Unchained - How 'a Criminal Choice' Got Sam Bankman-Fried a 25-Year Prison Sentence - Ep. 626

Episode Date: March 29, 2024

Listen to the episode on Apple Podcasts, Spotify, Fountain, Overcast, Podcast Addict, Pocket Casts, Pandora, Castbox, Google Podcasts, Amazon Music, or on your favorite podcast platform. Sam Bankman-Fried (SBF), FTX's co-founder, was sentenced to 25 years in prison and $11 billion in forfeiture for massive fraud, marking a historic moment in the crypto industry. Judge Lewis Kaplan emphasized the sentence's necessity due to Bankman-Fried's risk-oriented decision-making philosophy known as “expected value” and lack of remorse.  Sam Enzer joined Unchained to unpack the sentencing, discussing the fairness of the length, explaining how the $11 billion forfeiture would work and how it’s different from the bankruptcy proceedings. Additionally, Enzer provided insights into the kind of prison SBF would end up in and into the three-year supervised release SBF will face after his prison term. The conversation further delved into the broader impact of the sentencing on the crypto industry, suggesting it could signify the end of a dark chapter.  Show highlights: Whether the 25-year sentence is fair, according to Sam What the $11 billion in forfeiture means for SBF Whether the assets of SBF actually belong to the FTX estate Where SBF will likely go to prison and why Sam believes that SBF will not go to a maximum security prison When the clock starts ticking for the 25-year sentence Why SBF will not be eligible for parole and whether he could get "good time credit" What the defense will attempt in appealing the conviction What types of behavior could get SBF enough credit to appeal for a reduced sentence Why SBF will have to be supervised for three years after his release How SBF’s philosophy about “expected value,” was the theme of the crime, according to Judge Kaplan Whether the co-conspirators, such as Caroline Ellison, will be sentenced and serve in prison Why Sam says that the sentencing represented "the closing of a dark chapter" in crypto Thank you to our sponsors! iTrustCapital Polkadot Guest Sam Enzer, Partner at Cahill Gordon & Reindel Previous appearances on Unchained: Why the SEC’s Case Against Coinbase Is So Significant for Crypto Why SBF’s Testimony So Far Has Likely Already Doomed Him Another Bad Week for Sam Bankman-Fried in His Criminal Trial Why These Lawyers Say It’s Over for SBF-But His Only Hail Mary Is to Testify SBF Trial: How Sam Bankman-Fried’s Lawyers Might Try and Win His Case SBF’s Lawyers Could Be Annoying the Judge How Might That Impact the Trial? Links Unchained:  FTX Founder Sam Bankman-Fried Sentenced to 25 Years for Historic Fraud SBF’s Prison Sentencing Is Coming Up. How Many Years Will He Get? Is Prison Crypto’s New Glow-Up? Post-Incarceration Do Kwon and SBF Are Admired What to Expect from Sam Bankman-Fried’s Sentencing – and the Lessons We Should Learn Learn more about your ad choices. Visit megaphone.fm/adchoices

There was a decision made to intentionally engage in conduct that would hurt people if the market broke a certain way, but could help them and could cover up the hole in their balance sheet if the market broke another way. One flip of the coin leads to jail. The other leads to more opulence, wealth, and no one knowing the wiser. And Bankman Fried made a choice. That's a deliberate choice. It's a coal-calculated choice. It's a criminal choice. Hi, everyone.

Welcome to Unchained, your no-hype resource for all things, crypto. I'm your host, Laura Shin, author of The Cryptopians. I started covering crypto eight years ago, and as the senior editor of Flores, was the first Maytream meter porter to cover cryptocurrency full-time.

This is the March 29th, 2024 episode of Unchained. Pocod is the original, and leading layer zero blockchain with over 2,000 plus developers, and the PogoDOT 2.0 upgrade will be a massive accelerator for the ecosystem. Join the community at PogoDot.network slash ecosystem slash community. With I trust capital, you can buy and sell crypto in a tax advantage retirement account. Enjoy significant tax advantages, 24-7 access, and the industry's lowest fees.

Local news is in decline across Canada, and this is bad news for all of us. With less local news, noise, rumors, and misinformation fill the void, and it gets harder to separate truth from fiction. That's why CBC News is putting more journalists in more places across Canada, reporting on the ground from where you live, telling the stories that matter to all of us. Because local news is big news. Choose news, not noise. CBC News When McDonald's partnered with Frank's Redhot, they said they could put that shit. on everything. So that's exactly what McDonald's did. They put it on your McChrispy. They put it in your

hot honey McNuggets dip. They even put it in the creamy garlic sauce on your McMuffin. The McDonald's Franks Red Hot menu. They put that shit on everything. Breakfast available until 11 a.m. at participating Canadian restaurants for a limited time. Franks Redhot is a registered trademark of the French's food company LLC. Today's guest is Sam Enzer, partner at Cahill, Gordon, and Rindell. Welcome, Sam. Hi, Laura. Thanks for having me on again. We're recording a few hours after Judge Lewis Kaplan sentenced Sam Bankman-Free to 25 years in prison and $11 billion in forfeiture. You followed the trial closely, in part because you gave us fantastic,

regular updates on every aspect of the trial. What's your reaction to this sentence? I had predicted, I think on this show and others, that Sam Bankman-Fried would get a sentence somewhere between 20 and 30 years, and that is, in fact, what Judge Kavanaugh. Appland Did he sentenced San Bernardan Fried to 25 years in prison, $11 billion in forfeiture. And I think that that strikes a balance that I think is fair, reasonable, and appropriate. It strikes a balance because this was a fraud of epic proportions. And San Beckman Fried did just about everything you can do to inflame the fire rather than putting it out by not accepting responsibility, tampering with witnesses, destroying it.

evidence, proceeding to trial, perjuring himself on the witness stand, and then not really accepting responsibility, giving a mealy-mouthed, what my wife calls a husband's apology, an apology where you'd say, I'm sorry you feel bad about what I did. I'm sorry that mistakes were made, as opposed to, I'm sorry that I did something wrong. Here is what I did wrong. I apologize to you for. that and it will never happen again. There's a difference. I've learned it after over a decade of marriage and his apology was not full remorse. It wasn't full acceptance or responsibility. All of these factors are aggravating and I think justify a sentence north of 20 years. But on the other hand, you have mitigating circumstances. Number one, Bankman Fried was very young.

Relatively speaking, this is not Bernard Madoff. He's not a guy who committed a Ponzi fraud for decades and only eventually got caught late in his life. There were exit ramps, but the number of exit ramps from the fraud are much smaller than what Bernard Madoff had, and that warrants something less. This was his first crime, Bankman Freed, and possibly, I mean, likely his only crime in his life. This was a weird confluence of events, a perfect storm in terms of a crypto bull run, the internet being a way to convey solicitations of deposits. There were a variety of things that came together to make a fraud of this nature even possible. So when you put it all into them, and another important factor, the government sought a sentence of 40 to 50 years.

In doing that, they are implicitly acknowledging that a life sentence is not appropriate. because here the maximum sentence was north of 100 years. The guidelines were stratospheric. And the government could have said maxed this guy out. Put him away for as long as possible. He did not do that. And as soon as they did that, you are now in a terrain where the defense is saying, yeah, it's got to be prison time, but it should be six and a half.

The government's saying he's got to do more than that. It should be 40 to 50. if you look at the midpoint, 25 is roughly in the middle. And so it's almost like a reasonable balancing of these various interests. Judge Kaplan is basically saying that as bad as this was, and as important as it is, that it be a long sentence to deter others and send the right message. We also have to acknowledge as a society that prison is supposed to rehabilitate, except in rare cases. We're supposed to acknowledge that somebody is capable of being redeemed, and we have to give them some light at the end of the tunnel, both to incentivize them to really take that rehabilitation work seriously. And so that if they do get out, hopefully at an age when they've learned something, there is some life there at the end of the road for them to come back into society. And then what is it about the $11 billion in forfeiture? Because presumably SPF will never earn that. I mean, most people don't earn that amount in their lifetime.

So, you know, what exactly does that mean? And like, how does it get paid back into who? Yeah. So forfeiture, the government has the power to forfeit, to seize and forfeit to the government coffers, the U.S. Treasury. any proceeds of a fraud. So if there's any property in the world that Sandbank-Ben-Fried arguably owns, which could be traceable to the fraud,

or if he doesn't have enough assets, if there are substitute assets that are clean assets, but necessary to satisfy that amount at $11 billion, the government can recover them. And what the government has said here is they're going to, rather than taking the money and using it for government budget, they are going to remit the funds to victims. There is a program the Department of Justice has.

The Attorney General has discretion through the chief of the money laundering and asset recovery section in Maine Justice to set up a claims process where if you're a victim of a fraud, you put a claim in, somebody, whether it's the chief of the money laundering and asset recovery section or a designated claim administrator will receive the claims, will determine whether they are valid claims, whether the amount is right. And if there are funds that have been seized, they will be sent back to victims to compensate victims. Whether there is a recovery here, there are assets out there. Right. In the bankruptcy estate, there's money. Bankman Freed may have properties that have not been seized yet. I'm not sure whether the government expects to

seize funds, but if there are funds to get, they could use the authority of the forfeiture judgment to go recover the funds and try to repay them to victims. And just to understand, you said if the property is in his name, I think, you know, at least from the trial, a decent amount of it was purchased with FTAX customer money. So if it's in his name, is that considered his, or is it part of the FDX estate? It's a great question. So, first of all, I think there are some very interesting legal issues about whether the government, if they really wanted to, could go in and seize money that is technically part of the bankruptcy

state. This was an issue that arose back in the made-off days. There were circumstances, but I don't think the government would do that. I think that the government would probably say that whatever assets have been determined by the bankruptcy court to be part of the FTX bankruptcy estate, they're going to leave that there, and that will be distributed through the process of administered by the bankruptcy court. And so really what we have to talk about then is, are there assets that are not company assets, but that belong to him? And that can be very broad. Okay, it doesn't have to be in his name. If he's the de facto owner, but he put it in somebody else's name, let's say he used fraud proceeds to buy a Ferrari and gave the Ferrari to his brother.

If the government could prove that, they could seize that Ferrari, even if the Ferrari is in the brother's name. As just an example. And, you know, maybe that's a bad example for SBF. I think he's more of a Toyota guy or a Hyundai guy. Well, he has his $35 million apartment. The apartment would be a good example. If that's in his name and if it's still out there, they could seize it, sell it, and use the proceeds to compensate victims. But just to understand, so I think the FTX estate is also trying to compensate victims, but this would be some kind of parallel process that the U.S. government.

Oh, interesting. Yeah, the FTX estate can only recover the property of the debtors. which are the FTX entities listed in the Chapter 11 petition. They can't take anybody's money, right? And there is a distinction between a company that files for Chapter 11 bankruptcy and the individual executives who work at that company. While we think of FTX and SBF is one because he created the company and he was the CEO, they are legally distinct.

And there are assets that are owned by the. entities. And there are a separate category of assets that he personally possessed owned controlled. Okay. And then just last question, like he'll be roughly in his 50s when he gets out. So if he earns any money after that, then does some percentage of that automatically have to go to the government for this $11 billion forfeiture? The forfeiture judgment, if it's not satisfied, will continue to hang over him. And like any debt, the government can collect him. Oh, okay. And where do you think he'll go to prison? And how will that be decided? Designations for prison are decided by the U.S. Bureau of Prisons. The court does not have the power to decide where an inmate goes. They can make a

recommendation, but they cannot control them. So the Bureau of Prisons will do a calculation. I expect they'll send him to someplace that is not maximum security because he is a nonviolent white collar criminal. If you've seen the movie Office Space, one of the greatest movies of all time. I'm not a big movie person, so most movies I have not seen. You should see Office Space. And they talk about minimum security, white collar resorts. I don't really think there is such a thing.

but I do think he's going to go to a circumstance that's not as bad as going to a max security with violent. And when do you think it'll be decided? The Bureau of Prisons usually does that within a few months of the sentencing. And then since he's been in jail since last summer, does the 25-year clock start once he enters that prison or does that time somehow get included? He gets credit for all the. time he's been in custody. So the Bureau of Prisons in a, they have an office in Grand Prairie, Texas that does a calculation of how much time he earned. And they will do, they will run a calculation of how much time he's earned from the date of his incarceration. Oh, so in a way he's already

served like nine-ish months or something like that, seven months. Okay, got it. All right. So in a moment, we're going to talk a little bit more about SPF's future, but First a quick word from the sponsors who make the show possible. Pocodot is the original and largest layer zero blockchain with over 2000 plus developers. The anticipated Pocodot 2.0 upgrade will be a massive accelerator for the ecosystem. Upgrading the infrastructure with eight times higher transaction throughput and twice as fast block times, tailored court time for the needs of every protocol, trustless bridges to multiple chains, and revised tokenomics with a token burn to reduce inflation.

Perfect for GameFi and DeFi to build. grow and scale. Get your Web3 ideas to market fast. Think big, build bigger with Pocod. Join the community at Pocodot.network slash ecosystem slash community. Back to my conversation with Sam. And so we often hear about prisoners

being eligible for parole. When would SBF be eligible? There is no parole in the federal system. That is not allowed in the federal system. In state prisons, many states have a parole the federal system used to. They abolished it. So if you get prison time, you do the time. There is no parole release. The exception to that, there are a few things. Number one, if you behave well in prison, you get good time credit. So the Bureau of Prisons will give you a percentage off of your,

effectively they're giving you credit against the sentence for being a good inmate. And that, you know, probably we'll chop five to ten-ish percent off of the actual amount of prison time. That's number one. Number two, there are programs in prison. So, for example, if you, there's a program called ARDAP. If you have a drug abuse problem and you go to rehab, you can do the RDAP program if you're eligible. And that can be a basis to get credit.

And maybe he'll argue that he is eligible because he abused Adderall or something like, like that as a means of getting more credit. In addition, many inmates in the advent of the pandemic, many inmates made motions for what's called compassionate release. The federal rules of criminal procedure have been expanded and the statutes have been expanded to allow someone in prison if they can justify a showing of compassionate release to ask a court after sentencing to reduce the sentence. Indeed, I think Sam Bankman-Fried's sentence is 25 years. I believe that's the same as what Bernard Ebers, the CEO of WorldCom got for the WorldCom fraud. Ebers actually applied a few years ago for a retrospective reduction of his sentence under the compassionate release statute. And so that

might be a pathway. I mean, it would be way too soon for him to do that, but it is something he could pursue, let's say, in five years, in 10 years, in 15 years, and say, look, I've been a good inmate, judge, please reduce the sentence. And would it then go to Kaplan or a different judge? If Kaplan's still around, it'll go to him. I see. While SBF is serving his sentence, which he's doing now, I expect he's going to appeal the conviction and sentence. Indeed, he said, his lawyer said he was going to today in court, that that was their intention, and I'm not surprised by that. And so I'm sure he will try to attack the conviction and the sentence on a direct appeal. He loses the direct appeal.

There are methods of doing a post-conviction challenge to a conviction, including what's called a writ of habeas corpus. So there are these, there's a whole world of schemes and statutes that inmates sometimes use to try to challenge their conviction. It's very, very difficult. It's very unlikely to prevail in a direct appeal. It's even less likely to prevail in a post-conviction collateral attack on a conviction. But I expect he will pursue all of these avenues. And direct appeal is what? Direct appeal is SBF files a notice of appeal with the intermediate court of appeals called the Second Circuit Court of Appeals. So in our system, we have a trial court, which is Judge Kaplan.

There's an intermediate appellate court, which is a circuit court. And each, there are several, there are several circuits in our country. The Second Circuit covers New York, Vermont, a few other states. So you apply to the Second Circuit, you appeal to them. They make a decision. and you can then ask for the U.S. Supreme Court to hear the case. It's very rare that they would do that. They typically will only hear a case if there is a conflict between multiple circuits on a point of law. So they take a case on that issue to resolve the conflict. So more or less what you're really looking at is we've got a judgment now impose it,

or there will be a final judgment imposing sentence. and memorializing the conviction against SBF. He will, I am sure, file a notice of appeal with the Second Circuit indicating that he intends to challenge the conviction in sentence. That opens an appellate case. A docket number is assigned. A briefing schedule is set. SBF will file an appeal, a brief, explaining why he thinks his conviction should be overturned.

I am sure he'll argue. he got an unfair trial and that there were errors in the trial process. And I think he'll probably also challenge his sentence. He'll say even if the conviction was appropriate, the sentence was unlawful. And at a minimum, the sentence should be revisited. The government will have an opportunity to oppose. SBF will have an opportunity to submit a reply brief in support of his appeal. The circuit will hear argument, oral argument, before a panel of three judges.

and then they render a decision. That process can take a year, two years, three years, can take quite some time. And I don't think SBF is going to prevail in an appeal, but he certainly will pursue. And so if that takes two or three years, basically we could be looking at a situation where if the clock started last summer,

then by the time he actually enters prison, he'll have actually served, let's say, like three years of a sentence, something like that. Yeah, and he will enter. The Bureau of Prisons is going to conduct itself as though this is a final judgment. So he will go to prison. He will be designated. He will go to a prison.

And he will be serving his sentence while the appeal plays out. Okay. Oh, I see. Got it. And so earlier when we talked about the good behavior, you said at most 10%, so basically that would be two and a half years off of the 25, and then he'll start having already served a bit. So potentially, once the appeal process is over,

it might end up being like 20 once it's all kind of the legal process is done. Well, I wanted to ask about an anecdote that was told today, which is that Sam has been teaching the other inmates at Metropolitan Detention Center. I think it was something about helping them get their degrees, like maybe high school degrees. Is that the kind of thing that constitutes good behavior? Or what are examples of good behavior that would get him less time? I think good behavior is actually much easier than that.

For good time credit, it's kind of just don't make trouble. This behavior of teaching other inmates is great. I applaud him for doing that. And I think that's the kind of thing that you would ask the court to consider on a compassionate release application. Oh, okay. And the docket says that he'll serve three years supervised after his release. Talk about that. What does that mean?

So it's common in our system that we have a period of supervised release following a prison term. And so what that means is when the day comes, assuming Sandbank and freed services time and survives, he'll be released. and then a probation officer will be assigned to supervise him and ensure that he complies with the conditions of his supervised release for a period of time. Part of the, and I think he was sentenced to three years of supervised release, which is very common. So part of that is actually rehabilitative. The probation department has resources.

They can connect you with job placement programs, therapists, and they can connect you. have a budget to do that. And so there is a component of it that is helpful as a resource for somebody getting out. But part of it is also to make sure that they follow the rules and aren't going to reoffend. And if they do, then the probation officer can submit a violation report, can accuse the person of violating their conditions of release. And the judge can then make a determination about whether they in fact violated and if so punish them, including by sending them back to prison. And so in Sam's case, like what's an example of something that would violate? Like what are typical conditions for a prisoner like him?

No drug use. No commission of new crimes. So if he committed a financial fraud, he got out and committed a financial fraud, he'd go right back in. Okay. So now let's talk a little bit about what happened during the sentencing today. first of all, SPF spoke for a little bit. Basically, I'll just recap this for listeners. It started with one of the FTX creditors giving a speech about how he and other creditors

have been affected. It ended up veering a little bit more into criticism of the FTX bankruptcy estate and eventually Judge Kaplan just said, look, this is things you should take up with the bankruptcy of state. It's not appropriate for this hearing, which concerns, you know, what Mr. Bankman-Fried's sentence should be. And then after that, the lawyer representing a class action lawsuit, I guess, of FTAX creditors spoke about how Sam and the other insiders have been very helpful to them. And he wanted the judge to take that into account. But I felt like a lot of

this was theater because I thought, I'm sure Judge Kaplan has already decided. I don't know how much these speeches on the day of are affecting things. And then Mark M. Casey, his new lawyer, gave, yeah, I guess, like an argument for their recommendation of six years. He was definitely better than Mark Cohen, I have to say. Mark Cohen has a much sleepier demeanor. It's just the word that I kept writing in my notebook every time he spoke. I was like very sleepy delivery. Mark McKeezy, you know, just has a more normal delivery and cadence, you know, very clear. Honestly, from his speech, I wrote in my notebook at the end, you know, very compelling. I could feel this sort of like just emotional vibration in the room of like everybody kind of feeling like, okay, yeah, Sam's a human.

You know, this is kind of a big deal of what he's facing here. However, I don't remember, well, the main thing is that he said something like Sam has, does not have Melis in his heart but he had math in his head. And those words came back to haunt him later. Similarly, right after this, Sam spoke. And when he spoke, first of all, when he walked in the courtroom, you know, he had his hands in handcuffs and he was dressed in, you know, this rady old khaki-ish shirt.

And yeah, and you could hear chains when he was walking. And, I mean, he kind of smiled at the courtroom, I think, sort of to put on a brave face. but, you know, last we saw him, you know, he was wearing suits and stuff for the trial. So this was definitely a change. However, one thing is, you know, when he spoke, everything was sort of as you expect, like expressing kind of concern for the creditors and how they're facing these troubles. But then he talked about the liquidity crisis that FTCS faced in November of 2022. And the second he said those words, I was like, judge is not going to like this.

And indeed, yeah, it went on in that vein for a little bit. And I left this speech feeling like, oh, he didn't do himself any favors there because this goes back to, you know, what you mentioned about. He perjured himself. And I felt like he's continuing with that storyline. But anyway, I might have messed up the order. At some point, Nicholas Rowe spoke. I think it was actually maybe before SBF, I forget. But as usual, he gave a very clear and, you know, very loud, slow delivery, like just every word landing.

He called out those phrases like liquidity crisis. So he must have spoken after SBF and, you know, made the case for why they were recommending 40 to 50 years. Yeah. And then Judge Kaplan spoke. And so here's actually what my question is. I know it's a very long recap, but I wanted people to kind of hear this sort of blow by blow. So Judge Kaplan, he talked quite a bit about this concept of expected value. And he, at least to my mind, he seemed to imply that this philosophy was what led SPF to commit these crimes.

For instance, he called out different conversations that Caroline Ellison had with Sam about expected value and about how willing he was to take risks. In one of the conversations, he said that he was risk neutral and that, he would flip a coin if he knew that tales, it would come up with the world being destroyed, but heads the world would be twice as good. You know, he talked about Sam's ambitions to be influential, especially politically. He talked about how Sam committed one of the biggest bribes in U.S. history. And then he basically talked about how this interest in sort of expected value, which, you know, Judge Kaplan said some people would call cost-benefit analysis, but he implied, like, it's a kind of form of gambling in a way. And he said this was a light motif of the case. It's in his nature. So I was just curious for your thoughts and how he really zoomed in on that aspect, the expected value part of, you know, Sam's motivation.

Judge Kaplan is a brilliant judge, and he's got a strong moral compass. And unfortunately for Sandbankman-Fried, he handled this case in a manner that exposed Judge Kaplan to weeks of testimony about the conduct, the crime. So Judge Kaplan sat through. And this is why many defense lawyers, if a client is guilty, many defense lawyers will counsel their client that they should bite the bullet and plead guilty and accept responsibility because. If it is inevitable that you're going to be convicted, it is better to accept responsibility and not expose the court to weeks of gory testimony about the nature of the crime. So in the trial, the motif was this theme about Sandbank-Bin-Fried being utilitarian, having a utilitarian philosophy, having an approach,

basically says, I can break an egg if it makes an off. And applying that here, it sort of takes away all the defense arguments about how this is just mismanagement and a liquidity crisis got away from us. No, this was a decision. There was a decision made to intend,

intentionally engage in conduct that would hurt people if the market broke a certain way, but could help them and could cover up the hole in their balance sheet if the market broke another way. One flip of the coin leads to jail. The other leads to more opulence, wealth, and no one knowing the wiser. And Bankman Fried made a choice. that's a deliberate choice. It's a co-calculated choice. It's a criminal choice.

As opposed to, oh, I'm just a college kid and, oh, my God, things are getting away from me and I'm mismanaging and my flip-flops are, oh, my God. And oh, I lost $8 billion. Right? This is the combating themes that are being presented. Taking the undisputed facts and putting a gloss on them. And the defense wants to paint a gloss of a mistake. mistake, perhaps an innocent mistake, perhaps a negligent mistake, but not a criminal mistake. And the government paints a story of, no, this was theft, deliberate, cold, and calculated,

and we know where Judge Kaplan landed on it. He saw it and called it the way he saw it as a deliberate, calculated bet, a criminal bet. And Beckman Fried Lawson. the bit and has to suffer the consequences for that. At this point, what happens now for the co-conspirators, Caroline Ellison, Nashat Singh, and Gary Wong? When will they be sentenced? And what are you expecting on that score? I would expect them to be sentenced. Now that Bankman Fried has been sentenced, their sentencings will follow. They will argue that they assisted in bringing Sam Bankman Fried to justice. and that the sentence handed down to Sandbeck-Mefreed, which was important that they were

part of achieving it and necessary to achieve it and deserve leniency for it. It would not surprise me at all if all of them get no present time. I think that they have demonstrated, first of all, separate and apart from whether they deserve no time. Judge Kaplan wants to, just as you want to punish the bad guy, to deter others from committing bad crimes, you want to incentivize and encourage cooperation because the government needs witnesses to make cases. You can't get a guy like Sandbank been freed without a human narrator to tell the jury, this is what it all means, this is what

happens. I spoke to him. He knew exactly what was up. He told me to change this, he told me to changed this spreadsheet that we were going to give to one of our lenders to be the most misleading scenario, right? It's hard to do that without a human witness. Judge Kaplan knows this. And so to talk about the coin metaphor, the flip side of the deterrence coin is the incentive coin, the carrot. We've got to give a carrot to cooperators. And for that reason, I would expect very lenient sentences for the cooperators and perhaps sentences that do not involve prison. time. So it feels like we're kind of closing this very long chapter in crypto because in a way, all of that started really in May of 2022 with Tara Luna. So, you know, at this point, what would

you say this whole trial and this sentence means for crypto generally? I think this is the closing of a dark chapter and the opening of a new one. I think SBF represents. I think SBF represents the Wild West Cowboy ethos of crypto of early days, jubilance and a lack of diligence, positioning a fraudster, a huckster to take advantage of folks. But the technology itself has transformative promise for society. And there are so many good actors with good intentions, entrepreneurs, developers, innovators, who are trying to take this technology. We're trying to take this technology and use it for the good of themselves, for the good of our country, for the good of our society. And they need a runway to do that. And to do that, we've got to get rid of the bad actors.

SBF was prosecuted. This demonstrates that there are guardrails against bad actors, that it can be handled by our system, notwithstanding that it's on the blockchain instead of on Wall Street. And I think it's important to look forward now and say, all right, we've got a new bull market. hopefully we've learned something from the mistakes of the last bull run. And maybe we can embrace some of the consumer protection that we need to restore confidence and let this technology and its promise better everyone. All right. Well, thank you so much, Sam, for coming on Unchained. Thanks for having me.

Don't forget. Next up is the weekly news recap today presented by Unchained contributor, Megan Christensen. Stick around for this week in Crypto. after this short break. Did you know you can buy and sell crypto with tax benefits in an individual retirement account? ITrust Capital makes this possible. But what does this mean? When you buy crypto outside an IRA, like on an exchange, you face taxes on gains. But in an IRA, like a Roth IRA, gains can be tax-free.

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please go to conixontario.ca. With Amex Platinum, you have access to over 1,400 airport lounges worldwide. So your experience before takeoff is a taste of what's to come. That's the powerful backing of Amex. Conditions apply. Thanks for tuning in to the weekly news recap. Today, we're diving into Coinbase's legal tussle with the SEC. Munchable's remarkable recovery of stolen Ethereum,

the unfolding trial of Tornado Cash's developer, a finance executive's unexpected escape amid legal troubles, Ku-coigne's regulatory challenges from both the CFTC and DOJ, Black Rock's continued optimism for an Ethereum ETF, and Ripple's looming battle over a potential billion-dollar SEC fine. This recap was written by Juan Aronovich and edited by Nelson Wang. I'm Megan Christensen. Let's begin. A Manhattan federal court has ruled against crypto exchange Coinbase, allowing the SEC's lawsuit, which alleges unregistered sales of securities by the cryptocurrency exchange to proceed to trial. This decision marks a significant victory for the SEC and could have wide implications for the crypto industry.

The lawsuit filed in June accuses Coinbase of operating as an unregistered broker and exchange. The SEC is seeking to permanently stop the company from continuing such a contract. Judge Catherine Polk Thela, in her ruling, stated that the crypto label doesn't change the nature of the transactions, which fit within the longstanding legal framework for identifying securities. Despite the court's decision, it did agree to dismiss part of the SEC's complaint pertaining to Coinbase's wallet application, stating it did not act as an unregistered broker in this instance. Following the news, Coinbase's shares dropped around 2.5%. The company's chief legal officer, Paul Greywall, responded on Twitter by saying, quote, we were prepared for this, end quote.

Also this week, Quinnbase announced its intention to significantly increase the portion of its customer and corporate USDC balances stored on base, its Ethereum Layer 2 network. This shift aims to leverage the benefits of blockchain technology, including enhanced security, reduced fees, and fast-for-settlement times for its users. Currently, Quinnbase holds $256 million in USDC, with a significant portion already on BASC. Coinbase's initiative comes at a time when base has demonstrated significant growth, achieving a total value-locked, TVL, of over $1 billion, with substantial activity spikes following Ethereum's recent Dinkin upgrade. In a remarkable turnaround, the WebThruc Gaming Platform Munchables successfully reclaimed $62.5 million worth of Ethereum lost in a security

exploit on Wednesday. The funds were returned by a developer who was linked to the theft, affirming the integrity of the platform security measures. Munchables, which operates on the Ethereum Layer 2 Network Blast, encountered the security breach when unauthorized transactions were traced back to an internal team member, sparking concerns of a potential inside job. Following intensive investigations led by blockchain detective Zach XPT, speculations arose about the exploiters' connections to North Korea hackers, although conclusive evidence has not been found.

The breach was enabled by smart contract permissions that allowed the developer to execute fund transfers, a vulnerability that was exploited to siphon 17,413 from the platform. In a statement on X, Munchables reassured its users, declaring that, quote, all user funds are safe, end quote, and also announced the unconditional return of the stolen assets to a multi-sig wallet, safeguarding the platform's liquidity. The community's response has been overwhelmingly positive, with many applauding the swift action taken to secure the return of the funds without resorting to controversial measures such as rolling back the blockchain. Dutch prosecutors recommended a 64-month jail sentence for Alexei Perzsev, the developer behind

tornado cash, for alleged involvement in laundering $1.2 billion through the cryptocurrency mixing service. Pertsov's trial, which could set a precedent for the legal treatment of open-source project developers, took place over two days, with the verdict expected on May 14th, arrested in August 2021 following Tornado Cash's blacklisting by the U.S. Treasury for its alleged connection to North Korean hackers, Perciv's case highlights the ongoing debate over the role of privacy tools in the crypto ecosystem and their legal implications. In a turn of events that has captured international attention, Binance, the world's largest cryptocurrency exchange, finds itself embroiled in controversy in Nigeria. Nigeria authorities have levied four counts of tax evasion

against finance, including allegations of non-payment of value-added tax, commonly known as VAD, and company income tax, failure to submit tax returns and aiding customers in tax evasion. Alongside these charges, two of Binance's senior executives, U.S. citizen Tegrin Gambarian, and British Kenyan citizen Nadim Andrawala were detained in Nigeria. In a dramatic development, reports emerged that Nadim Andrawala had managed to escape from custody, and Abuja, Nigeria's capital. This escape coincides with Nigerian authorities intensifying their legal actions against Binance by filing new tax charges. The Nigerian Federal Inland Revenue Service announced these charges amid ongoing tensions between the Nigerian government and

Binance. Finance responded to the situation by stating, quote, we are made aware that Nadim is no longer in Nigerian custody. Our primary focus remains on the safety of our employees, and we are working collaboratively with the Nigerian authorities to quickly resolve this issue. End quote. In a concerted effort to enforce regulatory compliance, the CFTC and the DOJ simultaneously targeted Ku-coin with serious allegations. The CFTC's complaint against the exchange encompasses charges of illegal dealings in off-exchange commodity futures transactions, including major cryptocurrencies like Bitcoin,

ether, and like coin. Without the necessary registration, I'm not. unahearance to regulatory standards. This regulatory action emphasized the requirement for Ku-coin to align with all applicable regulations and highlights Ether and Lycoin as commodities within the scope of the CFTC's authority. Parallel to the CFTC's legal action, the DOJ accused Ku-coin and its founders of anti-money laundering violations, specifically criticizing the exchange's lack of an effective anti-money laundering program and adequate know-your-customer procedures. These charges allege that Ku-coin facilitated the transmission of over $4 billion in suspicious and criminal funds.

Following these allegations, Ku-coin experienced a notable withdrawal of assets, with 273 million leaving the platform as users reacted to the potential implications of these legal challenges. Larry Fink, CEO of BlackRock, the world's leading asset management firm, maintains a positive outlook on the potential for an Ethereum ETF, even amid speculation that the SEC might classify ETH as a security. This optimism follows a successful launch and significant growth of BlackRock's Bitcoin ETF and its Ethereum-based tokenized fund, indicating a strong start in the cryptocurrency-based fund market, and nearly $245 million minted in Ethereum-based bill tokens.

BlackRock is positioning itself as a major player in the digital asset space. Things confident suggest to believe that the regulatory designation of Ethereum will not hinder the approval and success of a potential Ether ETF. The SEC proposed a hefty fine against Ripple Labs, totaling almost $2 billion, marking a significant moment in the regulator's ongoing enforcement actions against the cryptocurrency industry. The SEC's filing in a New York court asked Judge and Alisa Torres to enforce the fine, emphasizing the need to deter Ripple and others from future violations related to unregistered security sales. The fund comprises $876 million in disgorgement, $198 million in prejudgment, $198 million in prejudgment

interest, and an additional 876 million in civil penalties related to Ripple's direct sales of XRP tokens to institutional investors. The SEC argues that these sales, amounting to nearly $1 billion, were conducted without necessary registrations, undermining the financial market's legal structure. Ripple, for its part, has signaled its intention to vigorously contest the SEC's claims. The company's executives have criticized the SEC's approach, accusing the regulator of misleading and punitive tactics. Ripple's response to the proposed judgment is anticipated by April 22nd. Meanwhile, House Republicans urge the SEC to provide clarity on whether Ether is a security

before Prometheum can custody it, warning of market disruption if classified as such. FTX's bankruptcy estate is set to sell two-thirds of the stake in the AI startup Anthropic for $884 million, a significant transaction that values the stake and more than twice the acquisition costs by Sam Bankman-Fraid in 2021. The deal involves various institutional buyers, including Jane Street and Fidelity managed funds, underscoring the high interest in anthropics potential. The move is part of the estate's effort to maximize returns for creditors from FTX's assets. Ethereum's gas fees for transactions involving blobs have surged exponentially, following the introduction of a new protocol named Ether Scripps, just weeks after the Dengun upgrade,

implemented to lower costs. The blob scriptions feature allows users to inscribe data on blobs, leading to a dramatic increase in the blob base fee to $14,499,530 way. Despite contrast with the intended effect of the upgrade, which was designed to make transactions cheaper by enabling roll-ups to store data temporarily in blobs rather than permanently in call data. And that's all. Thanks so much for joining us today. If you enjoyed this recap, go to UnchainedCripto.com. That is Unchained Crypto.com. And sign up for a free newsletter so that you can stay up to date with the latest in crypto. Unchained is produced by Laura Shin with help from Nelson Wang, Matt Fulcher, Juan Aronovich, Megan Gavis, Shashank, and Margaret Korea. Thanks so much for listening.

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