee investigations INTO the collapse.” The Senators’ letter drilled down as follows: “To name just one challenge: will the firm’s lawyers be able to effectively investigate their current and former partners who were central in FTX’s conduct? Additionally, given their longstanding legal work for FTX, they may well bear a measure of responsibility for the damage wrecked on the company’s victims. Put bluntly, the firm is simply not in a position to uncover the information needed to ensure confidence in any investigation or findings.” That assessment was perhaps too gentle according to the federal lawsuit filed in February against Sullivan & Cromwell by the Moskowitz Law Firm on behalf of 16 customers of the FTX crypto platform. Among the allegations in the lawsuit are the following: “…from November 2022 to mid-January 2024, S&C’s income from matters just related to FTX has surged, exceeding $180 million — or 10% of the total revenue the 900-lawyer firm publicly stated it collected in all of 2022 — with paralegals billing $595/hr. and partners billing up to $2,165/hr.” “S&C attorneys served as the primary legal services providers for the RICO enterprise, assisting in the structuring of the enterprise operations.” “When the FTX fraud was revealed in November 2022, Mr. Miller and S&C moved to consolidate power over the FTX Group without delay, quickly ousting SBF [Sam Bankman-Fried] and his lieutenants and appointing in their stead hand-picked successors to navigate FTX through the bankruptcy process. S&C’s post-collapse maneuvering seems particularly calculated, given that S&C was well positioned to see the collapse coming, via knowledge gleaned from prior engagements.” “Mr. Miller and S&C moved to divert the $250 million FTX Guaranty Fund from LedgerX, one of the few entities S&C specifically chose not to include among the over 100 FTX entities it forced into bankruptcy, in order to secure receipt of a multi-million-dollar retainer to S&C before the FTX Group filed for bankruptcy, presumably to improve the Firm’s revenues throughout the extensive FTX bankruptcy process. With S&C’s assistance, SBF [Sam Bankman-Fried] and FTX caused billions in losses to Plaintiffs through at least two separate schemes, both of which contributed to the downfall of the FTX Group.” Notwithstanding the myriad conflicts, Judge Dorsey was all-in on Sullivan & Cromwell becoming lead counsel in the FTX bankruptcy. When Sullivan & Cromwell argued against allowing the U.S. Department of Justice’s U.S. Trustee to appoint an independent examiner – a legally mandated position for bankruptcy cases exceeding $5 million — Judge Dorsey sided with the law firm. Dorsey’s decision was sharply rebuked by the Third Circuit Court of Appeals on January 19. The court wrote: “Under the Bankruptcy Court’s interpretation, the appointment of an examiner under either subsection of Section 1104(c) would be subject to a court’s discretion and a judge would have the final say as to whether an investigation was warranted. But this interpretation runs counter to the statute’s plain language and established canons of construction.” The Appeals Court also insightfully noted the following: “First, an examiner must be ‘disinterested’… This requirement of disinterest is particularly salient here, where issues of potential conflicts of interest arising from debtor’s counsel serving as pre-petition advisors to FTX have been raised repeatedly….” The U.S. Trustee has tapped Robert Cleary of law firm Patterson Belknap as its independent examiner to conduct the FTX investigation. Cleary is a former U.S. Attorney for the District of New Jersey and the Southern District of Illinois and a former Assistant U.S. Attorney in the Southern District of New York. One of the areas that Cleary will examine is if Sullivan & Cromwell’s conflicts were adequately addressed prior to its appointment as lead counsel and if it failed to disclose any material conflicts. Sullivan & Cromwell ranks among the oldest law firms in America. It was founded 145 years ago by Algernon Sydney Sullivan and William Nelson Cromwell in the financial district of lower Manhattan. During the Wall Street crisis of the 1930s, Sullivan & Cromwell built a reputation for defending Wall Street firms against shareholder lawsuits and antitrust actions. Sullivan & Cromwell also played a pivotal role in the 2008 financial crisis, the worst since the Great Depression. As Wall Street On Parade previously detailed, the firm’s Senior Chair, Rodge Cohen, paved the way for the Fed’s unprecedented $29 trillion bailout of Wall Street banks after their corrupt activities collapsed the U.S. economy in 2008. Why Sullivan & Cromwell decided to leap with both feet into the dodgy world of crypto will, hopefully, inspire another academic paper very soon. Related Articles: No One Trusts the FTX Bankruptcy Case: News Outlets Intervene; Justice Department Trustee Demands Independent Examiner; SEC Orders Disclosures A Sam Bankman-Fried Company Loaned or Invested More than $1 Billion in Clients of its Law Firm, Sullivan & Cromwell Bombshell Emails Raise Questions about What Sullivan & Cromwell Knew about Fraud at Sam Bankman-Fried’s Crypto Firms

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Enron’s Board of Directors: Contemporary Lessons on Crypto Marketplace Manipulation Computer Crimes - Crypto Computer Crimes Manual (W/183 Highlights)
by Gunnar Larson 15 Jun '24

15 Jun '24

A few years ago, I wrote an essay titled: "Enron’s Board of Directors: Contemporary Lessons on Crypto Marketplace Manipulation Computer Crimes - Crypto Computer Crimes Manual (W/183 Highlights)" https://thecapital.io/article/crypto-computer-crimes-manual-w183-highlights… Working references on disclosure controls and procedures, as well as strategic initiatives including mergers and acquisitions, joint ventures, and management restructurings (including public/private board of directors). Full, fair, and accurate disclosures from all parties in a battle for corporate influence or control are critically important to investors, particularly when they are called upon to make decisions about their investments. Contemporary crypto computer crimes likely are key considerations relevant to making informed investment decisions by sophisticated investors, underscoring protection of pension assets via keen planning. BitLicense marketplace manipulation techniques and potential cross-border computer crimes has been a major focus of xNY.io's scholar research/innovation communication and Bank.org's business plan execution strategy. The World Bank (WorldBank.org) notes that vulture funds endanger the gains made by debt relief to poorest countries. "The Bank has already delivered more than $40 billion in debt relief to 30 of these countries...thanks to this, countries like Ghana can provide micro-credit to farmers, build classrooms for their children, and fund water and sanitation projects for the poor," wrote World Bank Vice President Danny Leipziger in 2007. World Bank directors warn that strategies adopted by vulture funds divert much needed debt relief away from the poorest countries on earth and into the bank accounts of the wealthy. Bank.org is clear-eyed; microcredit lending fraud is a major issue for developing economies. Likewise, in western developed economies, market history warns that when boards of directors approve of and/or ignore the misuse of computer software programs which compute values based upon data input formulas from active cross-border manipulation structures, the results can lead to scandals like Enron. Such outcomes cost investors billions of dollars when the share prices of affected companies collapse, while also shaking public confidence in the United States securities markets. Enron’s Board of Directors: Contemporary Lessons on Crypto Marketplace Manipulation Computer Crimes In its 2000 review of best corporate boards, Chief Executive Magazine included Enron among its five best boards. Even with its complex corporate governance and network of intermediaries, Enron was still able to "attract large sums of capital to fund a questionable business model, conceal its true performance through a series of accounting and financing maneuvers, and hype its stock to unsustainable levels."On paper, Enron had a model board of directors comprised predominantly of outsiders with significant ownership stakes and a talented audit committee of various state and federal regulators. Two decades later, in 2021, it is clear that cryptocurrency and blockchain computer software systems require contemporary, ethically pure and sound cultivation to support the realization of a "generation of innovation," maximizing the full potential of blockchain software technologies. Board directors that will pioneer the next chapters of the meaningful New York legacy of global, cross-border banking will agree: Close scrutiny of corporate governance and greater responsibility placed on directors to vouch for the reports submitted to the SEC and other federal agencies have resulted in the growth of computer software solutions such as blockchain systems and processes. Cryptocurrency and Blockchain computer software products allow corporate directors and internal auditors to assemble and analyze financial and other relevant data—including unstructured data—and create reporting required by New York BitLicense regulators and various Federal counterparts. Before its demise, Enron was lauded for its sophisticated software, including financial risk management tools powered by computer software. Risk management was crucial to Enron not only because of its regulatory environment, but also because of its business plan. Enron established long-term fixed commitments which needed to be hedged to prepare for the invariable fluctuation of future energy prices. Enron's downfall was attributed to its reckless use of derivatives and special purpose formulas manipulated by computer accounting software tools. To engage in probable computer crimes, Enron hedged its risks with special purpose entities which it owned, and Enron retained the risks associated with the transactions. Enron's aggressive accounting practices were not hidden from the board of directors, as later learned by a Senate subcommittee. The board was informed of the rationale for using the Whitewing, LJM, and Raptor transactions, and after approving them received status updates on the entities' operations. Although not all of Enron's widespread improper accounting practices were revealed to the board, the practices were dependent on board decisions. Eliminating Bad Board of Director Schemes Ranging from additional corporate board responsibilities to criminal penalties, the Securities and Exchange Commission (SEC) implemented disclosure requirements to comply with the law. A recent SEC order reiterated the importance of the disclosures, noting that the requirements were adopted in order to alert the market to large and rapid accumulation of shares that might represent a possible change in corporate control so that shares can be valued accordingly. The SEC order also noted that the requirements were designed to provide an issuer’s management with timely information to appropriately protect its shareholders’ interests (including pension protections). The SEC’s recent enforcement actions relate to disclosure obligations in connection with M&A transactions and fights for corporate control. In 2015, the SEC brought forth a number of similar enforcement actions alleging that filers had failed to update their disclosures after taking steps towards certain plans and proposals. These types of enforcement actions continue to create challenging issues for practitioners, particularly when potential transactions are still in the early stages of planning and preliminary negotiation. The SEC’s historic actions serve as a reminder to investors, including vulture activists, that Schedule 13D violations can result in monetary liability and, in the case of registered funds and investment advisers, can also have other regulatory consequences. Care must be taken to avoid those communications constituting group activities with disclosure consequences. It should be noted that in some cases, coordination among the parties or sharing of information is sufficient to form prompts for disclosure purposes. Intention of Disclosing Crypto Computer Crimes Manual (W/183 Highlights) Published by the Office of Legal Education Executive office for United States Attorneys, the “Prosecuting Computer Crime Manual” has been xNY.io’s reference guide as international scholars researching Crypto Computer Crimes and how to best position corresponding Bank.org business innovation moving forward. The SEC encourages the description of any plans or proposals such as Proof of Burn (PoB) or Short Selling market activities which may relate to or would result in: The acquisition by any person of additional securities of the issuer, or the disposition of securities of the issuer; An extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the issuer or any of its subsidiaries; A sale or transfer of a material amount of assets of the issuer or any of its subsidiaries; Any change in the present board of directors or management of the issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; Any material change in the present capitalization or dividend policy of the issuer; Any other material change in the issuer's business or corporate structure, including but not limited to, if the issuer is a registered closed-end investment company, any plans or proposals to make any changes in its investment policy for which a vote is required by section 13 of the Investment Company Act of 1940; Changes in the issuer's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the issuer by any person; Causing a class of securities of the issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; A class of equity securities of the issuer becoming eligible for termination of registration pursuant to section 12(g)(4) of the Act; or Any action similar to any of those enumerated above. Below we share 183 highlights to the Computer Crimes Manual as per best disclosure practices to illustrate various potential scenarios when market conditions are met and a board of directors potentially exploits blockchain technological software innovation with forecastable reckless consequences. https://thecapital.io/article/crypto-computer-crimes-manual-w183-highlights…

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