- The prosecutor has charged FTX’s SBF with misappropriating customer assets.
- The move will not be legal due to the lack of crypto regulation, the DoJ claimed.
The trial against FTX [FTT] founder Sam Bankman-Fried “SBF” finally kicked off on October 3, and one of the most controversial issues – no clear regulatory framework for cryptocurrencies in the US – has emerged.
Notably, the prosecution and defense are increasingly questioning whether the regulatory standards surrounding crypto in the US are relevant to this case.
Prosecutors representing the U.S. Department of Justice (DOJ). archived a motion to the court on October 4, in which they claimed that the lack of a clear legal framework does not prevent them from filing suit against SBF.
The defense had claimed in the October 2 filing that FTX’s operations are spread around the world. She followed all the rules for her activities through her local entity in the US. But as things stood,
“FTX was not regulated in the United States.”
The DOJ argued in its motion that the lack of crypto regulation is irrelevant to whether “the victims” (namely FTX customers) entrusted their funds to the defendant’s care. Authorities have charged SBF with misappropriating customer assets.
The move will not become legal due to the lack of crypto regulation, the filing claimed. Existing laws are sufficient to prosecute the founder of the FTX.
The defense also argued that it was common practice in the crypto industry to pool and reallocate customer funds. In response, the DOJ said legal arguments only worked if SBF believed the practice was legal.
The DOJ also said it does not mind SBF highlighting its philanthropy and charity work. But the defense must submit such plans to the court in advance, so that the authorities can ensure that the defense does not use this data for an image makeover.
SBF insists on limiting testimonies
More like the defense team pleaded that the court restrict testimony from certain users, investors and alleged co-conspirators. They alleged that the prosecutor had similarly tried to block the defense team’s proposed testimony.
The defense team specifically opposed the testimony of a Ukrainian citizen. The defense claimed the testimony would arouse the jury’s “sympathy and outrage” due to the country’s ongoing conflict.
We are well aware of the lack of consensus among US regulators on the status of crypto assets. In light of the lack of a crypto-specific regulatory framework, security regulator action against alleged violations in the crypto industry is often characterized as “regulation by enforcement.”
SBF, the disgraced founder of FTX, faces seven charges, including bank fraud and securities fraud.
